India plans to boost tourism, travel in annual budget - sources

EIH

05/01/2018 10:39

* Finance minister likely to present 2018/19 budget on Feb.1 
    * Likely to offer tax incentives, more funds for tourism - 
sources 
    * Govt says India needs about 200,000 more hotel rooms 
    * Foreign tourists inflow up 15.6 pct y/y in 2017 until Nov 
 
    By Manoj Kumar and Aditi Shah 
    NEW DELHI, Jan 5 (Reuters) - India is planning to cut taxes 
on travel and tourism in next month's federal budget and give 
more incentives to the $210 billion sector, government sources 
said, hoping to boost  economic growth and create more jobs.  
    The move could add to a domestic tourism boom in the world's 
second most populous nation, where low inflation and rising 
incomes are changing lifestyles and consumption patterns of an 
estimated 250 million middle-class Indians. With scores of 
destinations introduced on airline routes last year, air travel 
is also surging. 
    India's tourism sector grew over 10 percent in the six 
months ending September, compared to near 8 percent in the 
year-ago period. According to an industry report, tourism 
employs 40 million people in India and could add 10 million jobs 
in a decade.  
    "We'll announce measures in the budget to promote investment 
in the tourism sector," a top finance ministry official told 
Reuters, adding that Finance Minister Arun Jaitley favours 
lowering a 28 percent tax on hotel tariffs, and offering 
incentives to attract private investments. 
    If the moves come about, companies expected to benefit 
include airlines like IndiGo, owned by InterGlobe Aviation 
 INGL.NS , and Jet Airways  JET.NS  and hotel operators such as 
Indian Hotels  IHTL.NS , that owns the Taj Mahal chain and EIH 
Ltd  EIHO.NS  that operates the Oberoi hotels in India.  
    Tour operators including Cox & Kings  COKI.NS  and Thomas 
Cook  THOM.NS  are also likely to gain.  
    In India tourists, on average, pay 30 percent tax on hotel 
rooms and travel compared with less than 10 percent in 
Singapore, Thailand and Indonesia, said Pronab Sarkar, president 
of the Indian Association of Tour Operators (IATO). 
    Another government official said the budget was likely to 
"significantly" raise allocations for tourism infrastructure and 
raise income tax exemptions on investments in new hotels.  
    A third official, who is aware of the finance ministry's 
pre-budget consultations with industry groups, said Jaitley was 
expected to lower income tax on corporate profit, offer tax 
incentives on hotel construction, allocate more funds for new 
tourist trains and building roads to tourist destinations. 
    The government will offer incentives to more regional 
airlines this year to cover new, under-served airports, the 
official added. 
    All three officials, who spoke on condition of anonymity, 
declined to provide numbers or share further details.  
     
     CHEAPER FLIGHTS 
    India needs about 200,000 new hotel rooms, Tourism Minister 
K.J. Alphons told parliament this week. 
    "We have reached a plateau point and need more resources to 
create new infrastructure and develop tourist packages," Alphons 
later told Reuters, adding there was huge potential in 
developing areas that were not the usual tourist destinations. 
    Prime Minister Narendra Modi has said developing tourism, 
particularly in India's remote north-eastern states, is one of 
his top priorities.  
    Hotel occupancy levels in India are at their highest levels 
since 2008, even though many hotel chains have raised prices. 
    The need for rooms has been spotted by foreign investors 
with Japan's SoftBank Group  9984.T  backing start-ups like OYO 
Rooms, which has emerged as the largest aggregator of budget 
accommodation across the country with hotels in over 200  
destinations. 
    One major driver of the domestic tourism boom has been the 
launch in 2017 of five regional budget airlines on over 100 
routes, which are given incentives by the government to offer 
cut-price flights to uncovered and remote areas, encouraging 
thousands of families to explore flying for the first time.  
    Domestic airlines carried 10.6 million passengers in the 
first eleven months of 2017, up 17 percent from the year-ago 
period - encouraging some established players like Spicejet 
 SPJT.BO , Jet Airways and Vistara, a joint venture between the 
Tata Group and Singapore Airlines  SIAL.SI , to start flights to 
new locations. 
     
    ONLINE PLAYERS 
    Tour operators said double-digit hikes in urban wages, 
coupled with an over 25 percent rise in the benchmark Sensex 
index  .BSESN  last year, have contributed to the domestic 
tourism boom. 
    At the same time over 9 million foreigners visited India in 
the first 11 months of 2017, up 15.6 percent from a year ago. 
    Domestic tourists, who account for 88 percent of the sector, 
are increasingly using online portals for hotel and travel 
bookings.  
    Travel portal MakeMyTrip  MMYT.O  reported a 186 percent 
jump in hotel bookings during the September quarter and its 
holiday package segment that includes hotel and flight bookings, 
saw a 71 percent increase in revenues over the same period. 
    Online operators say tourism could emerge as the new engine 
of growth after the IT sector but that it needs government 
support.  
    "The government must lower the tax burden, ease rules and 
build infrastructure if it wants to ensure 15-20 percent annual 
growth in tourism in coming years," said Sarkar of IATO.     
    ($1 = 63.5200 Indian rupees) 
 
 (Additional reporting by Gaurav Dogra in Bengaluru and Rupam 
Jain in New Delhi; Editing by Euan Rocha and Raju 
Gopalakrishnan) 
 ((manoj.kumar@thomsonreuters.com; +91 11 4954 8029; Reuters 
Messaging: manoj.kumar.thomsonreuters.com@reuters.net)) 
 
Keywords: INDIA ECONOMY/TOURISM