Presentation on

Budget 2011(Service Sector - Hotel Industry)

Introduction

• What is Budget?

• What is Service Sector?

• What Service Sector includes?

Introduction

• What is Hotel Sector?

• What does it includes?

• Categorization of hotels in India:-

Heritage

Luxury

Budget

Resorts

Types Of Hotels

• Historic hotels

• Unusual hotels

• Treehouse hotels

• Bunker hotels

• Shoe hotels

Cave hotels

Capsule hotels

Garden hotels

Underwater hotels

Important Hotel group in India

• ITC Maurya Delhi• ITC Maratha Mumbai• Fort Radisson of Radisson group in Kolkata• Radisson Jass Hotel Simla• The Taj Westend, Banglore• Taj Coromandel, Chennai

Careers in Hotel sector• The hospitality industry is a "high overhead" low gross margin industry. That

means that cost containment is a huge part of the equation.

• The most common career path in hospitality is a work from the ground up path. Start by learning operations and/or sales line positions and then work into supervisor/manager roles. You can make a decent living if you are one of two things:

A) Good at closing sales, orB) Good at being efficient and getting the most productivity out of your time.

• Other jobs that can turn into careers are:

Sales - career path = Director of Sales or GMCatering - career path = Catering Manger/Catering SalesFront (and sometimes Back) Office Manager - career path: GM 

Impact of Budget 2010 on Hotel Industry

• Foreign tourism decreased by 2.5% year to year, around 5.1 million. Room rates for the five-star hotels in Mumbai were down by 38% and In Delhi by 44%. Hence reducing Revenue per Available Room.

• Growth rate increased by 7% in tourism due to Common Wealth Games by in second half 2010. Gradually increasing Hotel industry due to lower service tax rates.

Impact of Budget 2010 on Hotel Industry (Contd…)

• The improvement in FTAs is a positive sign for the hotel industry as they dominate the demand in the five-star category covering over 60%

• Section 35AD of the Income tax Act, which provides for deduction in respect of expenditure of capital nature has been amended in regards to hotels. Improve direct tax liability.

Impact of budget 2011 on Hotel Industry

• Acc. to FDI policy, 100% Foreign Investment is allowed by Govt. in hotel industry.

• Due to infrastructure development, development of roads, railways & airports has grown & will grow more.

• Increase in tax exemption limit from Rs 160,000 to Rs 180,000 for individual tax payers.

• Lowering of qualifying age of senior citizen from 65 to 60.

Impact of budget 2011 on Hotel Industry(Contd…)

• Increase of service tax by Rs 50 on domestic air travel and Rs 100 on international air travel & Rs 250 overseas journeys by economy class.

• hotel rooms of over Rs 1,000 per day and AC restaurants serving liquor under the service tax net, amounting to an additional tax of 5% and 3% respectively.

• A consumer will be forced to pay about 25-30% taxes on the total bill value. Given the high rate of food inflation, there will be no choice but to pass on the burden of the increased taxes on consumers

• Focus on increasing GDP growth to 9%.

Case Study ( Taj Hotel )

Case facts and case details

• History

• Facilities provided

• Competitors

• Impact of budget 2011

Impact of Budget 2011 on Taj Hotel

• Indian Hotels stand alone in 3rd quarter revenues were 10.8% , while income for Taj Mahal palace, Mumbai , was at 15% yearly.

• The occupancy rate stood at 64% in FY 2009, while

Average room rates have recorded at steady growth at 7%.

• PAT weighed down by higher tax rate but lower interest cost helped cushioned the decline to an extent.

Impact of Budget 2011 on Taj Hotel(Contd.)

• High inflation in 2010 – increase in RM. Opening of new Taj Falaknuma palace, in Hyderabad – increase in expenses in marketing & advertisement.

• Decrease in profit by 4.6%. But after construction- increase in profits upto 29%.

• Thus overall 2011 performance of Taj Hotels were up to margin.

Conclusion

• The budget shows a negative impact on Indian Hotels as the increase in service tax affected Indian hotels at large, which lead in decrease in growth of hotel industry.

Bibliography

• Available information from www.moneycontrol.com on 12th March, 2011.

• Source of Case study available from www.indiaedunews.com on 14th March, 2011.

• Images & other information available from www.economictimes.com on 14th March, 2011.

Thank You