Saving the Indian Travel & Tourism Industry from ourselves

Reproduced as written in the March 2019 Edition of Hotelier India on the eve of an election that impacts next 5-10 years of Hospitality, Travel and Tourism in India. Perhaps our best years yet.

Let me start with a disclaimer that i'm a self made hotelier. I have never really worked on the floor of a hotel and all my observations are from a startup that goes by the name of IntelliStay Hotels, a newly significant hotel management enterprise in India. While being from the outside has some disadvantages in rediscovering well established principles, it is also often a boon because there is a refusal to accept the normal. This is one subject where I refuse to accept that we cant make the simple change that is necessary.

 Lets start with size. We have 20% of the world living here who dont just travel quite furiously domestically, but now also make up a significant number of inbound visitor numbers to several countries. While we are one country, our history is of fragmented states that continue to retain their character and visiting India is like visiting 15 countries if not more.

Yet with all the heritage and history that comes from being an ancient and diverse culture with unique tourism destinations and natural environs of world class nature, we have yet to command our share of global tourism. Each year we set aggressive and unrealistic targets that are achieved five years thence. This comes to Competitiveness, Capability and Comprehensiveness.

Lets talk a bit about our competitiveness as a destination. We do not address the building blocks of being a great tourism brand. As it is, with our location, the big markets that feed tourism are mostly half way across the world which means expensive flights. At least the rest must be affordable. We have addressed several core issues these last five years like, travel applications, Airports (2.5X growth), Trains (Faster, cleaner, safer), Roads (now fastest in the world) , Security ( dependably safe), and Cleanliness (Swatch Bharat was genius). However, we have made the budgets impossible with a GST slab that is sometimes three times or more higher than our neighborhood. Is hospitality really that luxury? Are hotels the only spends of travellers? they shop, they eat and they explore and spend. How many hotels in India charge over USD 300 per night ADR? I think two hands are enough to count them. By being not competitive, we are sacrificing a volume business and anyone who knows revenue management will tell you there is a trade off between price and demand. We should look at Tax like we look at RevPAR and not how we look at ADR. The GST council took forever to remove the criteria where INR 7500/- per night on any one room night in a year triggered the next tax slab for the whole year. But having done it, we did not revise the other criteria that if you sell above INR 7500/- per night for one night, then F&B is billed at 18% versus 5% for the whole year? How do we explain these anomalies and suffer for months?

Capacity is the next key issue. India just has about a million rooms of which about 20% is branded. Many city-countries like HK, Singapore and Dubai have more rooms. Hotels are not hyper profitable in India. They scrape trough. Hotels require capital investment two times per sq ft at least as other asset classes. That needs credit and at our credit cost, if ROI is less than cost of credit, how does new Infrastructure come up? How long will we keep converting from the unorganized sector and show it as 100,000 new rooms? We need to properly incentive-ize hotel building to keep up with the high demand from the domestic audience which is a 100 times more than our inbound visitor traffic and they need rooms at $50-$100 per night. These hotels get built at INR 25 L to INR 50 L per key and therefore infrastructure lending needs to begin at 20 Cr or more. Hotels are no longer built for the rich and white. They are also built for the brown and hustling. Today Infra status is available only for 100 Cr + projects which encourages people to build a category that is already in over supply, instead of inducing a category that is in gross under supply. Zoning of lands for hotels will ensure competitive bidding only among hotel investors instead of competing with other asset classes like residential and commercial which are less capital intensive and so more aggressive often leading to land grabbing. We dont need subsidies. We will pay our way but at least lets make land available in key hotel markets and lend for longer at sustainable rates. Is it any surprise that so many CAPEX heavy hotel brands are today also high on the list of NPAs? Its designed to fail. We simply dont have that large a luxury market for so many products and players. The infinite demand is in the middle and bottom. Only leisure locations now allow for luxury. Our cities certainly have their fill. 

If we address the issue of Competitiveness and Capacity above, the third area we need to focus on is on Comprehensiveness. The traveler has changed. The new traveler is not a luxury seeker. Not in any great numbers. The new traveler seek Unique experiences. There are few places on earth that are unique as India. They need to explore not just monuments but the cities, the nightlife, the roads and alleyways. They are looking for a story. Not a Spa. A great Ad-film is not destination marketing. It needs to be seamless from the time we arrive to the time we leave. Sufficient Tourism desks with well informed assistance at our international transit hubs. Basic infrastructure for parking, roads, tourism plazas, freshi-lities and security at each destination. Proper vetting of tourism staff like drivers, guides and tourism police. Social infra at famous monuments. You go to the Taj Mahal, Fatehpur Sikri and Agra fort in the day and then what?. You spend a day exploring Ellora and in the evening one has to watch CNN on the Telly. We need to come together as government, citizen bodies, eminent persons, destination management companies, hospitality and transport players and curate our Alpha locations. Lets pick 5 per year and give them a once over. Amritsar is a great example of what can happen when hearts and minds come together. These action committees need structure, empowerment and transparency. It cant become another private club

Tourism is a State subject and quite often the Centre is unable to push a vision through. Its time to get competitive. The states need to sign up for a common minimum program if they need to get central support for tourism infra and marketing. Reward those who work and punish those who are indifferent. The people will set them right. 

While India goes global as a traveler, the world is yet to see India in a way it should. With 10% of GDP share and 10% of the workforce, Tourism and Travel can power a whole generation of growth and pull a large chunk of our people out of abject poverty. It only needs everyone to work together. If the next government post election can set an agenda to build on the successes of the last 5 years, we can double our Industry size with no difficulty in 5 years. It will be critical to India.

Prashanth Rao Aroor

MD & CEO

www.intellistayhotels.com

www.staymango.com

The views expressed are personal.