International luxury hotel investment in India stays strong despite tax overhaul

The Grand Hyatt Kochi Bolgatty in India is set to open by the end of 2017.

Although luxury hotels will be charged 28 percent under India's goods and services tax regime, global hotel groups like Hilton, Hyatt Hotels & Resorts and Carlson Rezidor have committed to future investments in the country.

These hotels with a 28-percent goods and service tax (GST) rate on rooms and tariffs of $116+ would be paying the highest taxes compared to their global counterparts, Business Insider reported. These would be even higher costs than the luxury hotels in New York, London and Paris, excluding add-on levies, like municipal tax, service charges, etc. 

"Hilton continues to see great potential in India," Kaushik Vardharajan, VP of development at Hilton India, told the Economic Times. "Tourism, which accounts for 7.5 percent of the GDP, is the third largest foreign exchange earner for the country. We are committed to India as a key market and the last few years were dedicated to establishing the operations infrastructure, opening several hotels and building a strong development pipeline." 

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International hotel chains remain optimistic about their development pipelines in India, but are "taking a thorough approach" to expansion before the increased GST launches. The chains are setting up back-end systems for the revision and writing up procedural manuals to prepare team members for the country's biggest tax reform since its independence from the UK. "Since tourism and hospitality industry is of high priority on the government's agenda, we believe that the authorities will continue to be thoughtful of the implications GST percentage has on the industry," Vardharajan told ET. 

India's Hilton branch has a current development plan that includes 18 hotels for five of its brands—Hilton, Conrad, DoubleTree by Hilton, Hilton Garden Inn and Hampton by Hilton—across 11 Indian cities. Meanwhile, Hyatt Hotels & Resorts will debut the Hyatt Regency Lucknow and the Grand Hyatt Kochi by the end of 2017. The group just recently opened Hyatt Place Rameswaram.