BUDGET EXPECTATIONS: HOSPITALITY

17 Jan 2023 , 09:25 AM

At present, hotel projects of over Rs. 2.0 billion get infrastructure status. However, smaller hotel projects do not enjoy the benefits. Hotels have high capital intensity and relatively high fixed costs. An infrastructure status will give hotels the benefits of lower taxation and electricity rates and simplified approval process for projects, apart from a favourable repayment structure.

Given the number of approvals required for new hotels, a single-window clearance for hotel projects will improve the operational ease and reduce the delays in the commencement of new hotels. Incentives for new entrants to the hotel industry could promote entrepreneurial ventures.

The Budget could have announcements to boost consumption/spending. There could be significant spend on sanitation and safety as well in the upcoming Budget. The hotel sector will remain an indirect beneficiary of these announcements. Given that road travel has witnessed a sharp increase in the last one year, infrastructure and connectivity improvement measures will impact hotel demand positively. 

From an international traveller’s perspective, reduction in GST rates can make the room rates competitive compared to other overseas destinations. While recovery in foreign tourist arrivals is still some time away, this could help the industry capitalise on international demand, going forward.