PHD CHAMBER PITCHES FOR GUARANTEE FOR RETURN OF 16% FOR NEW HOTELS IN THE NCR

The PHD Chamber has mooted the idea of a guarantee return of 16% for new hotels, which are coming up in the NCR for the the Commonwealth Games, on the investment for at least for 10 years. This will act as in-built incentives for the industry to invest in the segment.

According to PHD Chamber’s estimates, Delhi has a shortage of 1.7 lakh hotel rooms and sizeable part of it should be put into the stream before the Commonwealth Games 2010.

“It is a challenging task to create quality hotel rooms of that magnitude in a relatively shorter time frame and timely completion requires speedy action in allotting the sites, making available adequate credit for construction and finally clearing the building for use,” says Mr Sanjay Bhatia, President, PHD Chamber.

Many of the hoteliers are not coming forward to bid for the plots because of the higher floor prices fixed since at that rate the operational efficiency, cash flows, amortization of the costs etc will go out of gear. Also, industry is not very sure about the rate of return since the occupancy factor depends on many variables, which are extraneous to the industry.

Equally significant, PHD Chamber points out is the need for a perspective plan to put to use the additional capacities created after the Games. India’s share in international tourist arrivals is around 0.40 per cent. International tourist arrivals touched 3.92 million in 2005 and 4.4 million in 2006. There is an estimated 400 million domestic tourists and that number is rising rapidly. “We have to learn from tourism centric countries as to how they attract large numbers and for longer duration. Newer themes and concepts should be developed to hard sell India as a rich, exotic and varied tourist destination,” says Mr Bhatia.

According to the Chamber, for manning the hotels that will come up for the Games, at least 2 lakh trained manpower is required. Presently, number of trained persons coming out from catering and hotel management schools is much less than the requirement. Also, such personnel are often poached by the call centers and BPOs offering higher salaries and perquisites.

Hailing the recent initiatives by the Government of India, such as launching of bed and breakfast scheme for augmenting room capacity, identification of land for hotels with land – owning agencies, income tax exemptions to budget hotels in the NCR region, inclusion of tourism in the infrastructure Committee headed by the Prime Minister etc, the Chamber opined that these initiatives should be a precursor to the sustained roll out by the Government for promotion of tourism in the country.

Higher tourist flow from both within and abroad is necessary to sustain the operation of the hotels that are coming up in different metros and particularly in Delhi. Some of the proactive steps taken/contemplated by the Government, such as visa on arrival for people from select countries, extension of one year medical visa to three years, emphasis on Public – Private partnership etc. are steps in the right direction. “However, tourism needs incremental policy measures both by the Centre and the States to tap the potential,” Mr Bhatia observed.

Major concerns of industry as cataloged by the Chamber include lack availability and high cost of land, restrictive building norms/bye laws, long procedures & multiple clearances, lack of basic infrastructure and poor quality of infrastructure, high taxes, restrictive floor area ratio (FAR) guidelines and longer gestation period.

Hotel tariff in India is very high because municipal bodies auction land for building hotels. Taxes, such as luxury tax at the state level, also increase the cost of hotel accommodation. Higher taxation, differential rates of taxes in various states on tourist vehicles, entry tax and parking charges at each state/ destination push up the cost of tourist transport – another key segment of the sector – and also subject the tourists to avoidable harassment because the vehicle needs to stop at each state border to pay the taxes. It is estimated that all these factors make India more expensive by 25 per cent to 30 per cent as compared with other tourist destinations in the region.

Further, there is a need for rationalization and uniformity of taxes and ensuring hassle free inter-state movement. Creation of a common market for tourism in India by removing inter-State barriers to tourist movement and rationalization of taxes on hotels, tourist transport & sales tax on Aviation Turbine Fuel are important. Fuel constitutes around 30% of the operating cost of an airline in India with sales tax on ATF levied by the State Governments being as high as 30%.