Budget 2011: Hotel FY11 marked the turnaround of the hotel industry as the economy recovered after the financial crisis. The industry saw rapid recovery as the year progressed. While foreign tourist arrival increased over 2009 levels, domestic travellers also provided a big boost to the hospitality industry. As a result of sharp increase in demand, occupancy and average room rent (ARR) returned to levels before the slowdown. Revenue per average room (RevPAR) also increased by 6.2% YoY during the year. While there is a shortage of rooms, several domestic hotel companies and foreign players launched new projects across different segments. These new hotel properties are expected to close the demand-supply gap in the industry in the coming years.

Budget Expectations

	Infrastructure status for the hospitality industry for quick completion of the ongoing projects and loans at lower rates for future capital expenditure
	Rationalization of the tax structure to provide a level playing field to all participants
	Single window clearance of all tourism projects

Budget Measures

	Increase in tax exemption limit from Rs 160,000 to Rs 180,000 for individual tax payers
	Lowering of qualifying age of senior citizen from 65 to 60
	Focus on road and infrastructure development
	Imposition of service tax on hotels charging over Rs 1,500 per day with an abatement of 50%
	Imposition of service tax on service provided by air-conditioned restaurants that have license to serve liquor, by giving an abatement of 70%.
	Increase of service tax by Rs 50 on domestic air travel and Rs 100 on international air travel.
	Increase in allocation to infrastructure
	Focus on increasing GDP growth to 9%.

Budget Impact

	Infrastructure growth is very important for tourism. Development of roads, railways and airports play an important part in developing the tourism sector.
	Readjustment of tax rates will help put additional money in the hands of the travelers.
	Imposition of service tax on hotels charging over Rs 1,500 per day and on air-conditioned restaurants that have license to serve liquor will raise prices of their services.

Company Impact

	Better infrastructure and higher GDP growth will help the hotel sector grow. Major hotels to benefit are Indian Hotels, Taj GVK, Oriental Hotel, EIH and Hotel Leelaventure.
	Readjustment of tax rates which has put more money in the hand of the domestic travelers will help boost the fortunes of the hotel sector. This is a positive for Indian Hotels, Taj GVK, Oriental Hotel, EIH and Hotel Leelaventure.
	Imposition of service tax on hotels charging over Rs 1,500 per day and on air-conditioned restaurants that have license to serve liquor is a negative for hotels in the range of budget and over. It will also be a negative for hotels which earn significant revenue from their food and beverage business. Hotels chains likely to be impacted are Indian Hotels, Taj GVK, Oriental Hotel, EIH and Hotel Leelaventure.
Budget Impact: Hotels Sector Analysis for 2009  Latest: Performance Of Hotels Stocks | Hotels Sector Report

Complete coverage – Budget 2011