Effect of COVID-19 on Hospitality Industry
Hotel Business Review|September-October 2020
The economic damage caused by COVID-19 novel corona virus pandemic is difficult to predict. However, there is widespread agreement among economists that it will have severe negative impacts on global economy. The hospitality and leisure clients were the first ones that experienced bad weather conditions but they are moving quickly and remain focused to understand and quantify the operational and financial impact for their business. The hospitality industry showing maturity, by working together, is showing true hospitality commitments by helping the society, where it can. With the Mission Begin again and the subsequent unlocks, the hotels were allowed to open, with SOPs. Ashok Malkani tries to gauge the impact of the lockdown on the hotel industry and how it is meeting the challenge of keeping the properties’ environment safe for the clients.
Ashok Malkani

The cascading effect of coronavirus pandemic has hit the hospitality industry and both, the hotel chains as well as the stand alone hotels are facing a difficult time. According to Hotelivate, a hospitality consultancy firm founded by the erstwhile team of HVS India, the Indian hospitality industry is staring at losses of over Rs.130-155 crore, whereas the alternate accommodation segment is likely to make losses of over Rs. 420-470 crore. According to the report, “March has borne the brunt of many large-scale cancellations across the corporate, MICE and leisure segments. Notably, the extent of this lost business has primarily been seen across the top eight markets. Various Tier Two and Tier Three hotel markets in India continue to witness a small erosion in business and occupancies, in at least the first half of March, were only partially lower despite the spread of the virus in some states.”

Vineet Verma, Executive Director & CEO, Brigade Hospitality Services Limited says, “COVID 19 has literally crippled economies worldwide and there are no signs of an early recovery. The hospitality sector has been the worst hit, with occupancies since March having crashed to near Zero in many cases. Several hotels have been compelled to shut down and we fear many more will follow if the situation is not brought under control soon. The owners are beset with problems. There are bank loans to discharge, statutory payments to make whereas our revenues are literally non-existent. We are anxiously waiting for some relief packages to be announced by the Government that can help the hospitality sector somehow tide over the crisis.”

Gurbaxish Singh Kohli, Vice President, Federation of Hotel & Restaurant Associations of India (FHRAI), disclosed, “According to the World Travel & Tourism Council (WTTC), the hospitality industry was estimated to be worth INR 16.9 lakh crores in 2019 contributing about 9.2 per cent of the country’s GDP. It employs over 4.2 crore people, which is about 8.1 per cent of the total employment in the country. In the wake of the Corona disaster, the industry will see losses of around 70 to 80 per cent lasting for at least 6 to 8 months. This could mean a potential revenue loss of around INR 7 to 8 lakh crores. In such an eventuality there will be massive job losses in the industry potentially jeopardizing the livelihood of around 20 to 30 lakh employees. The social and economic costs of such a mass scale disruption cannot even be estimated.”

Girish Krishnan, Hotel Manager, Four Points by Sheraton Mahabalipuram Resort & Convention Center, states, “With the emergence of COVID-19 spreading rapidly around the world, the primary focus of every individual, along with the government and businesses, is to ensure everyone’s safety and security.

“Due to the unprecedented travel advisories, self quarantines and subsequent nation-wide lockdowns, the hospitality industry has experienced a complete sudden standstill. The impact of the crisis has reached every corner of the world. The industry at large is trying its best to handle the crisis by communicating to its audience with an assurance for their safe future travel.”

Gurbaxish Singh Kohli

Making Ends Meet

With the industry having to bear huge losses it is at a loss to know on how to tackle this issue.

Grappling with the issue is tough, says Gurbaxish Singh. He continues, “Right now we are all in unchartered territory and there is no historical reference point to fall back on. So everything we estimate at the moment will only be conjecture. Some people are equating the effect of COVID-19 to the world economy similar to World War II. So there is no doubt it is going to wreak massive global meltdown on many economies across the globe. By some estimates USA, Japan and most European countries will see negative GDP growth in 2020, knocking off 3-4 percentage points off their GDP. Though India is expected to grow at a positive 3 per cent GDP, this is still significantly lower than the earlier estimates of around 6 per cent GDP growth rate.

Girish Krishnan

“ In such a scenario, Government intervention is the only option to help maintain our balance sheet. Also digging into contingency reserves or looking at external funding can be the other sources to help tide the crisis.”

Vineet Verma

Girish declared, “The brand (Four Points by Sheraton) is currently working towards structuring right revenue model with efficient management in consideration with price model. This is to ensure that the hotel and its associates can adapt to post-crisis situation with all their zeal and efforts. We are also working towards a few areas where we could minimize the expenses such as minimizing non-compulsory operational expenses, reconsidering maintenance expenses. To bring back the enthusiasm, we are also ideating on new concepts, new approach towards travellers, managing the payment and suppliers etc.”

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