Spotlight

Roadmap for development

A shortfall in tourism accommodation is still being felt despite an increase in air fares. The following excerpt from a tourism report by the Planning Commission, Government of India discusses how the Centre and state governments can alleviate this problem

A proper census of the available hotel rooms in various cities and rural areas in India has never been held but unofficial estimates put the number at one million. At the end of 2006-07 the number of rooms in hotels in star categories approved by the Ministry of Tourism was 1,00,000, out of which 30 per cent were in five-star/five-star deluxe categories. As against 60,000 hotel rooms in Bangkok, for instance, there are 20,000 in Delhi and 25,000 in Mumbai.

An extreme shortage of hotel rooms has been felt particularly in Delhi, Mumbai, Bengaluru and Goa. The shortage in these and other cities has pushed up the tariff rates to unprecedented levels, driving them beyond the reach of the upper middle class leisure traveller. India's competitiveness for holding international meetings and conferences has been seriously affected and many of them whose first preference was to hold them in India moved to south East Asia on cost considerations.

It is estimated that the shortfall in tourist accommodation in the country will be 1,50,000 rooms by 2010 of which more than 1,00,000 will be in the budget category. The main reason for the shortage of hotels is the short supply of land suitable for construction hotels, particularly budget hotels. Action by the state governments coupled with private sector activity have eased up the situation to some extent but the problem remains acute in some cities like Delhi, where auctioning of hotel sites by the DDA has priced out the construction of budget hotels. Land prices have shot up to astronomical levels and in many cities, especially the metros, land cost may account for 30 to 50 per cent of the project cost against the international norm of 10 to 15 per cent.

The following measures taken by the Centre/state governments or authorities under them could alleviate the difficulties:

• Land use conversions may be allowed liberally from agricultural and institutional use, and even from residential use to hotel use within city limits or in their close proximity.
• A higher floor area ratio (FAR) may be allowed for hotels in places where there is no congestion, in conjunction with strict rules on underground parking.
• Land may be given on long-term lease or on a revenue sharing basis instead of being auctioned by a government land owning agency.
• Railways may make available lands for development of budget hotels by competitive bidding, on PPP basis. A modicum of freedom in taking commercial decisions will have to be given to the private sector partner although these will have to be subject to reasonable regulation.
• Additional land is likely to be made available for hotel construction in the course of city side development in many of the 48 non-metro airports and two metro airports being developed by the Airports Authority of India and the two metro airports being constructed on PPP basis by the private sector. Other ideas to augment the supply of land for hotel construction include earmarking of the surplus lands within cantonment areas. In the scenario of acute shortage of urban land cantonments could consider releasing some areas by construction of multi-storied residential and office buildings.
• Many state government corporations have hotels and hotel-like properties. These are in most cases being run at sub-optimum levels and in many cases at a loss. The availability of rooms can be enhanced and the quality of service upgraded if long-term leases are given to professional private sector hoteliers on the basis of international competitive bidding.
• Adoption of single-window clearance of hotel projects as per the system adopted by the governments of Andhra and Karnataka.
• Encouragement of B&B schemes whereby owners of suitable residential accommodation are registered for offering accommodation to tourists and are treated as non-commercial activity and given the concession of relief from luxury tax and VAT and of residential rates for water supply and electricity, as has been done in NCT.

Apart from increasing the supply of land for the construction of hotels some aspects of state taxation practices that impact on hotels also deserve attention. State governments levy luxury tax on hotel rooms ranging from five to 20 per cent. A bigger problem is that some states the charges are levied on the basis of the rack rates or the published rates, and no allowance made if variations occur in the rate charged. The group was informed that the concept of published rates is going out of favour in the hotel industry and most hotels work on floating or flexible tariffs. Rates are changed from season to season and sometimes from customer to customer. In the summer or monsoon months discounts are given ranging up to 50 per cent. In business cities like Bengaluru deep discounts are given during the weekend. Charging of taxes on the basis of published taxes causes great annoyance to both domestic and foreign clients and undermines the competitiveness of the Indian tourism.

Beach tourism

Beaches are one of the most important destinations for the affluent tourists from the northern hemisphere. India has a coastline of 6,000 kilometres but beach tourism is not well developed with Goa being the only international beach destination in the country.

One factor, which affects the competitiveness of beach tourism in India, is the stringent coastal regulations zone requirements (CRZ) under which a hotel cannot be built within 200 metres of the coast. Such a restriction does not exist in any successful beach destination in the world. In 1992 the Ministry of Environment and Forests (MOEF) had issued orders for relaxation of the requirement so as to enable hotels to be built between 200 and 100 metres of the beach. The Hon'ble Supreme Court also issued a direction asking the government to identify the stretches on the coastline on which beaches could be developed and report back to them. Although 15 years have elapsed this work has not been completed, as the MOEF has got involved in the task of comprehensive revision of the CRZ regulations.

To improve India's competitiveness in beach tourism the group recommends that a decision be taken quickly on hotel construction on beaches according to the prevailing practice in other countries. The sensitive areas could be clearly defined and one or two long stretches of the coastline, particularly on the west coast, could be opened up for development of tourism.

Conference tourism

Meetings, incentives, conferences and exhibitions (MICE) is another area of tourism in which India lacks in competitiveness because of lack of world class conference centre apart from Delhi's Vigyan Bhawan, which is normally reserved for government conferences. It is estimated that about 500 large annual conferences are held in India by domestic organisations alone.

This has the potential to give India a competitive edge, as the conference centre would have assured business for a large number of days in the year. But what needs to be done is to facilitate the establishment of four or five large convention centres in the country. So far a large facility has been built in Hyderabad and another conference centre is proposed to be taken up in Dwarka in Delhi. In order to have more convention centres it would be necessary for the states to facilitate the allocation of land and for the Central government to give such centres infrastructure status under Section 80-1A of the Income Tax Act, so that they can have tax benefits.

Entertainment for tourists

Whether it is heritage tourism or beach tourism, the foreign tourists as well as domestic leisure travellers want some form of entertainment, particularly in the evening. For this purpose consideration needs to be given to allowing casinos to operate in certain locations. Though the subject has remained a taboo in the country it has to be borne in mind that casinos will not only increase the competitiveness of tourism destinations in the country but also have the potential to generate substantial revenues for the state governments, just as lotteries have done for some of them. Casinos are the mainstay of the economies of tourist destinations such as Las Vegas, Monte Carlo and Macau. Singapore too has allowed the establishment of two casinos in its territory.

For heritage sites sound and light shows are a favourite form of entertainment. Such shows are being held by the state tourism departments in some tourist destinations but they are of poor quality. It is necessary to hold such shows at a larger number of major historical sites and substantially improve their quality.

Tourist clusters

In the affluent countries there is flow of tourists out of the cities not only during holidays and almost every weekend, weather permitting. The weekend tourists, particularly those with children, normally go out short distances to resorts and tourist destinations, such as mountains, lakes and beaches. But they also go to man-made attractions and clusters of attractions such as Sentosa Island in Singapore.

The rapid increase in disposable income in the upper middle class in India presents a big opportunity for development of tourism in the country. The group recommends the creation of tourism clusters of areas between 100 and 500 acres within a distance of 150 kms for the cities for the setting up of a cluster of facilities and attractions for tourism. They may have hotels, restaurants, spas, theme parks like Appu Ghar in Delhi and Essel World in Mumbai, and attractions such as skating rinks, lakes with boating and sailing facilities, golf courses, tennis courts, and indoor games. Although the clientele of tourist clusters will primarily be domestic, they will also serve to increase the attractiveness of traditional tourist destinations for international tourists. The entire development, including the acquisition of land, will have to be undertaken by the private sector, but as an incentive they will need to be given infrastructure status under Section 80- 1A of the Income Tax Act.

HR development

As in some other service sectors there is a large skill deficit in the tourism sector, which is impeding its development and impinging on its competitiveness. There are 26 IHMs which have come up with Central financial assistance, and 12 more are in the pipeline. There are 125 private institutes affiliated to various universities/boards, which run hotel management courses. There are six Food Craft Institutes (FCIs) run by the Centre and four more have been sanctioned and 20 run privately.

The hotel management institutes including the private ones are producing 14000 graduates annually and the FCIs 4,000 workers in the skilled categories. It is estimated that there is 35 per cent attrition to other industry leaving only about 9,000 graduates and 2,500 skilled workers available annually to the hotel industry. Against this the annual requirement is estimated at 69,000 in managerial and 1.34 lakh in skill level categories. Thus there is a very large shortage of skilled personnel in the hospitality sector and the deficit is more acute in non-managerial categories.

The hotel management courses (of four years) fall under the purview of the All India Council of Technical Education (AICTE), but by virtue of a dispensation granted by the Hon'ble High Court the National Council of Hotel Management & Catering Technology (NCHMCT) has been performing the regulatory functions, fixing the curriculum and affiliating hotel management institutes, holding examinations and granting degrees to graduates in the tie up with the IGNOU. The NCHMCT has also undertaken the regulatory work with respect to the food craft institutions, although a large majority of private institutions remain unrecognised and are not seeking affiliation.

The Indian Institute of Travel & Tourism Management (IITTM) is an institute affiliated to the All India Council for Technical Education, running courses for tour operators and holding examinations and granting diploma. The IITTM also conducts short-term courses for tour guides, holds examinations and grants diplomas for the profession.

The Ministry of Tourism is proposing to set up nine more IHMs and 25 more FCIs so that each state has one IHM (with some tourist-oriented states having two) and one FCI. Initiatives are also proposed to make the industrial training institutes, polytechnics and secondary schools in the vocational streams to undertake programmes for increasing the supply of personnel in the skill categories. In the group there was full support for all these initiatives but the group also felt that even after all of them fructify there will still remain a huge shortage of skills in the hospitality sector.

The group believes that expansion of education and training in hotel management, food crafts, travel and tourism education (including the training of tour guides) should be left to the private sector and the Central government should devote its attention to regulation. For taking such initiative the establishment of a development council with the full participation of the industry would appear to be the right step.