Like all other sectors, the hospitality sector had also pinned high expectations on the Union Budget 2021. Despite accounting for 10% of India’s GDP and employing 9 percent of India’s working population, the hospitality industry failed to find a place in the Union Budget 2021.
The onset of the COVID-19 pandemic not only changed our lives but rattled economies and dismantled industries-hospitality industry was no different. It received a severe blow, especially during the lockdowns.
The travel and tourism sector has been one of the most impacted sectors- travel restrictions and closure of borders worsened the situation. The industry experts were banking on a budget of 2021 to heal from this disaster. However, that has not happened and has left the sector disappointed. While the budget 2021 presented a diversified approach- focusing on healthcare, inclusive development, infra, innovation, and human capital, there is nothing constructive for the hospitality sector.
Hospitality Sector Feels Disappointed With Union Budget 2021
During the June quarter, i.e., the lockdown period, according to data published by CMIE, there was a drop in employment in the travel and tourism sector by 5.5 million. Whereas in December 2020 quarter, the sector employed 20.7 million people who show this sector’s employment scale. Travel and tourism after 2018 were one of the few sectors that grew faster compared to other sectors.
While some feel that the finance minister will provide some relief to the travel sector by addressing the highway infrastructure, however, the hospitality sector was left out in the Budget 2021. In a pre-budget memorandum to the FM, FHRAI included some priority reforms to stabilize the industry, such as classifying hospitality under the RBI Infrastructure lending norm criteria, review of the Kamath Committee recommendations, industry status to restaurants, hotels, and resorts across the country, MAT waiver for a time period of 3 years, to include hospitality and tourism in the concurrent list, and IGST billing to hotels for corporate and MICE bookings.
According to the Federation of Hotel and Restaurant Association of India’s (FHRAI) Vice President, Mr. Gurbaxish Singh Kohli, with less than 25% of pre-pandemic revenues and zero exchange earnings, the sector is facing an existential crisis. Industry insiders were surprised that the hospitality sector had no mention in the budget, while during the pandemic, many hotels were turned into quarantine centers to manage the crisis.
A few had a different viewpoint and felt that the finance minister’s announcement for the COVID-19 vaccination fund was an optimistic step. As more people get vaccinated, people will gradually return to pre-pandemic lives, and once normalcy is restored, it will ultimately boost the various crippled industries in the country, including travel and tourism. However, there is still a long way to go, and the hospitality sector needs immediate remedial measures. The rating agency, Icra stated that the hospitality sector might shrink by 65 percent in the financial year 2021.
FHRAI has written to the Prime Minister expressing the disappointment. The Federation of Hotel and Restaurant Association of India stated its incredulity on the 19% belt-tightening in the budget allocation for the Ministry of Tourism when the industry is in crisis. In the absence of a specific package for the sector, at least 30% to 40% of restaurants and 20% to 30% of hotels in the country face impending shutdown, resulting in huge job losses.
In a recent report, in the year 2020, the full-year occupancy in hotels was 34.5% in the country, and during the pandemic, it was 27.8%. Various key markets reported RevPAR (revenue per available room in Rupees) in the pandemic period in 100s, with RevPAR of INR672 in Ahmedabad being the lowest.
FHRAI stated that while most of the sectors are on a recovery path, the hospitality sector bears the brunt with an uncertain future. The industry is looking for sector-specific relief from the government.
Hospitality Sector – The Biggest Casualty Of The Pandemic
The hospitality industry has been one of the worst-hit sectors by the COVID-19 pandemic. The subsequent lockdowns restricted mobility and hotel occupancies, and the pan-India occupancy was at an all-time low in the eight months of the financial year 2021.
Even though reeling from the huge losses due to the COVID-19 pandemic, disappointingly, the hospitality sector could find a place in this Union Budget. The industry was expecting a helping hand from the government.
FHRAI has requested Prime Minister Narendra Modi to take cognizance of the hospitality sector’s tormenting situation and take urgent remedial measures to prevent it from succumbing.