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Summer business gets hit in the North because of GST, state policies

The leisure markets of northern India witnessed a slump in business even in their peak season summer this year.

, ET Bureau|
Updated: Jul 23, 2018, 03.28 PM IST
NEW DELHI: The leisure markets of northern India, including tourist hotspots like Kashmir, Shimla, Nainital, Rishikesh and Mussoorie, witnessed a slump in business this summer, which hoteliers and tour operators ascribed to the goods and services tax (GST) and some state-centric developments and policies.

The water crisis in Shimla, the closure of the Chandigarh airport from May 12-31, the indefinite ban in Uttarakhand on water sports, a ban in Nainital on entry of tourist vehicles without prior booked parking, and GST in areas like Kashmir which was earlier exempted, kept tourists away, said hoteliers and tour operators from Jammu & Kashmir, Himachal Pradesh and Uttarakhand, the states that see tourism revenue peak in summers.

Business was down around Jim Corbett National Park too, which is mostly frequented by families during school summer break. “Corbett has seen a lot of supply. There is pressure on occupancy and pressure on rates. Quarter one of this financial year has not seen the kind of growth we expected,” said Vibhas Prasad, director, Leisure Hotels Group. “There is regulatory pressure in Uttarakhand because of the ban on water sports. When there is uncertainty, it makes a guest thinks twice. In Nainital, there were issues around parking. Weather patterns did not help either.”

Leisure Hotels Group has about 26 hotels in its portfolio across locations like Corbett National Park, Haridwar, Nanital, Rishikesh, Kasauli, Naukuchiatal, Kausani and Kaashipur, of which 20 are fully owned assets. Leisure operates through its own brands and also has management or leasing arrangements with chains. It owns properties of Taj and Club Mahindra in Corbettt.


The past few months marked the first summer tourist season since the implementation of GST on July 1 last year.

Asif Iqbal Burza, MD, Ahad Hotels and Resorts, said business for his group was down by 50% from last year owing to GST. Ahad Hotels and Resorts has a tieup with ITC for its Fortune Resort Heevan hotel in Srinagar, and WelcomHotel Pine N Peak property in Pahalgam. Besides the partnership with ITC, Ahad runs hotels under its own brand name.

“The biggest reason for this has been the implementation of GST. The hotel industry in Kashmir was exempted from any lodging tax earlier,” he said. “From 0% we have been put in the 28% tax bracket. Our operational cost, as it is, was very high. We were exempted by the state government as a special case as air fares were high. The only tax that was levied was 5% on F&B under VAT. This has made the destination very expensive for travellers. In a state like J&K, heavy industries are exempted but tourism is not.”

Raj Chopra, owner of JW Marriott Mussoorie, too attributed the fall in tourist numbers to GST. “The main problem is the 28% tax, which is killing tourism. Hill stations are a seasonal business. We had a 5% tax previously, which went up to 28%, which translates to over Rs 3,000 per room."

Karan Anand, head, relationships at Cox & Kings, said traffic to hill stations such as Manali was disrupted due to the closure of the Chandigarh airport in May.

Aditi Balbir, founder of V Resorts, said in places like Uttarakhand, the ban on adventure sports along the Ganges impacted bookings. Coupled with widespread forest fires, floods and landslides, it has led to 15-20% fewer bookings across properties in the state, she said.

“Roads are being widened throughout and it is work in progress. This might have deterred tourists too. Water issues in Shimla was a major factor,” said Sanjay Sood, president of the Hotel and Restaurant Association of Northern India.

Manheer Singh Sethi, co founder of Travkart said traffic in places like Rishikesh was affected by 15-20%.
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