The last couple of quarters have been nightmarish for the hospitality industry in India! The industry is the third largest foreign exchange earner for the country and is expected to generate 13 million jobs! The Indian tourism and hospitality sector’s direct contribution to GDP in 2016 is estimated to be US$47 billion!! Yet, a slight fluctuation in the economy can make people spend less in the hospitality industry. Any slight decline in the Global economy affects the performance of Tourism and hospitality. Any changes in the law and order will affect the hotels. Even changes in taxes and increase in fuel prices can affect the hospitality industry. The hospitality sector is not even recognized as an industry by the government.
The Hotel General Managers should be lauded for the stresses they go through to manage these variables which they have no control over.
The cash crunch during the past few quarters after demonetization has led to lower footfalls at the leisure destinations and hotels, affecting all stakeholders, especially the last-mile and in-destination businesses. Banqueting and eating out at restaurants have been largely affected due to this artificial cash crunch leading to de-growth in the food and beverage outlets.
- Liquor ban in hotels on highways
Most star hotels and restaurants along highways (which are the city center roads in most cities) have suffered a sharp drop in business since a court order was passed prohibiting the sale of alcohol at these properties, with some reporting losses up to 60%. Total footfall to the hotels are also affected thus the room business is also down. The MICE (meetings, incentives, conferences and exhibitions) and restaurant business is on a steady decline.
On 3rd August 2016, the bill to introduce The Goods and Service Tax (GST) was passed in the Upper House of the Indian Parliament – The Rajya Sabha. This is to be implemented from 01st July 2017. The proposed rate for GST is a four-tiered structure of 5%, 12%, 18% and 28%. The hotel industry has been pegged at an 18% rate. Even though the government has introduced the bill and set out a date for its roll-out, there still isn’t enough clarity on its implementation. There will need to be systems in place and clear guidelines as to how the accounts need to be maintained and returns to be filed. On its launch, the Service Tax created a lot of confusions too, and hopefully, the authorities would have learnt a lesson from there, and will ensure a more seamless implementation of GST.
- Recent Natural disasters in India
The hotel industry is exposed to the physical risk of its property being damaged as well as the economic risk of tourism and corporate travel suffering as people avoid areas disrupted by the disasters. Case in reference is the floods , cyclones , earthquakes, avalanches etc. Furthermore, areas most heavily affected face the danger of stigmatization by tourists for some period going forward before becoming normal.
5. Safety and security of guests
Increased rate of crime against foreign tourists in India during the last 5 years has been responsible for denting India’s image abroad and casting a dark shadow on the whole tourism industry. Some of the recent incidents are ; German tourist raped near Mahabalipuram while asleep; Gang-rape of an Israeli woman in Manali, Himachal Pradesh; five men guilty of gang-raping Danish tourist in New Delhi; gang-rape of American tourist in Dharamshala
6. Health scares & advisories
Recent health scares of H1N1 virus, Swine flu, SARS, plague etc have driven the other countries to issue travel advisories against travel to certain affected regions of the country which has a direct impact on occupancies of hotels. Some of the travel advisories are un necessary and only caused panic
Of course, terror is on the agenda of most countries but Indian hotel industry is the worst affected whenever the Pakistani terror outfits make a posturing noise. India is mostly avoided for travel for security reasons most of the times by the corporate and leisure travelers
- Corruption of the system
Needless to mention, we have a legacy which we have to live with in an environment of corruption for licenses, permits and anything legal to do business. Even if we need a legal sewerage connection we have to pay to get it. This has put a strain on the expenses and costs and lower GOP’s of already strained profitability of hotels . This has immensely hiked the project costs of new hotels
I am not even talking on hospitality industry challenges like political mishmashes , talent crunch, in-stable power situations leading to high cost of captive power generation, water shortage, poor internet bandwidth, mobile phone signal drops , environmental issues , long holidays in Indian states which empty out business hotels etc