Infrastructure plays a very important role for the tourism sector. Development of airports, railways, roadways, better connectivity between places and facilities as well as maintaining the upkeep of tourist destination is very necessary. Further, strong GDP growth would also aid business travel.
The year 2008 would have been best left lost in the passages of time, especially for the hotel industry which had to deal with the worst financial crisis in several decades, high oil prices and a slew of militant attacks that played havoc on both business and leisure travel. Further, cost pressures, liquidity crisis and regulations concerning the real estate sector made funding for hotel projects difficult. CRISIL Research expects the profitability of premium hotels to be impacted due to the sharp decline in occupancy rates and room rates. It expects the demand to decline by 15.5% YoY in 2009-10 and this is going to affect the profitability of the sector. The hotel companies are already facing cash flow pressure, thereby affecting their expansion plans. The balance sheets of the hotel companies are under stress on account of acquisitions of land banks and rising debt levels. While the government is promoting year 2009 as 'Visit India', concrete measures on problems faced by the sector needed to be solved urgently to get the industry back on track.
Budget Measures
Commonwealth games outlay to be stepped up from Rs 21 bn in Interim Budget to Rs 35 bn in 2009-10.
Greater focus on infrastructure development. Also, the budget has indicated getting the GDP growth rate back on track.
Tax exemption on personal income increased from Rs 150, 000 to Rs 160, 000.
Fringe benefit tax (FBT) abolished. Surcharge of 10% on personal income-tax also removed.
No changes made in the corporate tax rates.
Rate of minimum alternate tax (MAT) on book profits has been increased from 10% to 15%, but with a provision of carrying forward the tax credit on MAT to ten years from the current seven years.
Budget Impact
The higher outlay for the Commonwealth Games would aid the hotel sector in faster execution of the projects in the NCR region.
Infrastructure plays a very important role for the tourism sector. Development of airports, railways, roadways, better connectivity between places and facilities as well as maintaining the upkeep of tourist destination is very necessary. Further, strong GDP growth would also aid business travel.
Exemptions on personal income tax would increase the income in the hands of the consumers, thereby increasing spending on discretionary items including domestic tourism.
Company Impact
The hotel sector would benefit on account of infrastructure development and strong GDP growth. Major hotel players like IHCL, EIH and ITC would stand to gain.
Infrastructure plays a very important role for the tourism sector. Development of airports, railways, roadways, better connectivity between places and facilities as well as maintaining the upkeep of tourist destination is very necessary. Further, strong GDP growth would also aid business travel.