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Friday, Jan 09, 2004

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Hotels and tourism — More room for optimism

C. Raja Rajeshwari

THE hotel and tourism industry, which is witnessing a turnaround in fortunes, has now received an additional boost, with the measures announced by the Finance Minister, Mr Jaswant Singh.

The inland air travel tax of 15 per cent has been abolished, making air travel more affordable. This is in continuation of the sops granted in 2003; where the government restored the leave travel allowance for Government employees. This had led to a pick-up in domestic travel in the past six months.

The excise duty on aviation turbine fuel (ATF) has also been cut from 16 cent to 8 per cent. This will mean a decline in input costs for the airline industry, at a time when prices were on a sharp uptrend.

Over the past year, airlines have expanded their customer base through discounted tariffs for domestic travel. The duty cut will help airlines continue with this strategy, which will have a positive influence on both inbound traffic and domestic travel.

The Government has also removed the foreign travel tax of Rs 500 per person. This move, however, will not have much of an impact, as most outbound travel is business travel, which has inelastic demand.

The year 2003 saw the fortunes of the hotel industry reviving, with occupancy picking up on the back of strong tourist inflows. The latest measures announced by the Finance Minister will play a role in boosting domestic tourism.

However, for the listed hotel companies, foreign tourists are the lucrative customers. Hence, these measures may not bring immediate benefits for such companies as Indian Hotels, Hotel Leela Ventures, Asian Hotels, ITC Hotels, Taj GVK Hotels and Resorts, Oriental Hotels, Bharat Hotels and Viceroy Hotels.

Blue Dart, the express courier company, which operates three aircraft through its subsidiary, Blue Dart Aviation, will also benefit. The Customs duty cut may help lower its cost of operations.

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