Hotel Industry in India Pitches for Equality in Regulations and Taxes
17 February 2017 05:04:01
The Parliament of Singapore passed a new law on 6th February making it illegal for home owners to rent out entire apartments and rooms for less than six months, unless they have permission from the Urban Redevelopment Authority (URA) to do so. This move is likely to affect private home owners renting their houses through hotel aggregators like AirBnb. The changes to the law come on the back of growing complaints regarding short-term rentals last year. The URA received 608 complaints in 2016, 61 per cent more than the 377 complaints in 2015.
Besides Singapore some of the other countries that have regulations in place include France, Germany, Netherlands, Spain and United States of America among others. Germany banned unlicensed rentals from May 1, 2016. Since then 40% of Berlin’s Airbnb listings disappeared. Amsterdam, meanwhile, has allocated $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 Homestay $65,000 each for listing apartment without permit. These measures not only created a level playing field among all parties, but also netted revenues to the exchequer in the form of taxes.
The Hotel and Restaurant Association of Western India (HRAWI) has beseeched the Government of India to come up with a policy to cover the unregulated room rentals that have mushroomed across the nation – a policy that is fair to all players and one that will allow the tourism industry in India to take off in a big way.
“We concede that homestays presently offer convenience to all parties concerned. But we have to view these things in perspective. The apartments are currently cost effective to tourists only because they do not pay taxes or follow regulations that hotels need to. This gives them an unfair business advantage that goes against the concept of fair trade practices. The graver issue is that a lot of establishments are taking advantage of the ‘Bed & Breakfast Homestays’ and run full-fledged commercial establishments without any kind of regulations and taxes. While five star hotels pay a substantial 38 per cent of the room revenue as direct and indirect taxes, some of the lavish bungalows listed in hotel aggregator sites like AirBnB do not pay a single rupee as taxes. Further, over 42 licenses are needed to start and operate an organized sector hotel, while the unregulated sector operates without a single license. The regulations that the licensed establishments have to follow are vast and cover fire safety measures, food safety measure, hygiene parameters and many other compliances,” says Mr. Dilip Datwani, President, HRAWI. “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 Rs. 1500/- for a room, then it has to pay 10% as luxury tax beside other taxes, but a bungalow listed in Airbnb, for over Rs. 10,000/- a day, ends up paying nothing. If nothing else, this is a loss of revenue to the exchequer also,” he adds.
HRAWI also questioned the relevance of subjecting hotels to administrative clearances, liquor permits and other licenses while these unorganized accommodations, providing the very same services are exempted. Homestays, functioning just like hotels do, are prevalent even today in a lot of States of India.
The association also pointed out that 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.
“The hospitality industry without these illicit accommodations in Maharashtra today, can generate almost Rs.600 crores 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,” concludes Mr. Kamlesh Barot, past President, Federation of Hotel and Restaurant Associations of India (FHRAI).
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