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Wednesday, October 23rd, 2019

A month after GST rollout: Hotel owners report sharp dip in bookings for meetings, conferences and exhibitions

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by July 31, 2017 General
Written by Neha Kulkarni
| Mumbai |
Updated: August 1, 2017 1:43 am

HOTEL and restaurant owners across Mumbai have been reporting a sharp dip in bookings for business meetings, conferences and exhibitions over the past month since the rollout of the Goods and Services Tax (GST) on July 1. Owners of such properties said clients find the 28 per cent levied on such bookings exorbitant and they are now taking businesses out of the country.

The Meetings, Incentives, Conferences and Exhibitions (MICE) segment is a key source of revenue for the hospitality industry. The higher tax rate has led to a slow rate of fresh bookings and some advance bookings have been cancelled, hotel owners said.

“The higher tax rate of 28 per cent is proving to be costlier than the earlier tax bracket. Earlier, clients in Mumbai would be charged 10 per cent luxury tax and an additional 12.5 per cent service tax that would be abated accordingly. The current tax rate is proving to be the highest across the world thus diverting clients to choose destinations that may not see such a high tax rate,” Kamlesh Barot, the former president of the Federation of Hotel and Restaurant Associations of India (FHRAI), said.

Hotel and restaurant owners said countries like Singapore, Thailand, Macau and Georgia that do not tax MICE-related activities above 10 per cent, are becoming stiff competition to Indian MICE venues.

“July remains the peak season to witness indoor meetings and exhibitions on a large scale in the city. It witnesses the maximum movement of conferences and seminars. A dip in the month of July hints at a further decrease in bookings for the coming months of September and October, which also see a huge demand,” Barot added.

Mumbai witnesses 45 per cent of its hospitality sector revenue coming from the MICE segment. On an average, as many as 17,000 hotel rooms in the city are dedicated for the cause every year. In July, around 75 per cent of the 17,000 rooms reserved for the MICE segment in the city went without bookings.

“Mumbai being the financial capital would attract a lot of bookings for hosting conferences. However, around 70 per cent of the clients coming to the city are from different states, which may not necessarily see a local booking office. This means, they do not receive Input Tax Credit (ITC) which creates additional losses,” Dilip Datwani, the president, Hotel Restaurant Association of Western India (HRAWI), said adding that his hotel witnessed a 25 per cent dip in July bookings for MICE events.

Also, soon after the GST rollout, Georgia announced a big cut in tax rates for MICE events.

“Clients are also turning to countries like Singapore, which hardly charge anywhere between 6.5 and 7 per cent of tax compared to our GST tax slab. In fact, many city-based clients are turning to these countries to plan weddings at affordable rates,” a hotelier said.

While tourist traffic has not been affected much, Mumbai hotel owners expect a dip in wedding bookings as well.

“Our chain of hotels has witnessed a 10-12 per cent decrease in the number of bookings of MICE and related events after GST implementation. We fear a dip in the number of wedding bookings in the city due to the higher tax rates. Those who operate on a tight budget may think twice before giving in to these tax rates,” Rishi Puri, owner of the chain of Lords Hotels, said.

Datwani said: “We have appealed to the government to revisit this particular aspect of receiving ITC from the GST. The industry could also benefit with a reduction in the overall tax rate of 28 per cent being levied on MICE.”

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