August , 2017
The hotel industry suffers from GST
15:45 pm

B.E. Bureau

Sudesh Poddar, President, Hotel and Restaurant Association of Eastern India, and Hony. Treasurer, the Federation of Hotel & Restaurant Association of India, spoke to BE’s Kishore Kumar Biswas about the major trends in India’s hospitality and tourism sector.


Q. Please mention some of the changes in the Indian hotel industry  that you are witnessing in the last 10 to 15 years.

A. The hotel or hospitality sector is growing continuously in India. But the rate of growth is not very high. The first visible change is the growth of online bookings. In India, at present, about 60% of the bookings of the rooms are online. And it is increasing. Online booking is done mostly through Make My Trip, clear trip, goibibo, OYO, etc.

Secondly, there is virtually no published tariff of rooms in the hotels now. The rate depends on the forces of demand and supply of rooms at the booking time. At present, the price of hotel rooms fluctuates like that of air tickets.

Thirdly, there is another sea change in this sector. The home’s stay option has become popular throughout India. One house owner can let some of the spare rooms of his/her house to the tourists. Governments of the respective states are interested in giving licences to the willing house owners provided they follow certain rules on safety, security, fire, and others. This home stay is cheaper and it helps earn income of the aged and not so wealthy house owners.

Q. Has there been any change in the source of revenue of the hotels in the last decade or so?

A. Booking for marriage has been a growing source of revenue. At present at least 20% revenue is coming from this. There are some exceptions. Some hotels like The Marriot or The Park in Kolkata earn as high as 40% or more from such ceremonies. Out of the total revenue, about 70% comes from accommodation and 30% from food and beverages. But there is exception as in The Park in Kolkata where 60% of the revenue is sourced from food and beverage.

Q. In which region of India is the sector growing the most?

A. In northern and western India, the hotel and hospitality sector is growing the most. Their growth rate is 10-15%. Whereas in eastern and southern India, we see the growth rate is almost 7-9%.

Q. About the foreigners’ choice…

A. One cannot particularise the choice of foreigners. Even the choices of hotel bookings of the tourists from the developed world are mixed. It is not as if that they always prefer expensive hotels. They stay in every category of hotels.

Q. How has the recent imposition of the GST been
affecting the sector? 

A. This has been thrust upon us. This is particularly unfortunate for high end tourism. It is known that 30% to 40% of the bookings have already been cancelled. The imposition of 28% GST on the rooms that cost above `7500 thousand has lowered the competitiveness of Indian hotels. Quite a large number of businesses are diverting to neighbouring countries. The conference and marriage contracts are most affected.

You can compare the tax rates of other neighbouring countries. For example, in Thailand and Singapore, it is 7%, Malayasia 6%, Switzerland imposes 8%, in China it is higher at 17%, but compared to us it is low. In Vietnam it is 10%. For budget hotels with tariff between 1000 to 2500 the GST is 12%. It may not be much affected. We are also not very worried about customers who prefer room tariff rates in between `2500 to 7500 because in this segment the GST is 18%.

Q. Have you complained against it to the government?

A. Yes, we have and we will do it again. Our demand is to reconsider the rates, particularly the highest rate of 28% imposed on the high end customers.

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