Pathway for re-energizing tourism and hospitality sector

08 Jul 2021

Travel – a hobby to many and a need for some of us – has slowed down ever since the pandemic struck. The longing to travel, however, has grown more than ever in many of us.

Tourism and hospitality has been one of the key sectors of the services economy. Although the pandemic has had a deep effect on the sector’s performance, studies show that in 2019-20, 39 million people were employed in it, which accounts for 8% of the total employment in the country.

India has a plethora of experiences to offer to tourists, both domestic as well as international. With its rich cultural heritage, long history, huge ecological diversity and a variety of places of natural beauty, India has been a forerunner when it comes to attracting tourists. During 2019, almost 11 million foreign tourists arrived in India, about 3.5% more than the previous year.

By 2028, estimates are that over 30 million people from overseas will travel to India, which could result in a revenue of close to US$ 60 billion. At the same time, the number of domestic travelers in India is massive at 1.8 billion trips in 2018.  

In the post COVID scenario, these tourists are again seen to be flocking to destinations, although there is a shift in the way they are traveling and the places being visited.

The hotel and tourism sector has generated interest in the previous years, receiving a cumulative FDI inflow of US$ 15.61 billion between April 2000 and December 2020.

The recent measures by the Government that includes providing financial support to 11000 registered tourist guides, and other travel and tourism stakeholders will definitely ease the stress of the people involved and will have a positive impact on the sector. Under new the Loan Guarantee Scheme for COVID Affected Sectors, working capital/personal loans will be provided to people in tourism sector to discharge liabilities and restart businesses impacted due to COVID-19. The remedial measures emphasise the commitment of the Government towards reviving the sector putting it on the growth path once again.

Following the restrictions on travel and tourism during the COVID-19 waves in the country, the sector needs strong policy measures and support for recovery. CII has been working consistently with the central and state governments to bring a sustainable revival to the tourism sector.

Some of the key policy recommendations made to state governments are:

Statutory dues, Licenses & Permits

Since hotels, motels, inns and accommodations in any form did not earn revenues during the lockdown period, therefore fixed costs should be waived for the period of lockdown. This includes Heat- Light- Power (HLP), gas, excise fees, levies and taxes (including property tax), license fees payable, etc. across the tourism, travel, hospitality & aviation industry.

CII recommends a blanket exemption for 18 months and auto-renewal of licenses without any fees till Dec 2022.

Reduction in Stamp duty and transaction charges

High land acquisition costs deter new projects. Reduction and standardization of land acquisition costs like stamp duty, FSI, and TDR across states would result in development and growth of industry as organizations and entrepreneurs would be encouraged to take up new projects.

Liquor License

CII recommends a blanket exemption for 18 months and auto-renewal of liquor license without any fees till December 2022.

Registration of lease documents

CII recommends a policy change with respect to registration of lease document of hotels and restaurants with land revenue department, with proposed registration fees of 1% of the overall lease amount payable annually from the existing 10% and one time relation of any penalty/arrears to the hotels/restaurants whose lease agreement is unregistered till date. This would encourage most leased hotels/restaurants to register their lease deed and ensure compliance.

Industry status

Hotel industry is classified as commercial in most states leading to higher operational expenses. Maharashtra Government has taken a step in this direction. If hotels are permitted industry status, it will assist in better revival of the sector with relief in electricity tariff, electricity duty, water cess, property tax, development and non-agricultural taxes, etc. and will enable hotels to provide better quality facilities.

Timely interventions in these stressed times will ensure recovery, pave the way for sustainable growth and make it possible for the sector to emerge as a growth driver of the economy.

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