Progress through PPP

S P Jain, chairman of Pride Group of Hotels and senior VP of HRAWI is of the opinion that a strong bond between the government and the private players is crucial for the sector’s development. By Dinkar Farwaha

S P Jain Chairman, Pride Group of Hotels Senior vice president, HRAWI

While the group is trying hard to bridge the gap between budget and upscale hotels, Jain believes that unless the government and the hospitality sector work in tandem (public-private partnership or PPP), the gap will prove too much to cover even after the expected supply of rooms by various players come into being. "As per the Planning Commission of India, an investment of Rs 10 lakh by the hospitality sector creates an employment of about 58 direct or indirect jobs, whereas in manufacturing industries the corresponding figure is only 22. Furthermore, employment from the hospitality industry is generated in both entry-level positions as well as in higher levels," Jain mentions. He is of the view that the tariff rates, which have gone up to unprecedented levels primarily due to the acute shortage of hotel rooms throughout the country, can be rationalised if this demand-supply gap is bridged." However, he also believes that the huge cost of setting up a new hotel in the country will act as a deterrent for the tariff to decrease. "The prevalent high room rates might continue to prevail, even when the supply increases," he says. Elaborating on the high-cost factor, Jain says, "The current cost of setting up new hotels, including the cost of land is indeed very high across all categories of hotels. For example, to set-up a five-star deluxe hotel, the cost ranges from Rs 300 crore to Rs 600 crore depending on the location of the hotel and the number of guestrooms. At such a high-cost, the economic viability of the new projects are at peril and given the increase in inventory of guestrooms in the future, the current high room rates would also be more rational. This would make the economic viability even more difficult," he says.

Jain believes

Jain is of the opinion that in order to remain competitive with other destinations in Asia like Malaysia, or for that matter Indonesia, which have a very pro-active tourism policy with very low level of taxation, hotels in India need to be subjected to a rationalised tax structure, specially with regard to taxes imposed by state governments like luxury tax, VAT, entertainment tax, state excise duty, etc. The need of the hour, according to him, is to grant an infrastructure status to the hotel industry under section 80-IA. He sincerely hopes that as an incentive to ease the acute shortage, and given the huge capital investment of putting up hotels, section 80-IA should be extended to all categories of hotels throughout the country, including those which are due to open in the next five years. "This would give the required boost to bring in the investment of Rs 40,000 crore required for the 100,000 guestrooms to be set-up in the five years to cater to the projected inflow of 10 million foreign tourists to the country," he mentions. When asked about his perfect vision for the industry for the next decade, Jain says, "I hope that with the integrated efforts of both the government and private players, the industry will emerge as one of the best in the world." n