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Hit hardest by pandemic, travel & hospitality sector wants tax incentives, policy support in Budget



Just when the travel and hospitality industry was slowly inching towards normalcy last year, the discovery of another variant of the coronavirus in November in South Africa had created concerns back home.

As more cases were detected in India, the administration imposed night curfews and banned Christmas and New Year celebrations. The Covid curbs only increased in January 2022, especially in the capital, as restaurants and bars were shut and weekend curfew was strictly implemented.

The contribution of the travel and hospitality sector to the economy can hardly be ignored. According to the World Travel and Tourism Council (WTTC), the contribution of travel and tourism to India’s GDP was 6.8% in 2019. It fell to 4.7% in 2020 due to the coronavirus-induced lockdowns, including travel restrictions around the world.

As one of the hardest hit industries since the outbreak of Covid-19, what are the expectations of the travel and hospitality industry from budget 2022?

Zorawar Kalra, Founder & MD of Massive Restaurants, with brands such as Masala Library, Farzi Cafe and Pa Pa Ya as part of its portfolio, says a lot needs to be done to bring back life into the sector. “The GST Input Tax Credit (ITC) should be restored. This industry is running on very thin margins and after two years of very tough times, we need support at this juncture. In the absence of ITC, , it is difficult for everyone to keep their heads above water. There should also be a mechanism in place to protect the industry from further lockdowns. For instance, why not come up with a furlough scheme, as has been the case in the UK, and perhaps introduce an insurance mechanism. After all, if there is insurance against earthquakes and fires, why not the pandemic?” he questions.

The restaurateur adds that with only the delivery option currently being open, it has been an extremely difficult time for the industry. “It would be beneficial to have very low-interest working capital loans made available to the industry as restarting after each lockdown consumes a lot of capital,” says Kalra.

In its statement issued earlier in January, industry body National Restaurant Association of India (NRAI) had observed how over 25% of restaurants were shut last year and more than 24-lakh people lost their jobs across the country. “The new guidelines, which prohibits dining completely and allows only deliveries, is completely unsustainable. It is like an excruciating and painful slow death for an erstwhile vibrant industry,” Kabir Suri, President of NRAI had said.

If the restaurant industry was dealt a severe blow, the travel and tourism industry had it no better. Those in the industry want the travel sentiment to be revived in the budget via stimulus packages and tax incentives for personal and corporate travel. “A reduction in personal income tax rates will place more money in an individual’s hands, which can accelerate the growth of travel. It can also include incentives for states to spend more of their budget on infrastructure and connectivity enhancements that can aid tourism,” says Nishant Pitti, CEO and Co-Founder, EaseMyTrip.

Despite the restrictions, Pitti expects a stronger recovery for the travel sector in 2022. He anticipates more travellers preferring locations that adopt sustainable tourism practises. “There will be a growth in revenge travel in 2022. Many travellers have woken up to the benefits and the need for sustainable tourism in a post-Covid scenario. There will also be a preference for locations with a focus on wellness activities that help them rejuvenate and lead healthier lives,” he adds.

Others in the industry are of the view that relief measures for a sector like travel and tourism need to be treated on a par with the IT sector, in order to help it revive business faster. “We expect the government to support the industry’s immediate revival and bring incentive proposals accordingly,” says Prahlad Krishnamurthi, Chief Business Officer of Cleartrip.

A minor increase, he says, is being seen in the cancellation rate of international flights and bookings. However, domestic booking and travel trends are faring better with metro destinations seeing good progress. “Leisure destinations like Goa, Chandigarh, and Jaipur indicate a massive uptick compared to last year. Similarly, most customers are showing interest in tourist destinations like Manila and Abu Dhabi for international travel. We believe that this trend of online bookings will prevail for the foreseeable future,” he says.

Echoing similar sentiments, Amit Damani, Co-Founder of Vista Rooms, a holiday homes and villa rental company, affirms that domestic travel is still on, with short leisure trips being popular. “People are heading out for short trips on weekends to nearby destinations that are within driving distance. Business travel, however, has been impacted drastically and will take another 3-6 months to get back on track,” he says.

For the upcoming budget, Damani wants more clarification at the national level on rules and tax systems that apply to the homestay villa segment. “Currently, it’s fairly fragmented, and each state may have its own set of laws surrounding what constitutes a homestay or BnB, and that’s more of a recognition than a policy .We are trying to simplify and get each and every property registered as a BnB nationally,” he says.

Given that homestays have become a popular component of domestic tourism, Damani is of the view that sufficient legislation and policy recognition are critical and expects to see such suggestions in this year’s budget.

Hopes are high for a sector that has repeatedly been at the receiving end of the Covid-19 pandemic. The travel and hospitality industry is hopeful that FM Nirmala Sitharaman would factor all the relevant aspects into the budget to help them grow.

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