Highlighting the “unfair” advantages enjoyed by unregulated players and aggregators from the unorganised sector like bed and breakfast and homestays, the Hotel and Restaurant Association of Western India (HRAWI) has announced that it will petition the governments of its western region, to create a level playing field and bring uniformity in regulations for all hospitality players in the market. It has pointed out that while five star hotels pay 38 per cent of the room revenue as direct and indirect taxes, some of the bungalows listed with hotel aggregators do not pay taxes. Further, over 42 licenses are needed to start and operate an organised sector hotel, while the unregulated sector operates without undergoing any such process.
“We welcome competition in any and every form, but this kind of disparity is unhealthy for the industry. It is almost as if we are doing our businesses with our hands tied. Disruptions are healthy, as it allows customers to enjoy best services at the cheapest rates. But the disruptors cannot be allowed to disrupt and proliferate simply on the basis of avoiding regulations and taxes. Today a hotel, let’s say charges INR 1500 for a room, then it has to pay 10 per cent as luxury tax beside other taxes, but a bungalow listed in Airbnb, for over INR 10,000 a day, ends up paying nothing. If nothing else, this is a loss of revenue to the exchequer also,” said Dilip Datwani, president, HRAWI.
“Clearly the big ticket concerns are the security issues and the loss of revenue to the exchequer. HRAWI recently compiled a document on how other major cities in the world have dealt with this issue. Some of the findings were revealing. After licenses were made mandatory in Germany, 40 per cent of Berlin’s Airbnb listings disappeared. Amsterdam, meanwhile, banned apartments rented out for more than 60 days per year, or to more than four people at a time. It has also allocated US$ 1.1 million to identify apartments that are being offered for short term rentals or don’t have landlords living in them. Barcelona has slapped Airbnb and homestays US$ 65,000 each for listing apartment without permit,” commented Sanjay Sethi, CEO and managing director, Chalet Hotels, owner of several Marriott properties in India.
“In a country like India where tourism is at a nascent stage the unorganised, illicit accommodation could spell doom. The primary problem is that there are no standardisations or categorisations. There have been multiple cases of exaggerated promises, misrepresentations, disagreements and conflicts with guests, hygiene issues and intimidations among others. Because the stays are unregulated, there are no redressal systems in place. Hotels are required by law to send details of foreign guests to the police station by submission of a C Form. This is a security requirement from the Ministry of Home Affairs. Homestays are not required to be compliant and the industry fears that this will become the de facto accommodation for those foreigners that seek anonymity from the Police,” added Datwani.
HRAWI also questioned the relevance of subjecting hotels to administrative clearances, liquor permits and other licenses while these unorganised accommodations are exempted.
“The hospitality industry without these illicit accommodations in Maharashtra today, can generate almost INR 600 crore per extra night that a foreign tourist stays back to the government as foreign exchange earnings, besides being the highest employment generator. Almost all tourist towns across the world have grown on the back of strong hospitality infrastructure and not unregulated homestays. The government will have to consider, either allowing hotels to operate with the same relaxations as would be given to these aggregators and such unregulated homestays as they are not treated equally, there can’t be a first among equals,” stated Kamlesh Barot, past president, Federation of Hotel and Restaurant Associations of India (FHRAI).