Hoteliers say tax holiday largely irrelevant

MUMBAI, Feb 29 (Reuters) - India's hoteliers said the budget on Friday did not bring them widespread benefits nor help the industry tackle the shortage of rooms in India.

Finance Minister Palaniappan Chidambaram in the 2008/09 budget proposed to grant a 5-year tax holiday for two, three and four-star hotels established in specific districts that are UNESCO-declared 'World Heritage Sites'.

The hotel should be constructed and start functioning during the period April 1, 2008 to March 31, 2013, he said.

"This budget, as far as the hotel industry is concerned, is negative," S.P. Jain, Senior Vice President, Hotel & Restaurant Association, Western India, said.

"The shortfall of rooms will continue and there's no support from the Finance Minister to attract finance to the sector." Jain, also managing director of Pride Group of Hotels, added.

To help meet the shortage of rooms, the hotel industry wanted to be given infrastructure status, benefiting from easier financing, and a tax holiday to be given to all categories of hotels across India.

"This will give boost to tourism sites like Hampi," Chender Baljee, chairman of Royal Orchid Hotels Ltd (ROYL.BO: Quote, Profile, Research) said.

"It's a very small benefit and not very significant. The tax holiday could have been extended to Tier II, Tier III cities, which can do with budget hotels," he added.

"It's a positive step but it's not relevant to us," Rajiv Kaul, Senior Vice President, Hotel Leelaventure Ltd (HTLE.BO: Quote, Profile, Research) said. "The need of the moment is to build more hotel rooms and this incentive will perhaps add up to 2,000 rooms."