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Learning the Hard Way

Thursday, October 5, 2017, 17:05 Hrs  [IST]

It has been good three months to the launch of this non-discriminatory Goods and Service Tax (GST); however the hotel sector in India is still struggling to grasp the alien (to them) concept. Speaking “off the record” hoteliers confessed that there is a lot of distress across the hotel sector as GST has brought in a setback both in terms of business and compliance. The bigger brands are blown away by the 28% tax imposed on the room tariff and their business is going through a bad phase. The overall buzz in the market has dampened the travel sentiment of the end customer and they are preferring budget and mid-scale hotels over the luxury ones. Even the hoteliers are trapped amidst the filing process and are striving to overcome the ambiguity. While resort-ish properties in the remote destinations are concerned about loss of corporate business due to IGST ambiguity, the city hotels are hoping to benefit from it as events and conferences will now be more key city-centred. The only good outcome of GST, as said by hoteliers, has been that all hotels are raising the invoices in the said manner and mentioning their GST numbers religiously. Akansha Pandey captures the prevailing sentiments by talking to few hoteliers.

Param Kannampilly, Chairman & Managing Director, Concept Hospitality
Our hotels cater to the corporate segment of travellers and so far the business has as usual. The companies which are organising events in states where they don’t have their registered office are now at least getting the CGST back, if not both. Though, across the hotel sector in India, the business is more or less ruined and the hoteliers are very disappointed. Also, I feel that the published tariff concept should be done away with. The concept of ‘Declared tariff’ is invalid as most of the hotels work on a ‘dynamic pricing’ system driven by the market forces. Also, filing returns is a big pain and we just managed to finish that off. The government should relook at the tax slab for the hospitality sector which is currently struggling to understand varied rates. This can be brought down to 12% probably and allow the hotel sector to flourish.

Arif Patel, Vice President - Sales, Marketing, Distribution & Loyalty, AccorHotels India
A kind of realignment is expected to happen in the way events and conference business happen in hotel. The whole business will now start happening on a management fee model. That is how this business happens outside of India. It’s quite positive as well. Hotels will now get business directly. We have been seeing growth in terms of leads and booking for MICE at our properties. More and more events will start happening in India as companies will not be able to avail credits for events happening outside the country. This will generate new demand for hotels in key cities in the country, he added. With supply in terms of hotel rooms is not growing, rates are bound to go up in coming months with demand increasing.

Anshu Sarin, CEO, Keys Hotels
We haven’t seen any negative impact in terms of business since the roll out of GST. Business is as usual at our hotels. Based on the rates and location we are immune to the GST. As far as new tax structure is concerned, we are more or less in the same bracket as we were in the past. Therefore, from a cost standpoint also, there is no additional burden to our consumers in the new tax system. We are fairly insulated.

Himmat Anand, Founder, Tree of Life Resorts and Hotels
Our segment is primarily leisure travel and we comprise two hotel brands – Tree of Life and Tree Leaf. Within the Tree Leaf Hotel category, the room rates fall under the 18% tax rate which is a reasonable range. On the other hand, The Tree of Life Hotels come under the 28% tax slab which is a high rate. This makes the Indian hospitality industry the highest taxed globally, having said that, our inventory across the country is small and doesn’t exceed beyond 30 keys. Hence, the impact for a brand like ours is not huge, though the bigger inventory brands falling in the 28% tax slab would be seeing a slowdown or a drop in business. Also, we are still struggling on the clarity of the rate and process of availing input credit. Once that is clear, tariff revisions can also be considered hopefully by Q1 next year.

Souvagya Mohapatra, Executive Director, Mayfair Hotels & Resorts
Our majority business comes out of the resort category of accommodation catering to the leisure clientele which now comes under the higher tax bracket of 28%. But there isn’t much impact on our hospitality business driven out of leisure and FIT. Whatever minor after-effect is being witnessed, will fade away in few months’ time. Besides, there is no change in the flow of corporate traffic to our business hotels which forms 50% part of our business. We are clear on the input credit and compliance part of GST but with revisions being notified from the government’s end, whatever ambiguity is there among other players will settle soon. In terms of room tariff, we today command a particular rate and will not go below the same.

Sunil Gupta, CEO, WelcomHeritage Hotels
The GST has had a positive impact at specific locations where the tax rate has now decreased from a higher rate to 18%. It is also stable at places where the corporate clientele is able to avail the best of credit. Unfortunately, 60% of WelcomHeritage properties are in the 28% tax slab which is making it all the more expensive for guests. We are continuing to grow our revenues but the overall buzz in the market has dampened the travel sentiment of the end customer. The leisure traffic from inbound markets may be slightly affected; however the domestic travel is going strong. The government should ensure more clarity on the input credit part and assist the hotel sector in smoother execution of the filing. The industry would welcome if the government rationalises the tax structure to 18% uniform tariff for hotels.

Rohit Vig, Managing Director, StayWell Hospitality Group India
The high tax slab of 28% levied on rooms with tariff above INR 7500 has eventually affected the business, especially of luxury hotels including our Park Regis Goa. There has been a significant increase on the room rates because of the tax structure. We are not looking at revising the prices which has been set up after detailed comparative study of the market and our product. However, the budget hotels, it is pretty much usual, apart from just double checking that the GST norms are being followed accurately. As far as corporate travellers are concerned, we haven’t seen any decline in the occupancy, but leisure travellers have started to opt for low-rate rooms. We are following the GST regulations irrespective of the rates going higher.

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