Despite the service sector accounting for a whopping 51 per cent of the country's GDP and notwithstanding various talks about incentives to the hotel industry, the hotel and tourism industries remain a neglected lot. While in China, about 60,000 new rooms are added every year to the country's hotel capacity, in India, the figure is less than one-tenth of China. It is a pity that India is not amongst world's top 40 tourism destinations, despite its historic significance, abundance of flora and fauna and a long coastline. Still worse, the travel and tourism industry despite being the second largest forex earner in the country is ranked 267th on government's priority list, just above the lighthouse sector.

A small country like Thailand spent over $51 million in 1995 to promote tourism compared to a mere $ 27.5 million spent by India in 1997-98.

The importance of building a flourishing tourism industry cannot be undermined any longer. Especially since the hotel industry is the biggest beneficiary of any improvement in this sector.

The tourism industry provided direct employment to 9.1 million people in the country during 1996-97, accounting for 2.5 per cent of the total labour force during the same period. Indirect employment was of the order of 21.4 million in 1996-97.

Compared to agriculture, which generates 44.7 jobs per Rs 100,000 of investment, tourism notches up 47.5 jobs for the same amount of money invested. This multiplier effect is, perhaps, the most important factor in favour of this sector.

India, probably, is among those lucky few countries that are endowed with natural tourist destinations. With 4.5 per cent of its land area under some form of legal protection, India is one country that can boast of a large number of natural parks and game sanctuaries rich in flora and fauna. The country's 6,000 km long coastline has exquisite sandy beaches, not to mention the various pilgrimage destinations.

But what has been done to exploit its potential? To be frank, nothing. Even China, a communist country, attracts more tourists than India, Mansoravar notwithstanding. "Past governments have repeatedly committed blunders in developing tourism infrastructure," says an industry source who does not wish to be identified.

Desperate condition of Indian roads, poor transportation facilities and infrastructure bottlenecks have all created insurmountable problems for tourists. Sample some.

Lack of infrastructure
Presence of good and reliable infrastructure in various segments including air services, road development, telecommunications, power, etc. is the key to growth of economy in any country.

Air services: Foreign tourists and businessmen would like to travel to their destination directly from their home country; but in India there are less than half a dozen international airports. It would be surprising to note that renowned tourist and business destinations in India like Goa, Bangalore, Jaipur, Agra and Gaya, to name a few, do not have an international airport. Moreover, many of the Indian airports cannot handle large aircraft. To add to tourists' woes, all the airstrips are under the control of either the state governments or the central government. For, lack of funds has led to poor maintenance of these airstrips and many are unfit for usage unless renovated.

Take the case of the airport in Goa, where air craft movement is restricted owing to the airport falling under the purview of the defense ministry. The Leela’s vice- chairman Vivek Nair says: "The Hotel Association has sought the defense ministry's permission to introduce two weekly international flights in Goa."

Foreign guests, who constitute more than 60 per cent of the tourists destined for cities like Goa and Jaipur, currently have to travel via Mumbai, unless they are ready to charter a flight. This makes things more cumbersome and time consuming, thus discouraging many time conscious tourists from visiting the two towns. Similar is the situation in Agra, where 44 per cent of the tourists are foreigners, and Udaipur (51 per cent) and Varanasi (56 per cent).

Even if airport related problems are rectified, it will be very difficult to achieve the government's target of 5 million tourists by 2000, mainly due lack of air seat capacity in international flights to India.

Road network: Airports being the weak links in Indian tourism, tourists are forced to use roads. More than 80 per cent of foreign and domestic tourists use the road network. But, the deplorable road conditions in India do not make their travelling any easier.

Internationally, all the major cities within a country are connected with six-lane highways. But in India, even the four metros are not well connected.

The major factor that hampers development of the road sector is the government control over all road properties. While the national highways are controlled by the central government, state governments have control over state highways. Intra-city roads come under the purview of the respective municipal corporations. All this creates unnecessary clash of interests with the buck being passed from one department to another without any concrete measures being taken.

The only saving grace are the grandiose plans of the government of connecting the four metros with a 5,871-km golden quadrilateral at a cost of Rs 30,000 crore, of building an eastern coast roadline along the shores of Bay of Bengal and constructing another 7,000 km cross-country corridor from Kashmir to Kanyakumari and Silchar to Saurashtra at a cost of Rs 50,000 crore. But industry analysts have their own doubts about success of these projects considering the huge costs involved.

Telecommunications: With the entire world emerging as a single market place, it is very important for any foreign traveller to be in direct contact with his business associates. But the cost of communications, whether by way of telephone or the Internet, is very high in India. A recent survey done by HVS International revealed that revenues earned from telecommunications in an Indian hotel comprise more then 6 per cent of the hotel's total revenue, while internationally it is less than 3 per cent.

With a new government in place, the market hopes the telecommunication bill will be passed in the Parliament without any hitch. This will bring in more private players, thereby providing better and affordable telecommunications facilities to the customer.

Power: The prohibitive cost of power in India is bleeding the bottomline of the hotel industry, indirectly affecting the tourist. There is also the added disadvantage of high government duty on power tariffs. Take the case of Maharashtra state. Despite obtaining an industry status in the state, the hotel industry is paying higher duties at commercial property rates. The duty for commercial properties is at 10 per cent of unit rate while that for industrial units is just 5 per cent.

Moreover, international energy costs are just a third of what Indians pay for power. London based hotels spend just 2.5 per cent of their revenues on energy while New York hotels spend even less at 2.2 per cent. But Indian hotels spend more than 6.6 per cent of their revenues on procuring energy. In value terms, on an average, London hotels spend Rs 326 per room per day and New York hotels spend Rs 263, while in India, the figure is Rs 753 per room per day. Such prohibitive costs hamper the growth of service industries in the country.

Apart from these infrastructure woes, tourists are required to pay very high taxes for availing hotel facilities and land costs are high, which lead to higher room rates.

High tax structure: The hotel industry is the second largest net foreign exchange earner. Between the year 1991 and 1998 there has been a 100 per cent growth in foreign tourists. Receipts from foreign tourists rose from US $ 1.45 billion in 1991 to US $2.91 billion in 1998. Despite this the hotel industry is heavily taxed. Expenditure tax, luxury tax and sales tax inflate hotel bills by as much as 30 per cent. Compared to this, effective tax rates in some of the South east Asian countries range between 4 and 5 per cent.

Apart from high taxes there is also a disparity in taxes charged by various states which aggravates the problem. As, in India, such taxes are the domain of the state governments, their rates also vary accordingly. Among the four metros, the luxury tax rate is the highest in Chennai while the Union Territories charge the least. The luxury tax varies from 20 per cent (Tamil Nadu, Assam, Gujarat) to nil in several other states.

Also, confusion prevails over the method of calculation of this tax. While some states calculate luxury tax based on the amount paid by the customer, there are others who calculate it on the basis of the rack rates (official rates quoted by a hotel to a customer).

Many times the customer has to pay less than the rack rate which leads to difficulty in tax calculation.

The WTTC (World Travel and Tourism Council) has developed a tax barometer (with the base year as 1994). This barometer tracks and monitors taxes on travellers and tourist companies in 52 high traffic destinations. By this measure, Mumbai is the most taxed destination, holding the 52nd position. While New Delhi fares slightly better at the 48th spot.

Regarding the corporate income tax, only 50 per cent of the forex revenue earned by hotels is tax free while the other 50 per cent is contributed towards forex reserves maintained by hotels. This forex reserve is exempt from tax if utilised for capital expenditures.

Considering the employment potential and the multiplier effect (that of benefiting various related industries by increasing employment) of the hotel sector, the government should make the entire forex revenue tax-free.

Release more land: Land availability is a major hurdle for any hotel project. Release of land at prime locations is difficult because large tracts of land in such locations come under the government's control. Normally, land for hotel projects is obtained through the periodic auctions of vacant plots (many a times just one) by the government. This increases the total cost of a project, thereby leading to high room rents and affecting the growth of both tourism and hotel industries.

The Indian government should follow the footsteps of its Singapore counterpart. As soon as occupancy levels reach a certain level, say 70 per cent, in Singapore, the government makes more land available, at affordable prices. This is achieved by auctioning more than just a couple of plots at a time. All these measures if emulated would go a long way towards attracting more number of tourists to India.