Tourism business suggests the state build relations by new rules
According to the experts’ approximate estimates, the investment volume in Ukraine’s tourism sphere in the next years could reach $2-2.5 billion, claims deputy head of the State Tourism Administration Yevhen Samartsev. Attracting this investment has long been a priority. Small wonder that the major topic of discussion at the third Industry of Hospitality professional forum of hotel and restaurant managers was the low investment activity in Ukraine and how to increase it.
The reduction in the number of hotels in Ukraine compared to last year is quite insignificant (0.3%), according to the statistics. Moreover, the survivors have improved the total volume of service and number of guests (primarily by improving their work efficiency). However, such data are far from comforting. First, the quality of service in many hotels is beyond criticism, and, second, the number of hotels per thousand residents is low even compared to our closest neighbors. Take, for instance, the capitals: while in Kyiv this index is six (two for Ukraine in general), in Moscow it is nine, with 25 for Vienna and 38 in Paris.
There are many obstacles to development. First is the notorious hotel duty, which will be canceled from January 2004 (though this was achieved only with hard struggle). Recall that many authorities’ representatives in the regions retained it to the last, since this duty is among few taxes left to local budgets. In addition to this duty, which could reach 20%, there were also the basic budget payments. Obviously, in this situation hotels did not officially register all their guests, while high hotel prices only played into the hands of the old ladies offering rooms to rent at the rail station. The latter can always guarantee moderate prices but not secure safety, which is one of the major issues for tourism. Experts forecast that due to the government’s decision hotel prices will drop by approximately 13.5%.
New hotel construction also involves certain complications. In fact, this question is settled only in the sphere of green tourism: interest on bank loans for constructing green hotels is comparable to that for young people’s housing loans. The tax service was also convinced that it is not worth it to equip such hotels with cash registers, since this kind of service is defined by the legal norms of subsidiary household earnings.
With big hotels it is more complicated. For instance, the State Tourism Administration asks local authorities to allot specific territories to construct objects for tourism. Kyiv, in the person of head of the Municipal Economy and Hotel Business Administration Director Mykhailo Shparyk, complains that often, when a good lot in the downtown assigned for, say, a hotel, was “immediately taken away and build over with office centers or elite skyscrapers.” However, Kyiv and the Crimea with its scandals in the coastal construction are subjects for a separate discussion.
In general, the State Tourism Administration, referring to the world practice, suggests canceling some of the existing rules of this business’s relations with the state and reflecting the following issues in legislation. First, lifting custom duties for complicated equipment, which is not produced in Ukraine (elevators, restaurant equipment, etc). Incidentally, this is how they do it in Russia. Second, establish zero VAT rates during the construction period and simultaneously lift the land tax. Third, consider half of the repairs and reequipment expenses within total costs. The state’s over-regulation in this field is the reason why many world network hotels have not yet come to Ukraine.
Jorge Zukoski, President of the American Chamber of Commerce in Ukraine, speaking about the role of the international business community, recalled another problem: high visa costs and the need to obtain it before entering Ukraine. Certainly, it is pleasing to know that, for example, Kyiv authorities are planning to construct landing grounds for private planes in course of reconstructing Zhuliany Airport, but, unless the government decides to issue visa on the spot in Simferopol, Odesa, the port of Odesa, and Boryspil Airport and to prolong the term for non-visa stays in Ukraine from eight to fourteen days for the countries that do not create problems with illegal migration, the Zhuliany airstrip will never be filled with foreign guest planes.
In Mr. Zukoski’s words, the ACC has firmly decided to cooperate with Ukraine in the sphere of tourism. However, he observed, the amount of such investment is limited, and other countries are fighting for it. Those whose reforms are more progressive will win, he said.
