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    Hyatt Regency temporary closure indicative of plethora of problems in India's hospitality industry

    Hyatt Regency temporary closure indicative of plethora of problems in India's hospitality industry

    Hyatt Regency temporary closure indicative of plethora of problems in India's hospitality industry
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    By Shilpa Ranipeta   IST (Published)

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    The Hotels Association of India’s preliminary data indicates that more than 40% of hotels have shut and about 70%, mostly small ones will face closure.

    The temporary closure of Hyatt Regency Mumbai due to a paucity of funds may have caught the attention of many, but this is indicative of a much bigger malaise plaguing the hospitality industry in India.
    The tourism and hospitality industry, which contributes to 8 percent of the country’s gross domestic product (GDP), has been one of the biggest casualties of the COVID-19 pandemic.
    The first lockdown saw the entire country coming to a standstill. However, even as the economy opened up, curbs on travel continued and so did the fear of infection. The second wave now has not only increased the fear of infection and apprehension regarding travel among consumers, but it has also sounded a death knell for the industry, especially for smaller players.
    Federation of Hotel and Restaurant Associations of India (FHRAI) estimates that the tourism and hospitality industry took a revenue hit of more than Rs 1.3 lakh crore in the past year due to the pandemic.
    According to the Hotels Association of India (HAI), hotels across categories continue to have almost zero revenue. The association’s preliminary data shows that more than 40 percent of hotels have shut and about 70 percent, mostly small ones, will face closure.
    Deep Kalra, founder, and chairman of MakeMyTrip also told CNBC-TV18 on June 8 that with the country now entering the 15th month of the pandemic, the period between October 2020 and March 2021 only offered some relief, but travel and tourism never returned to full steam.
    Well-funded organisations in the sector are only a minority, and the larger impact, he said has been on the lower end of the pyramid that depends on tourism as their livelihood.
    “At the lower levels of the sector, the situation is deplorable and distressing and we don’t have a count of the number of people who are on the marginal edge like tourist guides, people whose sustenance is only through travel and tourism - they’re not accounted for,” he said.
    Overall 70 percent of jobs lost
    The dire state of the hospitality and tourism industry has also put in danger the 90 million jobs that the industry supports. FHRAI has said that out of the 90 million jobs that the sector supported in 2019, over 50 percent were lost during just the first wave. The second wave worsened the situation and has resulted in 70 percent of overall jobs being lost directly or indirectly.
    Industry associations say they have been flagging off concerns about the industry’s survival for nearly a year now, having sent several representations to the government seeking urgent support.
    “After the first lockdown itself, we had indicated that 30 percent of the properties didn’t reopen and had called for stimulus for the industry. This industry requires international tourism, domestic tourism, travel, corporate events, etc to survive. That doesn’t exist anymore. There was barely any recovery after the first wave and the second wave now has taken hotels back to square one,” Pradeep Shetty, Joint Secretary of FHRAI said.
    Hotels say banks not offering credit
    Hyatt Regency Mumbai’s owner Asian Hotels West told the stock exchanges on June 8 that Yes Bank had held up all its funds in an escrow account after it defaulted on payments of Rs 4.32 crore to the bank for the first time due to the massive impact of the COVID19 pandemic.
    Hotels say that this too is a larger issue with the industry as banks are not ready to offer more credit to hotels, especially to medium and smaller-sized ones.
    Meanwhile, the Reserve Bank of India (RBI) earlier this month extended Rs 15,000 crore liquidity window to hotels, travel agencies, etc where commercial banks can offer fresh lending support to hotels and the tourism sector.
    MP Bezbaruah, Secretary-General of HAI said that while the support is welcome and could give businesses a breather, a lot will depend on the actual implementation by the banks. He added that much more attention is required to the serious liquidity problems of the industry.
    Hotel associations seek help from Centre
    Both associations have been in touch with the RBI, the Tourism Ministry, and others in the government to seek support. While the HAI recently wrote to Prime Minister Narendra Modi, FHRAI met the Tourism Minister Prahlad Singh Patel and Minister of MSMEs Nitin Gadkari on June 8 and made recommendations on immediate fiscal measures to save the industry from imminent collapse.
    The FHRAI told the ministers that with businesses steadily closing and non-performing assets (NPAs) rising, a sector-specific stimulus package is required that addresses the most critical aspects of reducing financial loss, mobilising loans, and retention of employment.
    Their recommendations also included a complete waiver of interest on loans beginning March 2020 till business normalcy resumes, announcement of special measures for the industry, and the interest burden of loans be borne by the government for a fixed period.
    They have also sought for monthly basic salaries to be paid directly to tourism, travel, and hospitality employees who have lost their jobs due to the pandemic, a provision of a moratorium of three years on the principal loan amount, working capital support at interest on fixed deposit rate plus 2 percent or MCLR rate.
    They have called for urgent release of SEIS pending payments, removal of secondary condition in EPCG and introduction of a long-term financing scheme for at least 10 years backed with a guarantee from the central government to banks and NBFCs.
    HAI, on its part, has also sought similar measures and has appealed to the PM for a one-time settlement of loans, extension of loan moratoriums and a waiver of all statutory liabilities at Centre, state and municipal levels for the pandemic period.
    It has also asked for the industry to be accorded ‘Infrastructure Status’ and tourism and hospitality to be brought under the concurrent list of the Constitution.
    “We have also recommended to form a consultative mechanism like a Task Force of the government and industry representatives which will help in pragmatic policy formulation and bring the true spirit of Public-Private Partnership,” HAI’s Bezbaruah said.
    Confidence level gradually dropping
    For the sector to begin stabilising, industry players, however, expect it to take at least another quarter.
    “The vaccination programme is critical to confidence building of people. Hotels are struggling and in the past two months, many more have shut down. Our estimate is that at least 40 percent hotels have shut down and those could be at the smaller level, city hotels, and some resort destinations too. Everyone continued paying salaries, and geared up for this year, but the second wave has destroyed people’s confidence levels and there are apprehensions about travel,” Priya Paul, Chairperson, Apeejay Surrendra Park Hotels told CNBC-TV18.
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