Hospitality in inhospitable terrain

• India’s hospitality sector is one of the worst casualties of the coronavirus. A report by JLL India states that at least 30% of hotel and hospitality industry revenue could be impacted if the situation doesn’t improve by the end of June 2020.
• However, there are quite a few premier hotels across the country who are making the most of this crisis by reinventing their service offering.
• The shut down and resultant slowdown is expected to last for a period stretching from February till October, 2020 in an optimistic scenario.
• A reorientation of spaces and activities within the hotel, re-training of staff and cost optimization are some of the strategies that will help the industry bounce back on its feet.

The global hospitality sector is one of the worst casualties of the Covid-19 health emergency. Several concerns immediately spring to mind when you consider the HORECA industry.

In a bid to prevent the spread of coronavirus the Government of India, suspended travel visas (with a few exceptions). It is being widely speculated the paranoia surrounding the infection that demand from FTAs is not expected to pick up any time soon. According to industry insiders, majority of the future travel bookings for winter i.e. October-March – the strong season for our industry – are done in the summer months, have largely evaporated. As travel bans across the world become the new normal, this was followed by the imposition of a covid-19 induced countrywide lockdown on 25^th March. This, too, added to the woes of the Indian hospitality sector since it curtailed the to and fro movement within the country at a time of peak demand. Consequently, domestic flights have been ordered to shut shop. All other demand segments such as Meetings, incentives, conferences and exhibitions (MICE), business, social and sporting events have been cancelled or postponed indefinitely for the foreseeable future, the hospitality segment is surely in a tizzy.

The signs of the impact of this deleterious disease on Indian hospitality industry had already begun to appear in February. As the spread of the virus continued its unrelenting movement to other countries, Foreign Tourist Arrivals (FTAs) into India started softening in February. A report by JLL India states that “In the third week of March 2020, at an all India level, the hotels’ sector witnessed a decline of more than 65 per cent in occupancy levels as compared to the same period of the previous year. As travel restrictions around the world intensified further, second and third quarters of 2020 are likely to be similarly impacted.” It further adds that (of the ₹38,000 crore annual revenue of branded and organised hotels, as per the industry), at least 30% of hotel and hospitality industry revenue could be impacted if the situation doesn’t improve by the end of June 2020.

Hotel magnate Prithviraj Singh Oberoi, Chairman, EIH Associated Hotels Limited (Oberoi Group), tells TPCI in his interaction:

“At present it is very difficult to put a date on the recovery. We are hoping that once the lockdown is lifted the business will gradually improve. We do not expect any increase in international travel till the fourth quarter of 2020.”

As insiders from the labour-intensive hospitality industry explain, hotels have lots of fixed costs such as wage bill, besides paying government levies, minimum load charges, among others. Further, the government has urged industries across the country to not lay off staff and cut salary, wherein liquidity is a problem. Given the decline in foreign exchange and domestic earnings, quite a few hotels in the country find themselves staring at the possibility of closures.

However, all hope is not lost, and there are quite a few premier hotels across the country who are making the most of this crisis by following the English adage “modern problems require modern solutions”. For example, hotel chains like the Hyatt and Hilton have partnered with Zomato and Swiggy and are offering customers the opportunity of home delivery of food items. Similarly, IHCL and ITC are offering clients contact less food delivery. Meanwhile, ibis New Delhi Aerocity is offering paid quarantine facilities to around 200 guests in Delhi. Airbnb is leveraging this opportunity to provide its host community the opportunity to connect with guests and earn an income despite the COVID-19 disruptions. Pullman & Novotel New Delhi Aerocity is offering a dynamic in-room dining menu to its occupants. The Pride Hotels have engineered a new initiative called ‘Work from Pride’ that seeks to provide an ambient and alternate workspace environment for the corporate and senior management of the companies.

The shut down and resulting economic slowdown are expected to last for a period stretching from February till October, 2020. In an optimistic scenario, the industry will see cash flows only beginning to improve in November, 2020 and perhaps get to normal levels by end of 2020.

Hospitality has experienced more than its fair share of global disasters – like the Great Depression, World War II and Recession – and recovered from them successfully. China, which is recovering from this mayhem, is witnessing a slow-but-steady upturn in travel demand. Data from STR suggests that mainland China’s hotels reached a 31.8% daily occupancy rate on March 28, from a low of 7.4% in early February. Further, the Chinese firm Huazhu Group — which operates over 2,000 hotels in the country — reports that occupancy has reached 62% at its operational properties, up from a single-digit occupancy rate just a couple of weeks ago. Hotels in India, too, can can take heart from these trends, even though they may have to rely largely on domestic travel in the initial months.

At the present juncture, there can be two main approaches for hospitality players. The first is to use this period to engage with the customers. As mentioned above, numerous hotel chains in India are already doing that in myriad ways. But in addition to the above, hotels can use this time to up their game by making their online presence more robust. Improving upon the booking experience, online branding and new marketing gameplans in a way that accepts social distancing as the new social reality are some of the ways to do that.

The second approach would be to focus and strategize on what should be done once the lockdown curbs cease to operate. As customers become finicky about hygiene, brands must focus on offering nothing but the best to their clients to win back their trust. A reorientation of spaces and activities within the hotel needs to be undertaken, taking into account the changing demands of the times. Employees of these hotels, too, will need to be re-trained, keeping in mind this scenario. Given their limited financial resources, hotels need to also think about cost optimization by deploying tools like budget reallocations, diversion of market expenditure and deferring of investment or expansion for some time.