The Good Times Will Still Take Sometime to Arrive

Bikramjit Ray Aug 10, 2016

THE SOUTH Asian Hoteliers' Conclave 2016 organised by Hotel Association of India (HAI) at The Taj Palace Hotel, New Delhi on August 9-10, featured an Open House with CEOs moderated by journalist Shekhar Gupta on the first day of the event.

Gupta was joined on his panel by Vikram Oberoi, CEO and Managing Director, EIH Hotels; Rakesh Sarna, Managing Director and CEO, IHC Ltd; Priya Paul, Chairperson, Apeejay Surrendra Park Hotels Pvt. Ltd; Nakul Anand, Executive Director, ITC Ltd; Patu Keswani, Chairman and MD, Lemon Tree Hotels Ltd.; and K B Kachru, Chairman Emeritus and Principle Advisor, Carlson Rezidor Hotel Group, South Asia.

Gupta began the session by asking his fellow panellists whether the promised 'Acchhe Din' had arrived for them.

“We are like the Congress today,” began Patu Keswani, “We have been like the Congress today for the last seven years. I think that in the next three years there is going to be a change and acchhe din will come, maybe in the end of PM Modi's first term in 2019. My guess is 2019 will be a great year for hotels. If you just do a forward projection of the scenario. Personally for the mid-market we are followers of Brexit because of our size. We are smaller than the luxury inventory in India and we are hoping for them to increase their pricing, when that happens we will also be able to increase prices.”

“I feel we are at a stage when we should expect things to boom. We are certainly not there today. I think we should look at the second term of the government where we will actually see results. I think taxation issues are to be dealt with and we better be serious about it. Our industry is together on this,” was K B Kachru’s response.

He went on to say that policies need to be corrected and if they are not, real challenges are ahead for the industry. "There is a mismatch in the kind of inventory and demand has to go up and we need to be focussed and really understand where the potential and market is," he added.

“Acche din nahin aayen, bahut din se wait kar rahe hain. But I think this has been the story of wait for tourism. We have been waiting for tourists. We have been waiting for infrastructure. We have been waiting for industry status. We have been waiting for lower taxes,” was Nakul Anand's opening statement.

“Where the change has taken place is that people are talking about tourism now. Traditionally, conventionally in India, tourism has always been looked at as elitist activity, when it can be positioned, as it has been world over as a driver of economic growth. It's up to the industry and we've all as industry association have been trying to set that mindset. I don't think we have got very far but certainly we have made a start. Abhi nahi aayen, but aane chahiye,” he added.

Priya Paul began by saying, “I think a seven percent GDP growth has given a lot of underlying strength to the hospitality sector. In almost all markets, occupancies have been steady. The supply-demand gap between many markets is starting to correct. I see the occupancies growing. What's not happening is the rates, which is a function of many other things. That is what's causing frustration in the industry because obviously if rates don't grow, investments and capex don't grow in the same way and certainly our returns”.

“I think it’s been quite stable for the past year or so, it's not taken off like a rocket that may happen in 2019 or much earlier. If the country is going to grow and if you're going to have GDP being added to by another person or two, why would that not drive more business for us?” She added.

“Life is relative. At Taj we are busy making good days. Acche din bana rahen hain. Governments come and go, PMs come and go, people of India are steadfast. At Taj we are very lucky to have 31,000 people. They are not perfect, but they dedicated. If I look at where we were two years ago, five years ago, two months ago, we see progress. Is the progress satisfactory? No, because we are a greedy bunch of people. But there is progress and there is a lot of hope. I know hope is not a strategy, but I think we are in a good place. The GDP growth in the country is going to have a windfall for us. The question is are we smart enough to catch it? Or are we too busy that things are not right? It's not perfect, but I think, we are at the cusp of something very great here," Rakesh Sarna told the gathering.

“When we look at our business, we really see two components. There is leisure business, which for the past few years has been very good. We have seen rates rise, occupancies rise, profit margins rise, profit rise etc. If you look at our city hotels, the customers’ propensity to pay is a lot lower. Occupancies continues to be low. Despite everything the government is doing and despite the seven percent GDP growth, we still see very little growth in that segment. Two things about hoteliers, number one, we always complain and the second thing is we are always optimistic. Having said that, I think long-term, for the next couple of years, occupancy rates are going up and at some point that will be reflected in increase rates," Vikram Oberoi said in his remarks.

The panel were asked next by Gupta on what their biggest complaint was.

“The biggest complain used to be taxation and the multiplicity of taxation, with GST coming in, part of that is going to get sorted out. We are concerned that its not coming on electricity and alcohol and that is always a big thing because inter-state alcohol continues to be a big issue,” said Paul in her reply.

Anand expanded on the issue of taxation and said, “I think the single most important thing that we cannot do ourselves is taxes. India is the largest exporter of taxes as far as tourism is concerned. We export taxes because the guy who goes out does so with a lot of taxes. The single best opportunity that we have is the GST. GST comes in two slabs. Worldwide in 50 countries we have given examples where it has come at half the slab. That has been the leveller”.

“If we could just focus on travel within South Asia minus China and Japan, it’s around $150 billion. If we could get 10 percent of that in India, we need to focus on them. Their average taxes are seven percent. Our average taxes are 35 to 40 percent. The single most important opportunity that we have as a country is the GST bill and where we can position ourselves there,” he added.

Keswani had a different take on taxation, his observation was, “In the first 60 years of India's independence, politics always trumped over economics. In the last ten years, what we have seen is on occasion, economic sense trumps politics. My personal crib about taxes in India, is not how high it is. It's how inefficiently it is deployed. If you leave one crore (Rs) with any of us, when we deploy it, we get a 10 or 5 percent return. The government will take that, with higher taxes and then effectively utilise less than 40 percent of it. As long as they keep taxing the healthy parts of the economy and redeploying it in an unhealthy way, I am against high taxes”.

Sarna, on the current situation began by saying "Optimism comes from the people. We have 125 crore of treasure. Are we deploying that properly? We have this huge resource, which will collectively rule this country. India has made it possible for India's time to come”.
“There are people who count on the number of trips the PM goes on. I think they have nothing better to do. He has made India a global name. He has made Indians outside India become proud. We have to grab these things and bring it all together. I think we will. I am brimming with optimism. I look at the markets, the stock markets. What do I complain about? The lack of agility of society. We need to do more ideation, but we are so busy doing our day job we don't have time for it", he added.

The panel discussion was followed by a very lively question and answer session.