Full open door could be must for hotels to earn tax breaks

Published>Sun, Jan 24 10 02:09 AM

Major hospitality chains planning to open properties in the national capital region (NCR) before the Commonwealth Games in October could lose out on the five-year tax holiday benefit if they are not able to throw open the entire room inventory before the sporting extravaganza.

According to tourism secretary Sujit Banerjee, the ministry would oppose full tax holiday to companies not closing projects on time. "How can hotels open partially and yet get the tax-holiday. They will have to come to us for registration and classification, and we will not allow such a thing," Banerjee told FE.

A host of hospitality majors?domestic and foreign?including the Taj Group, InterContinental, Hilton, Starwood Hotels and Resorts (Westin) have projects in the pipeline, which are slated for launch before the Commonwealth Games. While InterContinental group plans to open its Crowne Plaza in New Delhi before the Games, its two other properties would be operational in 2010 but not necessarily before the event.

"By opening partially, hotels will not only gain the benefit of the five-year tax holiday (except for five-star properties which are outside the ambit of the scheme), but will also get their licences fast as the ministry is under immense pressure to get the required rooms ready," said a hospitality consultant on the condition of anonymity. The tourism ministry is also pushing for an extension of the tax-holiday till July 2010 from the earlier March deadline as reported by FE earlier.

According to market estimates, only 50% of the total proposed room inventory will be ready before the Games. Though some hotel majors maintain they will launch full operations of their properties, sector analysts and experts are of the opinion that ground realities are different and as projects are met with delays, owners are planning to go for only partial openings.

This could come as a rude shock to the tourism ministry, which is struggling hard to put together a list of 40,000 hotel rooms in the NCR (required to host one lakh tourists expected for the Games). However, according to the ministry data accessed by FE, out of the 10,420 rooms in the definite category, over 4,400 rooms are still to come up.

Of these, 11,000 are rooms in guest houses, 5,500 in DDA apartments and 3,000 out of the bed-and-breakfast scheme. There are around 10,000 rooms which are part of the existing room inventory in the region. Out of the 10,400 rooms that were supposed to come up before the Games, 5,980 are completed and the rest are still to come up.

The slowdown has hit the hospitality industry hard. While revenues nosedived, credit crunch impaired the launch of new projects. Getting licences (some 130-odd) is the most tedious part of setting up a hotel in the country.

Source: Web Search