The new-look bi-monthly FHRAI Magazine is much awaited in the Hospitalty fraternity. It brings news from the Industry around the world and interesting happenings from across the country. Information related to all aspects of the Industry like trends, best practices, Human Resources Management, architecture and design, housekeeping, F&B, IT is well-researched and put into very readable articles and snippets.

FHRAI Magazine June 2008 Issue

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Some of the articles in this issue

Government needs to stimulate growth
by Harish Sud, Secretary General FHRAI

Apart from a 5 year tax holiday given to two, three and four star hotels established in specific districts that are UNESCO- declared World Heritage sites and the increase in allocation for development of tourism infrastructure from Rs 423 Crores to Rs 520 crores on account of the Commonwealth Games, there is nothing much for the Tourism sector in the budget.

The Hotel Industry in India has a supply of 110000 rooms. As per the Tourism Ministry, 4.4 million tourists visited India last year and at current trend, demand will soar to 10 million in 2010- to accommodate 350 million domestic travelers. Hotels in India have a shortage of 150,000 rooms fueling hotel room rates across India. With tremendous pull of opportunity, India is a destination for hotel chains looking for growth. India ranks 18 in business travel and will be among top 5 in this decade.

It is estimated that demand is going to exceed supply by 100 % over the next two years. With this disparity, the hotel room rates in India are most likely to rise 25% annually and occupancy to rise by 80% over the next two years. The hotel industry in India will be eroding its competitiveness as a cost effective destination.

On an average India earns Rs 65085/- from every foreign tourist, which is 3 times more than what the tourist spends in France and nearly double of the global average earning which is Rs 37570. The earning appears to be more in India from the fact that an average tourist tends to stay longer because of the size of the country and the variety of attractions here.

With the tourist arrivals witnessing a growth of 15 to 20% annually, the hospitality industry needs to create adequate infrastructure to balance their needs. In fact a FICCI study on Investment Opportunities in India points out that the fresh investment in the hotel industry would add 53000 rooms in the next five years ending 2011,well short of the current estimated requirement of 1.5 lakh rooms.

In spite, of the above, India’s share of International tourism is a dismal 0.5%. The annual growth of GDP in India of over 8% would lead to increased arrivals of business and leisure travelers. Needless to say that the Hospitality and Tourism Industry is the largest earner of foreign exchange and generator of employment in the country.

If the recommendations listed below are carried out we are confident that the necessary incentives for the investment of about RS 40000 crores required to meet the shortfall in rooms would be brought about.

  • To be granted infrastructure status under Section 80 1A of the Income Tax Act, 1961.Due to the non inclusion of hotels in the infrastructure list, RBI has from July 2007 disallowed hotels from availing ECB/FCCB although the hotel industry had been permitted by RBI to avail of them since the past several decades.
  • Rate of depreciation on buildings of hotels to be raised to 20% from 10% currently.
  • Hotels should be exempted from paying service tax on services received from foreign tour operators, as it is one of the prime foreign exchange earners.
  • Service Tax on revenue from banquet sales of hotels should be withdrawn as VAT/Sales Tax of 12.5% is charged by the State Governments on the same amount.
  • Tax holiday of 5 years for two, three and four star hotels and convention centers with seating capacity of not less than 3000 in the NCR needs to be extended to all hotels of all categories across the country.
  • Customs duty structure should be rationalized for hotels & Restaurants in tune with the international practices, to enable the Indian service sector to compete with their international counterparts.
  • To allow a rebate of 10% on account of Leave Travel concession under Section 80 of Income Tax, 1961.This was permitted by the Government to its employees in 2003-04.

If the Government of India extends the initiatives as listed to the Hospitality Industry, it will oil the wheels of bringing into the country an investment of Rs 40000 crores to cater to the needs of 10 million tourists expected to visit the country in 2010.

Commonwealth Games: A Golden Opportunity
by Vijay Pande, Chairman FHRAI Publications Committee

For Delhi'ites and the whole nation, the 2010 Commonwealth Games will be an event to look forward to. Held 28 years ago, the Asiad Games changed the face of Delhi, now the question is: Will the 2010 Commonwealth Games do the same, especially for the hotel industry?
Indian Hospitality can encash on this golden opportunity! To begin with hoteliers should market the heritage and cultural products of their individual states. The tourists who will visit India during the Games will become brand ambassadors for the future.Their experience will determine whether they will come back again or whether they will encourage their friends to do so. Hotels and Restaurants in India must realize the enormity of this situation and the ecological impact of such growth. Increasingly, tourists will pick destinations that espouse eco-responsibility; we have to rise to that occasion.
After the Commonwealth games 2010, branding and selling of Indian Hospitality should be on the pattern of the IPL T20 Cricket Tournament. Each region should market itself by highlighting its culture.
This opportunity has come after 28 years; although the venue is the same, it is a different time. India was a developing country then, today it is at par with the developed nations. 1982 changed the face of the Capital. Will 2010 do the same? More importantly, are we positioned to build on the opportunitied such events throw up?