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SPECIAL REPORT

Uncertainties galore in India’s ‘Paradise Unexplored’

North East of India despite having immense potential for tourism is plagued by issues of infrastructure, connectivity, security, and above all poor visibility. Hospitality Biz tries to understand the sentiments of the hotel industry players in the region along with opportunities and challenges for new investments.

Tuesday, June 2, 2015, 16:00 Hrs  [IST]

Sarbendra SarkarWhile in the political sense, the North East is a geographical region comprising the seven sisters - Arunachal Pradesh, Manipur, Assam, Meghalaya, Mizoram, Nagaland and Tripura - and Sikkim, from a tourism region stand point, the North Eastern region refers to the easternmost region of India comprising the contiguous seven sister States, Sikkim, and parts of North Bengal (districts of Darjeeling, Jalpaiguri, and Koch Bihar). The region is blessed with nature’s bounty in terms of beautiful landscape, mountain ranges, forests with rich flora and fauna, indigenous tribes and their rich culture and heritage, an amalgam which can enthrall leisure and adventure seekers alike. The whole region is a mystical space as it falls in the Indian Himalayan Region. Geographically, North East is the true frontier region as it has over 2000 km of common borders with Bhutan, Bangladesh, China, Myanmar and Nepal.

The region is considered a geographic gateway for much of India’s flora and fauna and harbours exceptional biodiversity and has relatively complex bio-geography. Roughly, the region contains more than one-third of the country’s total biodiversity. Besides representing the Himalayan Biodiversity Hotspot, the region also represents an important part of the Indo-Burma (Myanmar) global biodiversity hotspot, amongst the 34 recognised global biodiversity hotspots.

Despite all these advantages, the region remained aloof from the mainstream for a very long time because of numerous reasons. Lack of proper knowledge about the region and its rich diversity and issues of proper connectivity kept the region largely cut off from the rest of the country. It was in 1996, the Indian government announced a ‘New initiative for North East Region’ as part of integrating it with the mainstream. Many policy support initiatives followed. All departments of the government were asked to dedicate ten per cent of their annual budget for North East and a dedicated department was created to monitor it. The present government has gone one step ahead and assigned special task to all Ministers to visit North East region to understand the developmental needs of the region.

Kaziranga National Park

Considering the eco-sensitivity and fragility of the Himalayan region where mega manufacturing industries are a big no-no, Tourism has been identified as an activity which could deliver economic development and generate employment for the people. With this focus, various initiatives have been taken to promote North East as a destination for travel both within the country as well as in the international market. The Ministry of Tourism, Government of India has already organised three International Travel Marts dedicated for the region since 2013. This has benefited the region to a certain extent if the international arrival figures to the region are anything to be believed. But, it is a fact that we haven’t even scratched the surface considering the vast potential for tourism in the region.

Sudesh PoddarStakeholders’ speak
While everybody is excited about the vast potential for tourism in the region, they rue and lament about the lack of infrastructure and other regulatory issues which make the march difficult for the sector. The constraints are many - Lack of infrastructure; communication bottlenecks; geographical isolation; ethnic clashes leading to political instability; growth of insurgent activities; absence of leadership and entrepreneurship ability, the list goes on. “The North East is a very diverse region and is largely plagued by connectivity and infrastructure issues, as a result of which, despite being endowed with rich natural beauty, the flow of tourists in the region is restricted. Guwahati, the capital of Assam is fairly well connected and there are a number of good hotels there. A few branded chains are also on the anvil. Similarly, Gangtok in Sikkim too, has some good properties,” informs Navin Suchanti, Managing Director, Sinclairs Hotels.

Swarup DattaIndia Tourism has indeed been upbeat and supportive about travel into North East and its tourism potential. However, while any place can seem impressive in brochures, when it comes to ground realities, infrastructure is one of the biggest reasons the region is not developing. Bjorn Noel DeNiese, Director, Mayfair Spa Resort & Casino, Gangtok opines “Air connectivity is improving and the rail service from Arunachal has been of some respite but connectivity is still at least 15 years behind the rest of the country. Road conditions and highways connecting these regions aren’t something we can showcase yet, but if developed can be amongst the most scenic and interesting in this Asian subcontinent,” he stated. Organising trade fairs in the region at present, is not the best idea, he observes, as we will be showcasing incomplete products to the world.

BjornNoel DeNieseTourism in the North East is largely confined to few states or destinations. “Darjeeling area of West Bengal and Sikkim are fastest growing destinations in the region, because of the proactive government measures and largely peaceful socio-political climate. Darjeeling has been booming ever since Gorkhaland problem subsided. Shillong is also doing pretty well,” informs MP Agrawal, Managing Director, Central Hotel. The region hasn’t been able to attract inbound tourists because of issues related to connectivity, visibility, etc. What is sustaining the tourism industry in the region is domestic tourism. Sikkim had the highest foreign tourist footprint in the region with 31,698 as per the India Tourism statistics for 2013 and Mizoram, the lowest at mere 800.

“The marketing support for North East has helped to boost the tourism in this region. The local government needs to work on a comprehensive strategy in order to boost the tourism as the rich beauty, exotic flora and fauna and diversity in culture are the invaluable assets of North East which still needs to be explored,” says Sunil Sikka, Head - Business and Market Development, WelcomHeritage Hotels.

North East region offers immense opportunities for hotels in terms of both business as well as leisure tourism. North East India still is an untapped market, says Sarbendra Sarkar, Chairman and Managing Director, Cygnett Hotels & Resorts. “With the young generation of tourists preferring adventure tourism, the region has a great potential. The market is still largely untapped by branded hotels. The current demand is largely taken care of by local hotels. There is great potential to set up resorts and economy hotels,” he added.

Navin SuchantiHotel Investments
Except for Guwahati where there has been major hotel developments of late and presence of international brands, the hospitality industry in rest of the North East is dominated by and large by local players with smaller inventories ranging from five to 50 rooms. Shortage of big land parcels at ideal locations, land ownership issues and issues related with logistics, etc. are prohibitive for genuine investors. Highlighting the issue, Suchanti said, “In most states, except the locals, any other Indian cannot purchase land. This is a major impediment. It is indeed ironical that all Indians cannot own landed assets in many of the North Eastern states. This is an archival situation and must change. The people living in North Eastern region cannot be deprived of development.”

Presently, there seems to be a mismatch in the demand and supply in the North East market as far as hotels are concerned. Generally being first generation entrepreneurs in the hospitality business, hotels are not professionally developed. The curiosity about the region brings in a few but the services and facilities still leave much to be desired, says DeNiese of Mayfair Hotels. “Investment opportunities are good in the region. However, it has to go hand in hand with infrastructure development from the government. Sikkim as a state has indeed benefitted thanks to the arrival of the Mayfair Group about six years ago is the only five-star deluxe in the North-East. The casino business has also supported tourism in the region and the economic benefit has primarily overflowed to not just Gangtok but previously lesser known regions of Sikkim such as Lachung, Lachen, Pelling, etc.,” he added.
templatemo slide
Investment opportunities in the region are very good and there have been increasing number of tie ups between local owners and established chains are happening of late, agrees Swarup Datta, Regional Director - North East, Sarovar Hotels and Resorts. The challenges according to Datta are related to connectivity, which is vital for tourism development and manpower issues. “If you bring in people from outside to work, there is a friction with the local population, who see them as someone stealing the jobs meant for them. Political instability in the region especially Assam, Mizoram, Nagaland and Arunachal Pradesh also pose challenges for tourism,” he points out. Sarkar also highlighted similar issues which deter investors from the region. “Lack of proper infrastructure had kept investors away from the region. There are other challenges like constraint in land acquisition, availability of adequate power, transport and logistics, financing facility, skilled labour, marketing, security concerns and political environment,” he stated.

Adding to the challenges are basic facilities like water supply, power, good roads, etc. “It is difficult to deal with the diversity of the region and tribal culture. North East is prone to heavy monsoon that leaves a toll on the condition of roads which require high maintenance on regular basis. Also, the cost of delivery of services to these regions is high. These key challenges are keeping the investors away from the region,” informs Sikka. “Shortage of potable water is a major issue across the region. Power is scarce and the power tariff is exorbitantly high, almost 15 per cent more compared to other regions, all of which adds up to the operational cost for hotel operators,” informs Agarwal.

sunil sikkaIncentives
Although the central government had announced capital subsidy and other incentives for industrial development under North East Industrial and Investment Promotion Policy 2007 (NIIPP) for investors, there have been inordinate delays in processing the applications and delivery of incentives to investors in the tourism and hospitality sectors. The Department of Industries, Government of India had notified 30 per cent capital subsidy on capital investments in various industrial sectors including hospitality in April 2007 to accelerate industrial development in the region. The hotel associations have taken up the issue recently with the central government. “The project cost in the North East is exorbitantly high considering the material cost, labour cost, etc. Lot of investors invested their money expecting 30 per cent capital subsidy from the government. The members of Hotel and Restaurant Association of Eastern India (HRAEI) are suffering due to inordinate delay in finalising their legitimate financial claims under this policy. The 30 per cent subsidy under NIIPP was a kind of sovereign guarantee. If sovereign guarantee becomes so weak, it will reflect badly on the government,” said Sudesh Poddar, President, HRAEI

 
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