Budget to crub hotel expansion

Budget to crub hotel expansion

NEW DELHI, MAR 3: Hoteliers will have to take a second look at their expansion plans and new projects as their surplus funds dry up due to the budget proposal to withdraw tax concessions on foreign exchange earnings, industry majors said today.

"About 20 to 25 per cent of expansion plans at the project stage in the next two to three years could be adversely affected as tax outgo goes up reducing surplus available for building new hotels," Federation of Hotel and Restaurant Associations of India secretary general S Suri said.

With the phasing out of tax concessions, the exemptions will become 40 per cent in both cases with a futher reduction of 20 per cent in each of the next four years.

Luxury hotels catering to foreign guests and leisure destinations like Goa, Jaipur and Agra could be the worst hit as a major chunk of their profits accrue from foreign exchange earnings, Suri said.

However, international hotel consultancy firm, HVS International continued to be bullish on the Indian hotel industry pointing out that bottomlines in India were healthy compared to the rest of the world.

"Out of ten new projects, two or three will get hit by the new proposals. But the rest which are promoted by good companies are expected to take these things into account when preparing their feasibility reports," HVS Associate Director Manav Thadani said adding that it could even help in creating a level playing field as existing players would be at par with new entrepreneurs.

"Borderline projects may not go ahead as the new guys gofor a review to see the viability," he said.

"But we believe that the hotel industry will peak1999-2000 at a stronger level than before and are optimistic 2000-2001," he said.