Demonitisation & GST to shape the future path
The Government’s pro-active approach to negate the adverse impact of demonetization along with proposed GST should augur well for the tourism industry
Industry seems to be a divided lot over the impact of demonetisation on travel and tourism industry. While the Government opines that demonetisation has not taken away the sheen away from the country’s fast-growing inbound tourism sector, players of the industry believe that it has shed its gloomy shadow on the booming tourism and hospitality industry in India and the onset of the winter travel season has been stymied by the unexpected storm of demonetisation.
The statement issued by the Ministry of Tourism states that demonetisation did not have any impact on the Foreign Tourist Arrival and Foreign Exchange Earnings which have shown robust growth over the comparative period last year. Foreign tourist arrivals for the month of November have grown by more than nine per cent year-on-year to 8.9 lakhs visitors compared to 6.5 per cent in November 2015. The number of travellers from top source countries such as the US and UK has shown strong growth. The Unites States, the biggest source market for the month, grew 7.7 per cent to 1.38 lakhs visitors, while UK, another major source market grew 11.4 per cent. “It may also be noted that the number of e-tickets sold during 09-11-2016 to 08-12-2016 increased to 28,176 from 2807 during 09-10-2016 to 08-11-2016 with corresponding amount being Rs. 181.49 lakh and Rs. 3.10 lakh respectively. It can therefore be seen that sale of e–tickets and earnings from have increased significantly by 10 and 58 times respectively as people are buying tickets for ASI monuments online through cashless payments,” the statement reads.
No doubt that the Ministry has taken the numerous steps to ensure that no hardship is faced by tourists and the industry is not affected. Archaeological Survey of India (ASI) smoothly transitioned to cashless mode of payment by simplifying process of e – tickets.
Impact of demonetisation:
Pronab Sarkar, President, Indian Association of Tour Operators, opines that tourists had to pass through really bad time with sudden announcement of demonetisation of high value currencies without any prior notice. “They exchanged their dollar/Yen/Marks into Indian currencies and had a lot of these notes no more in circulation. They could not pay at entry fees at the ASI Monuments and missed their dream to see Taj Mahal or other monuments. They did not have small change to pay for food even could not hire car to reach back airport for return journeys, and even refused to accept old currencies. Even tour operators had difficulties in running their package tours (specially to pay toll tax/road tax etc). But with IATO’s immediate intervention and support of Ministry of Tourism, all these areas were streamlined. But some future groups got cancelled as tourists were apprehensive of their problems in India due to the restrictions in money exchange and restriction about re-exchange of their own money beyond Rs 5000. The tourists, who went back with negative experience, gave negative publicity and this may lead to slow down in future business growth. But tourism has great resilience power and Indian tourism growth will bounce back,” he hopes.
Subhash Goyal, Chairman, STIC Travel Group and Member, National Tourism Advisory Council, Ministry of Tourism, says that demonetisation has adversely affected the travel and tourism business as tourists can only change US$80 at the airport and it has become very difficult for them to survive with this money. “Moreover, there are long queues at the airport and foreign tourists are feeling unwelcomed. Also on the first day, ASI Monuments and the World Heritage Sites were not accepting the old currency. However, due to the personal intervention of the Tourism Minister Mahesh Sharma, we were able to get the monuments to accept old currency and now credit cards & banker’s cheques are also accepted. Only one problem remains i.e. foreigner should be allowed to change at least US$500-1000 at a time,” he adds and clarifies that even though in November 2016 we have witnessed tourism growth but this has been possible because the tourists had already booked and paid in advance for their holidays. “The impact of demonetisation will be felt in the coming months if the problem is not solved,” he cautions.
Sunil Kumar, President, Travel Agents Association of India, believes that demonetisation did matter since most travellers had other priorities to handle than to invest on leisure travel. “But that would come back to normalcy, hopefully by mid-year, or almost normalcy. Cancellations have been very limited, though. However, this varies from an individual’s personal position and priorities and cannot be generalised,” he opines.
Biji Eapen, President, IATA Agents Association of India, opines that demonetisation that has caused a severe country-wide currency crunch, this also has a domino effect on all aspects of the tourism business, both domestic and international. “Records have shown an 80 per cent drop in tourist spending with a 15-20 per cent drop in foreign tourist and 20-40 per cent in domestic tourist footfalls. Expect the government to cogitate and declare ‘Tourism’ as an Industry and the 4th pillar as promised,” he says.
Vishal Suri, Managing Director, SOTC Travel, however, feels that demonetisation of currency is expected to impact the growth of tourism sector in a positive manner in the long term. “There will be a more transparent economy via digitalisation that will lead to a boost in the economic growth. Speed and efficiency in getting the collection from customers will improve. The move is expected to increase online travel booking, EMI holidays and a change in business from unorganised to organised sector of travel,” Suri adds.
Expectation from 2017
Goyal expects a growth of 5-10 per cent because of the aggressive marketing by the Tourism Ministry and reforms in the e-visa system in 2017. “However, if demonetisation had not taken place there would be at least 20-25 per cent increase,” he says.
Ankur Bhatia, Executive Director, Bird Group & Member of CII’s Core Committee on Aviation, opines that tourism, hospitality and aviation have emerged as one of the key drivers of growth among the services sector in India. “In 2016, these industries experience a new era of expansion driven by strategic initiatives by the government and also attracted some of the highest Foreign Direct Investment (FDI) from investors. The same trend is likely to continue in the coming year as businesses will focus on growth and expansion resulting in greater options, better connectivity and improved quality. The competitive landscape within the Indian hospitality industry has never been as dynamic as now and the coming year will witness a spike in demand from tier II and II cities,” Bhatia says.
According to Kumar, 2017 started off with a slight set-back due to most travellers preferring to get their priorities in order than to travel on leisure and this will perhaps continue for some time. “The special fares/promos from airlines are indicative that there is a rush to get their seats filled up. In view of the complex environment, I would expect that 2017 atleast stays at its previous year levels, though hoping for a 6-7 per cent increase if being optimistic. But, surely, it cannot be a very big year for outbound. Inbound, is always a huge potential for India – and this varies with the promotion of Incredible India brand and the aggressive marketing of destination – India. We need to fair far better than we have done in the past and hopefully, we will,” he hopes.
“IATO’s all-time pleading has been for double entry, longer duration (stay period) extended to 90 days and application for visa be allowed 120 days in advance and all have been accepted. This only awaits government’s notification which is expected any day. This will bring remarkable change in the sustainable growth in coming year 2017. The increased trend in international tourist arrivals for 2016 is already visible so we are optimistic that 2017 will be good for international tourist arrivals,” Sarkar adds.
Rajesh Magow, Co-founder and CEO-India, MakeMyTrip, says that 2016 has ended with two biggest developments impacting the industry; introduction of GST and demonetisation. “This coupled with smartphone penetration and adoption led by young travellers is driving the shift from offline to online in the travel industry. With higher disposable income, people have started spending more time on their holidays (12-14 nights) by clubbing multiple destinations in their itinerary. Going in 2017 on the back of Christmas / New Year bookings, we are bullish about the growth prospects once the demonetisation effects are settled,” Magow says.
Manmeet Ahluwalia, Marketing Head, Expedia in India, feels that 2017 presents an exciting landscape for the travel industry, with people waiting to go on a vacation in the first quarter of the year itself and multiple extended weekend opportunities throughout the year. “This will also increase the propensity for last minute trips, owing to work pressures or other factors that hamper planning vacations in advance,” opines Ahluwalia.
Eapen feels that the government’s initiatives such as MoUs to promote bilateral tourism, the proposed ‘Project Mausam’ and MoT’s plans to revise its guidelines to exempt home stays from service tax or commercial levies amongst others will certainly make India a global tourism hub and boost Tourism revenues.
According to Suri, 2016 was a good year for the travel industry. “2017 would be a very promising year for the travel industry. Affordable airfares and the availability of a holiday on EMI will continue to make international travel more affordable,” Suri adds.
Popular Destination
Sarkar feels that India holds immense potential to attract tourists with both natural and manmade monuments/sites of interest which very few countries in the world can match those potentials. “Pune with Lavasa has come up in a big way in domestic sector along with a circuit covering Mahabaleshwar, Matheran and Shirdi as extension tour destinations. Another new dimension in domestic sector is specific pilgrimage packages on offer viz Sufi Circuit, Buddhist Circuit, Jain Circuit, Sikh Pilgrimage Circuit and of course Hindu pilgrimage Circuit. Hampi, Aihole, Pattadakal, Badami and Coorg in Karnataka gained popularity in domestic tourism market since the beginning of 2016,” says Sarkar.
Kumar feels that while there is not too much of a swing in favour of one destination from other previously-in-demand destinations, the consistent demand for Kerala in South as well as “Golden Triangle in the North” continues to be ever green. “There had been a subtle demand for tourists to explore east and north east, but in terms of volumes, they are not as many,” Kumar says.
Goyal also believes the same. According to him, the most popular destinations in India have already been Goa, Rajasthan and Kerala. “However, the new destinations that are coming up are North East mainly Sikkim, Arunachal, Meghalaya and Manipur. Madhya Pradesh and Gujarat have also become popular because of the aggressive marketing by the State governments. Odisha and Uttarakhand are also catching up fast,” Goyal informs.
GST and tourism
According to Sarkar, IATO has recommended that GST on tourism sector should be in the lowest slab and tax should not be more than six per cent. “If this is accepted by the government it will be a big turnaround for the tourism industry because presently tourism attracts about 25 to 30 per cent due to which our India tourism packages become cost prohibitive. We lose business to our competitors who offer very affordable packages and we cannot offer matching price which they offer. GST can bring some change and with tax balance, India will be very competitive,” Sarkar opines.
GST, which is expected to be implemented from 2017, aims to replace multiple state and central levies with a single tax. “All countries that have adapted GST have grown in their GDP. In case of travel and tourism, GST is likely to eliminate multiplicity of taxes. Implementation of GST will rationalise and simplify tax regime. It will lead to ease and transparency in compliances,” Suri says. Goyal opines that the Government that GST should not be more than five per cent on the tourism industry. “If this does not happen it would definitely adversely affect tourism growth in the country,” he says.
Kumar is also keeping my fingers crossed. “The talk is that the GST can be a few percent more than the current service tax. If that is true, we will be in trouble. The bigger challenge, which the government must take cognisance of, is that due to online marketing and technology; travellers are exploring possibility of a direct buy to avoid paying service tax to an Indian agent. This can be very damaging. We cannot have a situation where an Indian agents price for an overseas product is more expensive than an overseas agency selling the same product, directly online,” Kumar says.
With the winter session of Parliament being washed out, it will be a ‘watered down’ GST that will be introduced in 2017. “To supplement the objective of promoting travel and tourism sector, the Government must resolve the ongoing issues and provide a streamlined tax model in the final GST law. We are hopeful that the Government will put Tourism in the lowest slab and under no circumstances it should be more than five per cent,” he adds.
Bhatia feels that the government and the industry need to work together to address the various opportunities and challenges in these sectors for a super-charging growth. “It is imperative to aggressively market brand India globally to create a huge impact and attract high-end international tourists. With a relentless focus on quality and infrastructure, India would be well placed to achieve the potential of these industries,” Bhatia says.
