0

0

0

0

0

0

0

0

0

hospitality | IST

COVID-19 impact: Hospitality industry gasping for air

Even before the 21-day nationwide lockdown was announced, one sector that had already been feeling the hit of global coronavirus pandemic was travel and tourism industry. It began with cancellations of international travel, and was made worse by the grounding of international flights by many countries.

Even before the 21-day nationwide lockdown was announced, one sector that had already been feeling the hit of global coronavirus pandemic was travel and tourism industry. It began with cancellations of international travel, and was made worse by the grounding of international flights by many countries.
In India, domestic travel started taking a hit soon after, and things have only become worse since the lockdown came into force. The industry says given the sharp drop in bookings, spiralling cancellations, and the latest restrictions on international and domestic travel by air, rail or bus, the sector is at a virtual standstill.
Industry associations say the current situation puts at risk a large percentage of India’s tourism business activity, which is estimated at over $28 billion. Domestic tourism, which is estimated to be Rs 2 lakh crore industry, is also at risk.
Already, the chief executives of various airlines have announced that they will be taking a pay cut, and in some airlines, this pay-cut has extended to the entire staff.
Now, companies more directly involved in the tourism sector are taking similar steps. Online travel firm MakeMyTrip's top executives Deep Kalra and Rajesh Magow have decided to draw 'zero salary' from April 2020. Rest of its leadership team will take a reduction of around 50 percent in their compensation.
The hospitality industry is not being spared either. The entire value chain -- from hotels to tour operators, to travel agents -- are reeling from the restrictions imposed by the Centre and state governments in view of the virus outbreak.
Booking for social and commercial events like weddings, seminars and conferences have also dried up, and numerous luxury hotels have resorted to slashing room rates and adopting severe cost-cutting measures to try and survive the pandemic.
The problem is also spilling over down the value chain. OYO, for instance, has written to its vendor partners and warned them of possible disruption in payment cycles.
In the middle of all this, many hotels and establishments have moved to help the government's efforts to fight the spread of COVID-19; from supplying food to the needy, to housing people who have been left stranded, to offering properties as quarantine and isolation facilities.
Confederation of Indian Industry (CII) expects the slowdown that is hurting the travel and tourism industry will last till at least October this year and cash flows will begin normalising only by the end of the year.
CII has suggested a series of measures that will help the sector tide over this crisis and this includes zero-interest loans, a 3-6 month extension to the moratoriums already announced, and relief from paying statutory dues like GST.
Dipak Haksar, chairman of CII’s National Committee on - Tourism and Hospitality and the Former CEO of ITC Hotels - said this is an existential crisis for the hospitality industry.
“I don’t think we could have ever imagined the overall impact that the industry would have felt. Our own estimate shows that India may lose up to 2 crore jobs. In 2018, the hotels and tour operators annual revenues are around $32 billion and in the best case scenario, we will lose anything up to 60-70 percent in this year, about $21 billion. We are seeing a complete lockdown of demand and this is unprecedented,” he said.
“The industry is truly gasping for oxygen and seeks immediate sectoral relief from the government for its very survival and to support businesses from going bad as well as the jobs that are part of this industry,” he added.
Deep Kalra, a member of CII’s National Committee on Tourism and Hospitality, and founder of MakeMyTrip, said that 60 percent of the employees are on a thin margin base.
“We have got over 9 lakh organisations comprising the industry and we have a total number of people employed over 26 lakh. Majority of these people, 50 percent of these people earn less than Rs 10,000 a month and another 10 percent earn less than Rs 20,000 a month," Kalra said.
"So, 60 percent of this industry is truly on the very marginal scale and therefore high risk. When this very fragmented industry and very small operators, MSME and SMEs, face this kind of disaster situation, among the first reactions that you are going to see from small companies is letting people go. I fear most of these people will not have other jobs,” he added.
Ritesh Agarwal, co-chairman of CII’s National Committee on Tourism and Hospitality, and founder and CEO OYO Rooms, said OYO will make sure that the teams are paid.
“Our industry is highly fragmented and we as a company with sizeable cash reserves and a balance sheet would be able to at least make sure that we pay for our teams and all our basic cash flows,” he said.
He further added that for MSMEs, they have ensured that there are no payment disruptions. While for large corporations, there are discussions for payment timelines, said Agarwal.