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Budget 2009-10: Hotel
Infrastructure plays a very important role for the tourism sector. Development of airports, railways, roadways, better connectivity between places and facilities as well as maintaining the upkeep of tourist destination is very necessary. Further, strong GDP growth would also aid business travel.
The year 2008 would have been best left lost in the passages of time, especially for the hotel industry which had to deal with the worst financial crisis in several decades, high oil prices and a slew of militant attacks that played havoc on both business and leisure travel. Further, cost pressures, liquidity crisis and regulations concerning the real estate sector made funding for hotel projects difficult. CRISIL Research expects the profitability of premium hotels to be impacted due to the sharp decline in occupancy rates and room rates. It expects the demand to decline by 15.5% YoY in 2009-10 and this is going to affect the profitability of the sector. The hotel companies are already facing cash flow pressure, thereby affecting their expansion plans. The balance sheets of the hotel companies are under stress on account of acquisitions of land banks and rising debt levels. While the government is promoting year 2009 as ‘Visit India’, concrete measures on problems faced by the sector needed to be solved urgently to get the industry back on track.
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