Hospitality: Uneven Road To Recovery

Hospitality: Uneven Road To Recovery

Year 2020 Proved To Be The Worst For Hotel Industry With The Key Demand Driver, The International Travel Coming To A Halt. With Gradual Lifting Of Travel Restrictions Imposed Globally, The Hospitality Sector Is Planning Its Strategy For Resurrection

By: Sapna Srivastava

Hospitality has been one of the worst hit sectors during the Covid pandemic since March this year. Given the critical situation and the needs of the hospitality players, Union Finance Minister is working with the Reserve Bank of India (RBI) on extending the loan moratorium period for the hospitality sector.

Loan restructuring allows modification of terms of a loan to let banks give borrowers more time to repay or reduce the rate of interest. The hospitality sector has also been urging the government to pause loan repayments after the six-month moratorium that ends on August 31. The measure is favoured by industry experts as loan defaults in the hospitality sector after the end of August could go up as high as 50 per cent of the total outstanding loans extended to the sector.

According to the Hotel Association of India (HAI) demand in the tourism and hospitality sectors is down by more than 90 per cent. The hospitality sector which employs nearly 45 million people wants a staggered approach to the rate of interest.

The four of the top 10 countries (China, Germany, the U.S. and the U.K.) that contribute to about 65 per cent of foreign tourist arrivals (FTAs) in India feature among the top 10 countries reporting the maximum COVID-19 cases. Similarly, the top states contributing to domestic tourism, Maharashtra, Kerala, UP, Rajasthan, Gujarat and Tamil Nadu are severely impacted.

INDUSTRY TRENDS TO SHAPE THE RECOVERY

Hotels are emphasizing on customer experience even more. Technology is starting to play a greater role in guest interaction such as use of VR (virtual reality) innovations like way-finders, AR (augmented reality) maps and receptionless and key-less hotels. The key will be to maintain the personal and emotional connection in the post covid world of minimum human interaction.

The high-end hospitality players are making significant investments in new mobile technologies and analytics that will empower employees to focus on the customer and enable a high level of personalization that will differentiate a hotel stay from a rental flat or a budget hotel. Moreover, the focus is now on domestic travellers since international tourism is still a long way to go. Publicizing destination level hygiene and safety assessment as well as assuring healthcare and insurance incentives are part of hotelier’s promotional plans. Hotels are also allowing traveller’s flexibility to change their itinerary for 12 month without penalties.

CURRENT FORECASTS IN A HISTORICAL CONTEXT

‘Years to recover’ reflects the time from the event year to levels immediately prior to the major event. Both Occupancy and ADR will recover much quicker in this cycle due to limited supply growth subject to vaccine being in place not later than 2021.

GOVERNMENT SUPPORT REQUIRED

What is required now is a new approach from the Central & State governments such as GST holiday for all travel and tourism services, Waiver for the next 12 months of property and excise taxes, Reduction in electricity and power tariffs and Deferment of payment of all previous due GST till the COVID-19 impact exists. No new compliances should be introduced that may create additional burden of resources on the industry. Hospitality must be treated as priority sector lending and government funding for distressed ventures should be made available. In addition, moratorium can be extended for the next 12 months and covenant relaxation for all loans, in airlines/hospitality/travel service entities should be offered without limitation of size or turnover.

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