What no other natural calamity, dreaded wars, socio-economic and geo-political crises could do in centuries of civilisation, COVID-19 has done in just a couple of weeks. Industry stalwarts feel that although this is a turbulent time for the tourism and hospitality industry, with the industry-wide solidarity, government’s support, positive attitude and dynamic action plan, the Indian hospitality industry will tide over this crisis. By Akshay Nayak
The Novel Coronavirus cases, globally, have been increasing dramatically ever since its outbreak late last year in the city of Wuhan in China – reportedly the epicenter of the virus outbreak, ahead of the Chinese New Year. The worst-hit after China were Italy, Spain, West Asian countries, some of the South East Asian countries and now the USA. With the WHO declaring it a pandemic, the whole world including India has taken cognisance of the devastating impact of the virus on human life and gradually the economy.
In India, vigilant measures were put into action by the Centre including screening of key international airports which gradually melted down to mandatory screening of travellers at all airports and advising the citizens to maintain due diligence to flatten the curve, following simple measures like social distancing and sanitisation. But despite this, the virus spread across the country due to many reasons like citizens hiding international travel history and violation of the quarantine period by people who tested positive. While the number of cases was in single-digit during late January this year in India, it spiked almost instantaneously and has been increasing exponentially nation-wide despite the Centre’s decision to implement a 21-day lockdown across the country to break the chain of transmission.
As the outbreak of the virus kept escalating within the country, India’s one of the largest employing industries – the hospitality industry saw the worst impact. In the early days of the outbreak, many foodservice brands observed maintenance of high standards of hygiene at all their outlets. Many hotels too offered rooms at slashed prices and allowed people to self-quarantine. But, gradually as the situation started worsening, the government moved to a shutdown mode with flights, both international and domestic, halted completely.
“India is under a nationwide lockdown for 21-days, at least. The Indian Railways have been grounded. Flights have stopped, every interstate bus service sealed. Intracity metros and even the unstoppable Mumbai locals have been brought to a grinding halt. Schools, colleges, offices, malls, cinema halls, factories, farms – padlocks on every door. Time seems to have come to a complete standstill. Reality does indeed prove to be stranger than fiction. As we all move towards adjusting to this new normal, businesses grapple with the challenge of attempting to answer the near-impossible question – How long will this last, and will our enterprise survive long enough to see light at the other end of the tunnel?,” writes Achin Khanna, managing partner – strategic advisory, Hotelivate, in a recent article titled – “The Cost of Closure – India’s Hotel Industry”.
Battling the situation is really difficult, says Khanna, pointing out that though the government has asked the hotels to operate during the lockdown period, citizens are asked to stay put at their homes, which will only keep the brick and mortar facility to bleed on undeniable costs including debt outstanding – Principal & Interest payments; Salaries & Wages; Provident Fund – Employer Contribution; ESIC – Employer Contribution; Property Tax & Insurance; Annual Licenses, Permits & Renewals; GST liability.
Short term impact
Since the industry is already hurting with the impact of the pandemic, Gurbaxish Kohli, VP, FHRAI and
president, HRAWI, says that the government directed the operators to shut down restaurants and hotels based on ground reality and at present it has advised practising social distancing. People are withdrawing from eating outside at restaurants as well as hotel room bookings have come to a standstill with all prior bookings cancelled. “In the short term this will adversely affect hotel and restaurant establishments who conduct everyday operations. Limited staff, squeezed liquidity, steady outgoings and no customers will translate to losses and based on their respective appetites, each enterprise will then have to make a decision on how to carry on their business.”
“Short term impact is that the industry is shut. Simple math. Each month is going to potentially decline 8.33 per cent on revenues for the industry. March and April are shoulder months and therefore safe to assume the impact will be at least 15 per cent from both these months alone. Add to that a few more months and the numbers keep going up. Very hard to say where that number is. While again, early to comment on long term impact. Hopefully once we put this behind us, it is entirely possible to have a good 2021,” expects Manav Thadani, founder chairman, Hotelivate.
As an immediate impact, the restaurant sector, which works on high operational costs, saw the president of NRAI, Anurag Katriar writing to the FM for a bailout plan for the many restaurateurs across the country. In his letter, he wrote, “The restaurant industry with an annual turnover of approximately Rs 4 lakh crore providing direct employment to over seven million Indians is in a very precarious situation currently, fighting a grim battle for its basic survival. In these times of unprecedented crisis, the
fate of 7.30 million employees in the F&B sector is our biggest concern. We don’t want them to suffer but unfortunately, we don’t have adequate resources to support them for long. Hence, we have written to our FM requesting for financial relief at such a crucial time.” Through the letter, the restaurant body chief asked for moratorium on bank loans, and deferment of statutory dues to state and center, and also restoration of ITC on GST for the sector in such challenging times. Katriar later lauded the center and RBI’s immediate action of asking banks to offer moratorium loans to businesses and consumers for up to three months.
Likewise, Khanna also positively points out, “The recent announcement that defers the filing and submission of GST on the monthly portal till June 30, 2020 is a welcome step. However, the hospitality sector will need this relaxation for a much longer period, possibly a full year.”
As the nation’s fight against coronavirus enters the last week of the 21-day lockdown, the players are joining hands in solidarity, trying their level best to ensure safety of not just the guests dwelling at their brick and mortar buildings but by helping the needy and below poverty line too. From NRAI to hotel companies like Pride Hotels, The LaLiT Group, Taj Hotels, etc. – they have been providing thousands of meals and essential food ingredients and items to the needy as well as to the frontline fighters – healthcare workers handling coronavirus patients.
Long term impact
The domestic tourists’ holiday seasons for travelling both within and outside the country are April to July and from October to December. At the time of writing this, at least one season seems completely disrupted due to the outbreak. It remains to be seen if the second season will also be wiped out, expresses Kohli. He says, “Forward bookings in hotels have completely dried up and my estimate is that the second season will surely take a hit because people will be wary of travelling and contracting the virus and would like to play it safe. Besides, senior citizens form a large portion of the domestic tourists and since the virus particularly adversely affects this section of society, they are most likely to call off their travel plans. This will be a massive disruption in the hotel, airline and tourism industry which can cripple the industry for years to come.”
Noting that lockdown is an unprecedented one and one can only hazard a guess, Kohli feels that everything we estimate now will be pure conjecture and we could be way off the mark. “It all depends on how long a lockdown we are looking at. Even if restrictions are lifted, by the time things limp back to normal we would have lost six months. This could result in job losses, income losses and reverse migration of labour from cities to villages. The recovery from the industry perspective could be a long and painful process and could take an entire calendar year for it to be back to normal. The economic and social costs cannot be estimated at the moment,” he added.
Speaking about the impact of the lockdown and the highly contagious coronavirus on the hospitality supply chain, Dr Nitin Nagrale, CEO, QualityNZ and founder & general secretary, HPMF, said, “Over the days, organisations across industries have lost business. As the international movement has come to a halt, and domestic travel too being hampered due to the self-isolation mandate, and also the panic situation among citizens, has impacted the overall sales of the hospitality industry. In turn that has resulted in less to no demand from the HoReCa sector within the country. The orders came down by 50-60 per cent as of March 18, ahead of the self-isolation and national lockdown. This has left the supply chain into a situation of supply surplus and demand deficit. The essential products and groceries are still available in abundance. What will be adversely impacted are products like toiletries and others which are imported. Also, ahead of the major spread of the virus in India, the supply chain fraternity was indicated with a directive that if any vessels are coming to India from the coronavirus affected countries, then it will be first quarantined for 14 days before it reaches the port, which again increases the clearance time for those products. Many suppliers have been approached by buyers to support them during this time with additional supplies and discounts to support their organisations. Suppliers have also been approaching the buyers with support such as free delivery on-call, etc. to support the industry.”
“At HPMF, we have made mandatory courses for all our members to keep them informed about Coronavirus and safety measures that they must consider. It helps them to plan the functioning of their own departments accordingly,” he added.
The industry started feeling the impact of coronavirus even before the lockdown was officially announced. Domestic as well as international conferences were cancelled as early as in the month of February
itself. “We are staring at a washout of the first quarter of 20-21. The FY is reduced to just nine months now, and though demand in the second quarter will try to pull up, it will remain sluggish. With the first quarter washout, revenue budgets will shrink, hotels would spend less capital on renovation, welfare expenses may see a dip. Non-essential spends will be completely cut down and hotels will be on a saving mode. The industry has been through similar shock after 9/11 when people stopped travelling but by November 2001, things were back on track and I hope we have a similar recovery soon,” explains Salil Fadnis, hotel manager, Hotel Sahara Star and VP, WICA.
Natwar Nagar, managing partner, Hotelivate, in his article “The BC & AC of Hoteliering” writes, “We believe the industry will see a flat year with compensation reduction of 10-15 per cent for
the mid-level and 18-25 per cent for senior management. We also think it imperative for companies to take a more cautious approach for business continuity and request for voluntary reduction from employees, as this would enable cash-flow management and allow the companies to prevent retrenchments. This should be done with every hope that organisation shall be able to pass on the benefits back in the form of bonus or ex gratia at the end of the year. As a firm believer in our industry’s grit and resilience, I do believe engagement and positivity should be our mantra in this time of hardship, as we await happier times of welcoming our guests back in.”