It’s the time of the year, which is marked with bundled holidays, accompanied by a pleasant cool weather that makes the perfect setting for a holiday and an outing for the average Indian. Be it school educational tours to family visits for weddings or solo travelling, the onset of autumn and winters in India is a golden period for the hospitality sector. So, are you planning to pack your bags as well?
While travelling, you may often end up spending more, but do you think there could be a possibility to earn as well while the world travels and spends? The hospitality sector in the stock market surely gives this opportunity.
The hotel industry in the recent past has suffered due to moves such as demonetization and imposition of high GST rates on hotel room rates. The demand in the sector has been quite muted owing to various factors. The moves have left a deep cut in the pockets of hospitality giants.
However, the recent GST rates revision for the hotel room rates have given a hope to the hotel industry which is banking on this relaxation to bring travelers back on their bill books.
“The GST rate for room tariffs of Rs 7,500 and above was reduced to 18% from 28%, while those between Rs 1,000 and Rs 7,500 would have to pay 12%. Hotels with tariffs of less than Rs 1,000 do not attract tax as per an earlier decision. Earlier, the slab of Rs 2,500-7,500 attracted 18% tax.” the Economic Times reported.
Analysts at CapitalVia feel that this will be a big positive for the sector and will also help the hotel to lower the overall pricing. What has also helped the sector is cheap air fares.
The GST rate cuts have mainly helped the luxury hotels in metros where the GST rates have been cut straight by 10 percent. Let us look at the various factors which signal to a festive fervor for the hotel industry as well this wedding and winter season:
1. Decreased GST Slabs
This has been hands down the top-most reason for the hotel industry heaving a sigh of relief. The operating margins for the hotels have gone up after the announcements made by GST council on September 20.
The rates applicable as per the new norms are as follows:
2. The Peak Season Approaching
The wedding season and winter are a heady concoction for the hotel industry every year as they expect the maximum influx of travelers. Banquet bookings and events also contribute to good business in these months as hotels make special arrangements for the same.
3. Cheaper Flights And Better Flight Connectivity
The aviation industry is closely linked to the hotel industry as the two go hand in hand. Over the past couple of years, the increase in number of flights and connecting newer places through direct flights has given a boost to for the hotel industry as cheaper the flight rates, the easier it gets for people to travel.
4. Government Moves To Boost Tourism Infrastructure
Just like the aviation industry, the tourism industry too is closely linked to the hospitality sector. Between the last winter & weddings season and this, the government has taken measures to upkeep its tourist spots to make them more attractive to the travelers and tourists.
The hospitality sector and the stocks trading in them are sure to take off on a strong footing this year in the last quarter as the demand is on the higher side. Industry experts feel that it would take some time for the companies to build the resources which are needed to meet the demand and in the coming 4-5 years the industry would show much higher profit margins and would hence reflect a good growth.
Analysts and research houses also claim that the tier-II and tier-III cities too are poised to grow since a huge chunk of volume to the Indian hospitality sector is added by this segment. However, when it comes to margins, the hotels in tier-I cities definitely have an edge over the tier-II and tier-III cities.
However, the industry also expects a better spending from the government’s part on the tourism sector in general which would in turn improve the performance of the hospitality sector. So, make sure to put your money at the right places to make the most of it while the world travels and spends. As always, we would say “Invest Responsibly!”.