Currency notes ban: Smaller hotels, luxury to get hit

NEW DELHI: The government’s move to ban currency notes of Rs 500 and Rs 1,000 and associated curbs on ATM and bank functioning will cause chaos in the travel and tourism industry and inconvenience inbound tourists, industry experts said.

“It is a very big step for the economy but has taken everyone off guard. The move is likely to cause a huge amount of uncertainty and will disrupt transactions, especially for smaller hotels, restaurants and food & beverage operations, which accept cash payments,” said Aashish Gupta, consultant CEO of the ?Federation of Associations in Indian Tourism & Hospitality.

The government’s decision, aimed at fighting corruption, black money, terrorism and counterfeit notes, was announced by Prime Minister Narendra Modi in a televised address on Tuesday evening. ATMs won’t be operational for the next two days and banks will be closed on Wednesday.

“While the move is laudable and will facilitate electronic payments, it is inconvenient for tourists holidaying in the country who might be carrying local currency,” said Sharat Dhall, president of travel portal Yatra.com.

The two denominations of currency notes will continue to be accepted in some places until November 11. These include booking counters for railway tickets and government buses, airline ticket counters and automobile fuel stations operated by state-owned oil companies.

The measures will create problems for the travel industry.

“The move is likely to cause some degree of chaos in the unorganised hotel space, especially standalone hotels and banquet businesses, which accept a lot of cash payments,” said Achin Khanna, managing director of consulting and valuation practice at HVS.

Luxury brands, already reeling under slowing sales and tighter income tax regulations, may face additional problems initially because cash transactions are common in some regions, although industry officials welcomed the move.

Pratik Dalmia, chairman of Assocham’s National Council on Luxury and Lifestyle, called it a significant initiative taken by the government. “We will have to see how it unfolds in the short term, but it is definitely positive in the long run.”

Yasho Saboo, CEO of Ethos Watch Boutiques, called it a step in the right direction for the luxury sector. “This is something that we anticipated. The impact in sales will be of a short duration but in the long-term it’s a positive move to fight black money that will reward businesses the right way,” he said.