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INTERVIEW

“Keeping shops open 24*7 will attract more tourism, boost employment”
Monday, 30 April, 2018, 08 : 00 AM [IST]

The Hotel and Restaurant Association of Western India (HRAWI) is a 68-year-old association of hotels and restaurants in Western India. Its members range from smaller hotels to five-star deluxe categories.

With its membership base spread across Western India, HRAWI covers Maharashtra, Gujarat, Madhya Pradesh, Chhattisgarh, Goa and the Union Territories of Daman and Diu and Dadra and Nagar Haveli, and is considered to be the voice of the hotel industry.

The association, which was founded by the late J R D Tata in Mumbai in 1950, is a part of the Federation of the Hotels and Restaurants Associations of India (FHRAI), the national body, which is located in New Delhi.

Talking about the various issues in an e-mail interaction with Shraddha Joshi, Dilip Datwani, president, HRAWI, threw light on the current scenario of the hotel industry.

Excerpts:
How will the hospitality industry benefit from the Maharashtra government’s decision to allow shops and retail establishments in the state to remain open 24*7?
The decision will gradually change the dynamics of business and nightlife, especially in the cities. By allowing shops and retail establishments in the state to remain open 24*7, not only will the city attract more tourists, but it will also improve employment numbers, become a safer place, and increase tax revenues for the government.

There are over one lakh restaurants in the state, and even if just the restaurants in the tourism hotspots decide to operate 24*7, then it could easily create additional employment opportunities for at least two lakh people.

This is a definite boost to tourism and the economy, and will help the hospitality sector to emerge even stronger.

Although, we would have wished for the Act to be extended to bars too. HRAWI has appealed to the government to consider allowing bars to remain open at least up to 3am, if not 24*7.

How do you view the Supreme Court’s order to allow hotels and restaurants to sell bottled water and other packaged products across the country in excess of the maximum retail price (MRP)?

The judgement has come as a relief for the hotel industry. Hotels do not just sell packaged drinking water, aerated drinks or any such packaged commodity, but they also serve it.

As was contested by us, the bench observed that hotels and restaurants besides selling food and beverages (F&B), also render a service, which cannot be governed by the Legal Metrology Act.

It added that such a sale made by hotels and restaurants make it a composite transaction with composite billing and that the MRP rates cannot be insisted upon for such entities.

We are thankful to the Supreme Court for acknowledging our concern and making a just decision.

How has demonetisation and the ban on liquor sales within 500m of highways affected the hospitality sector?
The Christmas and New Year celebrations of 2016 suffered a major setback following the announcement of demonetisation which was made in November that year.

There were several cancellations and F&B units witnessed a sharp drop in footfalls. Around that period, the state registered a 20 per cent cancellation in bookings by international travellers after demonetisation.

The unavailability or shortage of cash generally impacted the spending and hospitality sector was all the more affected as a large chunk of customers pay by cash.

Also the ban on the sale of liquor along the highways came right after demonetisation. An estimated approximately 35,000 restaurants and bars faced the possibility of closure in the Western region alone.

The decision led to temporary job losses across India, which fortunately was reversed. So while the potential damage was massive, the decision to denotify the highways saved the day for the industry.

According to recent reports, the restaurant industry in Mumbai and Bengaluru has opined that the impact of GST has been largely positive, but the lack of clarity on regulations remains a major hurdle. The survey revealed that the quality of food has emerged as the key driver for the growth of restaurants, followed by their location and pricing. Comment.
A successful restaurant has an environment that matches the food it is serving and the customers it attract. A restaurant that focuses on selling colourful pizzas to children should have an environment that is colourful and exciting.

A restaurant that focuses on selling upscale food should create an environment of dim lights, soft music and high-quality items, such as wine glasses and well-cushioned booths.

A restaurant that creates an environment that appears completely opposite of its intended style makes customers feel uncomfortable and does not give the restaurant an image to build on.

Food is one of the major factors in determining a restaurant’s success. Food, like a restaurant’s environment, should mimic its intended style.

Patrons of a fast food restaurant aren’t expecting food that is of four-star quality, but they do expect the food to taste good. Successful restaurants consistently serve fresh food that is exactly as described on the menu.

Successful restaurants employ managers and employees who perform at a high level and work to accomplish the restaurant’s goals.

Restaurant employees who don’t care will inevitably lead to poor service, a lack of attention to detail and, eventually, decreased sales. All employees and managers of a restaurant must focus on the customer to ensure success.

Restaurants do not earn a great deal, a five per cent profit margin is considered successful. Because of the low profit margins, strategically managing costs is imperative to keeping a restaurant in business.

The bulk of costs come from rent, labour and food, which can be reduced. From sending employees home when business is slow to reinforcing serving sizes, labour and food costs can go down.

What are your views on the Goods and Service Tax (GST) rate levied on the hospitality industry? In the recent Budget, the sector was ignored. What are the industry’s views?
One of the reasons our tourism industry has failed to attract as many foreign tourists as it should, is the heavy tax on tourism. While many neighbouring countries levy a tourism GST of five per cent, our GST is roughly approximately 23 per cent.

With our hotel rates at approximately 18 per cent and tour operators at an additional 5 per cent, at a minimum rate of 23 per cent, we are the most highly-taxed tourism country. This has been one of our biggest concerns with reference to GST.

Also a GST rate of 28 per cent for room tariffs of Rs 7,500 and above again is phenomenally high and will only widen the gap between demand and supply.

The hospitality industry was very disappointed with the Budget. Hospitality is the single biggest contributor to Indian tourism’s gross domestic product (GDP) and its growth or decline or stagnancy directly reflects on the health of tourism in the country.

The foreign exchange earnings (FEE) from tourism amounts to roughly $23 billion, and once again, a large chunk of this earning is generated by the hospitality industry.

Employment generation, which is one of the focus areas for the government, has the biggest support of the hospitality sector. It directly employs over 12 per cent of the Indian workforce and is one of the biggest employers of unskilled and semi-skilled labour.

According to a KPMG report, the hospitality sector is expected to grow at a CAGR of 16.1 per cent to reach Rs 2,796.9 thousand crore in 2022.

Despite having hospitality as an asset at its disposal which can propel the country’s growth, the government has yet again chosen to ignore its potential.

As HRAWI president, how have you seen the growth of the hospitality industry in India? What are the issues that need to be addressed for the growth of the hospitality sector?
Incredible India will be a success only when the hospitality industry, which is a key driver of our economic growth, gets the right attention.

One of the long-standing demands of the hospitality sector has been for it to be accorded infrastructure status, which would give a boost to investments in the sector.

Presently, the minimum project cost for qualifying for a soft loan is Rs 250 crore. However, if this were to be reduced to Rs 25 crore, the sector could see a dramatic increase in investments, leading to an increase in the hotel room inventories.

Aggressively promoting and encouraging investments in hospitality can place India on the map of tourism destinations of the world.

The government should also compare the tourism taxes levied by neighbouring countries with ours and understand that the high tax rate of 28 per cent works against our objective of attracting foreign tourists to the country.

What are the prevalent trends in the Indian hospitality sector? Can you throw some light on the future trends as well?
Mixed-use properties are an emerging trend today. The new model allows developers to utilise the full potential of an expensive real estate.

For example, retail or commercial spaces, clubs and even art galleries form constituents which help in creating the demand and generating business for the hotel.

Also concentrating on maximum utilisation of the property by introducing loyalty cards helps in increasing revenues.

The optimum usage of existing facilities also proves to be advantageous and offers a much better way of showcasing the property to more potential clients.

What are the prominent issues in the hospitality sector that are being tackled by HRAWI? What steps is the association taking to overcome the same?
There is ambiguity on GST rates for packages inclusive of stay and food. GST is being charged on the published tariffs and not on the actual rates of booking, and this has created confusion between hotels and customers.

One of the other issues affecting the hospitality industry has been the unavailability of integrated GST (IGST) for meetings, incentives, conferencing and exhibitions (MICE). We have put forth this particular concern as one of the biggest threats to the emerging Indian MICE market.

The unavailability of IGST credit for immovable properties for tourism purposes such as for hotels and related establishments is negatively impacting a huge business tourism movement in the country.

Barring some companies in the business of fast-moving consumer goods (FMCG) or services, not all corporates are registered across all states in India and are reconsidering conducting their MICE-related activities. A consequence of this is evident in the pattern of cancellations and the sharp drop in booking for MICE across the country.

The HRAWI has requested and suggested that Place of Supply Rules and IGST Act be accordingly amended to incorporate, in case of supply, to a registered person as a location of service recipient or as the place of hotel, in case of an unregistered person.

We have also asked the government to treat the foreign exchange earnings in tourism services as either exports or deemed exports.

HRAWI has brought up such issues among others to the notice of the authorities to put forth the point of view of the hospitality industry.

The association is also engaging with hotel members to resolve their queries. It organises seminars on such topics where subject experts provide logical advises to business operators.

How would you describe the current state of the industry?
As mentioned earlier, hospitality is the single biggest contributor to India's tourism GDP and its growth or decline or stagnancy directly reflects on the health of tourism in the country.

Employment generation, which is one of the focus areas for the government, has the biggest support of the hospitality sector.

It directly employs over 12 per cent of the Indian workforce and is one of the biggest employers of unskilled and semi-skilled labour.

Unfortunately, the real potential of the hospitality industry in India remains undiscovered.

Brief us about HRAWI’s initiative in Food Safety Training and Certification (FoSTaC) programme with FSSAI.
HRAWI aims to proactively ready its members to become FSSAI-compliant even before it becomes a mandate.

It would be in the best interests of our members and the industry to be thorough and fully equipped to meet standards that are internationally accepted and followed.

The training programme enables business establishments to institute a FSSAI-certified supervisor, who, in turn, can effectively cascade the communication to the grassroot levels in the establishment.

This is a win-win situation for the business, the auditing body and, most importantly, the customer.

We have been conducting the training programmes across the Western region and have received a great response so far.

What is the role of the food and beverage sector in the development of the hospitality industry? Do you think food can be a focal point of hospitality and promotion of local cuisines could attract business?
Interestingly, the food and beverage sector in India is as diverse and distinct as its culture. Indian cuisine is popular across the globe and is well appreciated by international travellers in India too.

If the local cuisines are well-promoted through food festivals, it will certainly benefit the hospitality industry.  

What are the prospects and future plans of HRAWI for the hospitality and food industry?
There were the challenges of the recent past due to demonetisation, the disruptions due to the highway liquor ban and then came the confusion of GST. The last straw was the fire at Kamala Mills, which put the whole industry in turmoil. The morale of the operators as well as the staff is low.

We have been working towards the concerns and have, to a good extent, managed to help our members by holding several seminars, workshops and advisories on fire safety.

We have also been holding such activities on GST and FSSAI’s compliance and mandates on food safety for the benefit of our patrons, besides holding dialogues with the concerned departments of the government wherever necessary.

We will engage with the government and the authorities to address the woes of the industry and try to keep the morale high of the massive workforce of the sector.
 
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