The travel and tourism industry is hoping for infrastructure status, rationalisation in Goods and Services Tax, modifications to Leave Travel Allowance (LTA), and incentives to boost local destinations from Budget 2025.
Amit Jain, Founder of Magicfares said in a note that the increasing demand for hospitality services, bustling airports, and the rise of popular travel destinations reflect the key role the sector has come to play in the economy’s growth.
Jain said that an increase in travel related tax exemptions could encourage people to spend a higher portion of their disposable income on travel. Rationalising GST rates to make hotel stays more affordable for tourists is another crucial step, according to Jain.
Modifying the Leave Travel Allowance (LTA) rules to include hotel stays as LTA expenses and offering incentives to corporates for organising meetings and conferences in India through partial or full tax exemptions on incurred expenses would further boost domestic travel and tourism, he feels.
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Axis Securities highlighted that India has the potential to become a top tourism centre globally.
The travel and tourism market in India is set to generate a revenue of $23.72 billion in 2024, with a projected annual growth rate of 9.6 percent over the next four years, according to a report by the India Brand Equity Foundation (IBEF).
"The travel and tourism industry has seen significant growth post-pandemic, with both foreign tourist arrivals (FTA) and domestic travellers returning to pre-COVID levels," the brokerage firm said in its note.
Axis Securities too is in favour of lower GST rates for the sector, granting infrastructure status to the hospitality industry, and promoting local destinations through fiscal incentives.
In the interim Union Budget, approximately Rs 2,450 crores were earmarked for the sector -- a 44.7 percent increase from the previously revised allocation -- to boost employment and stimulate tourism growth.
Sectoral performance
Hotel stocks have thrived post-pandemic, with a significant rally driven by strong demand boosting occupancies across all segments. In the third quarter of FY24, nearly all companies in the sector reported healthy operating margins due to this increased demand.
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However, during the April-June quarter, the travel environment faced challenges like severe heat wave and disruptions from elections, dampening recreational spending, Prabhudas Lilladher said in a report dated July 8. The all-India average occupancy declined to 59-61 percent in May from 61-63 percent in April. However, aviation traffic showed resilience with domestic numbers rising by 4.4 percent year-on-year to 13.8 million in May.
Travel and tourism stocks
Chalet Hotels, Lemon Tree Hotels, IRCTC, Safari Industries, Interglobe Aviation - gained 9-44 percent in the past six months.
Rating agency ICRA said that hotels are experiencing steady growth as the supply of hotels takes time to match high demand. CRISIL Ratings predicts robust revenue growth of 11-13 percent for the Indian hotel industry in FY25. Overall, the tourism sector is anticipated to sustain its momentum and grow significantly in FY25.
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