How will India's hospitality sector recover from the COVID-19 lockdown?

The hospitality industry in India has entered an uncharted territory. As lockdown persists amidst the continued transmission of COVID-19 and majority of Indians isolated in their homes, unsure of when this pandemic will pass. What does the future hold for those businesses that have ceased operations due to recent recommendations and mandates for complete shutdowns? There is no denying that from a business perspective, retail,travel and hospitality have taken the worst brunt of the pandemic's economic impact. Hotels across the globe have incurred unprecedented losses. With no concrete assertions about the timelines we face, and containing COVID-19 will take time. How much? We don’t even know that for sure. All that the hospitality sector can do right now is prepare for the worst while hoping for the best.

 By the end of the March, Hotels in India were operating at significantly sub-par occupancies and 10-20% lower ARRs (Accounting Rate of Returns). Allied income sources from MICE (Meetings, incentives, conferences and exhibitions) and F&B (non-resident) have been entirely shut down. Group events felt the first impact with mass cancellations impacting banqueting and allied income for hotels starting in February 2020, even before the impact of the Covid19 was visible in India.

While globally many hotels are facing closure, while in India it is far from witnessing closures yet but prolonged containment in the event of a mass outbreak in India and operational viability of hotels at low occupancies could make the scenario much bleaker for the hotel industry. 

According to ICRA Limited, a credit rating agency, “The travel and tourism industry will witness one of the longest tail periods of impact, potentially running into multiple quarters, in the post covid 19 period. While some deferred travel, particularly for business will re-flow in, room nights are essentially perishable commodities. Business on books for hotels, going into the summer months is low. This will severely hamper the industry’s ability to support its rates.”

Hotels with liquidity support in the form of cash balances will fare better. The hospitality industry globally and even in India need deep pockets, right now. Longer the downcycle, more hotels will struggle to revive. Stock of stressed hotel assets will increase over the next few months, ICRA predicts.

Amidst all this uncertainties what all hoteliers can do to ride the wave:

• Hotels can proactively close certain sections of their property to cut costs. 

•  Closing of  F&B outlets and the reduction of staff based on current infrastructure demand. 

• Leveraging on technology and aggregators services can also help in converting traditional dine-in F&B outlets, to takeout and delivery outlets, to comply with social distancing ordinances.

• Hotels can partner with local government and authorities to convert their unused spaces into makeshift quarantine and isolation spaces. For example- OYO has reached out to embassies of over 15 countries to accommodate foreign nationals stranded in India. Also, it has taken steps to provide support to frontline medical staff, aircrew, corporates, tourists, paying guests, among others who need accommodation.

• Hotels should review and reinvest- Hoteliers need to  pause, reduce/eliminate non-essential investments this year.

• Updation in pricing and making cancellation policies more flexible. Also offering compelling rates and booking incentives, will help to reinforce the hotel's bottom line during trying times.

• Improve and invest in energy efficiencies as it will help the hotel in the long run as it will curtail down on utility related costs.

• Rather than laying off share the pain of your employees- Hoteliers can have a more palatable approach by going for hourly wages and reducing the length of the workweek or converting some employees to part-timers.

• Most importantly remain calm, as this Covid-19 pandemic will force hoteliers to make some hard decisions about investments, activities, and employment. So, whatever the decisions are they should be guided by both courage and empathy- but most importantly fallback on the right data and have a long term clear vision in front of you...