COVID-19 Impact on Hospitality Sector in India
COVID-19 Impact on Hospitality Sector in India- The hospitality sector in India has witnessed the unprecedented deceleration this year in wake of the COVID-19 pandemic. The Indian hotel sector has been hit hard, tussling with significantly low demand, with very few future bookings. Since the outbreak of COVID-19, companies have been cancelling interviews at the top hotel management colleges in India. The overall hiring sentiment in the country is witnessing an adverse impact in the short term with 60-65 per cent interviews getting delayed, especially in the hospitality services sector, following the slowdown across industries triggered by the coronavirus pandemic. Even the students who were aspiring for a career in the hospitality industry are on the verge of full swing. Currently with the imposition of Section 144, there are barely any bookings being made for the future, and the current ones all stand cancelled. In this scenario, there is limited scope for quick revival.
COVID-19 Impact on Hotels/Hospitality Sector: Facts and Figures
The impact of the novel coronavirus on India’s hospitality sector jobs is nothing short of severe. While most economists expect things to rebound in the latter half of the year, uncertainty still lurks. A sheer job trauma is staring at the hospitality industry in the near future. This is as the chances of losing a job are at a high risk. Furthermore the entry level has postponed the hiring for the near future. Let us check here some of the facts concerning the drop in the various hotel occupancy sectors.
As COVID-19 concerns and restrictions have intensified in India, the country's daily hotel occupancy dropped to 11% during 23-29 March, according to preliminary data from STR, Department of Revenue, Ministry of Finance, Government of India.
Along with a steep downward trend in occupancy, average daily rate (ADR) and revenue per available room (RevPAR) have also dropped significantly in India. ADR, which has decreased year over year by roughly 20% or more for eight consecutive days, went as low as INR4,924.18 on 28 March. RevPAR reached its lowest absolute level (INR537.54) on 22 March.
In India, both luxury and budget hotels are running at just 10 percent of occupancy levels as thousands of people have canceled their trips. This may further worsen in the times to come at least till the end of this year. For instance, Airbnb announced its guests could cancel their reservations for a full refund.
The overall revenue of the Indian hotel sector is set to decline by anywhere between US$ 8.85 billion to US$ 10 billion, reflecting an erosion of 39% to 45% compared over last year.
Besides the actual business loss, the hotel owners will also incur losses due to fixed operating expenses, debt repayments, interest payments and several other compliances required to be undertaken as part of the sector.
With hospitality and travel sectors among the worst affected by COVID-19, OYO's entire executive leadership (CXOs) team has taken a voluntary pay cut, starting at 25%, with many opting for an additional uncapped amount, and some going up to 50% to enable building the runway for the company.
Ritesh Agarwal, the Founder & Group CEO, OYO Hotels & Homes, has decided to forego 100% of his salary for the rest of the year in wake of the novel coronavirus crisis.
Proposed Action Plans for Hospitality Industry
The hospitality industry can use this chasm to prepare for the upcoming demand by focusing on marketing and upgradation. This ‘Stop Gap Plan’ is about maintaining a thread of communication, using social media and advertisements, with the consumers. It's also about strengthening the communication within the company, to make a budget and plan for re-opening and to utilise this period to fix and upgrade whatever is possible. Another step is where all the action is required by the sector. Once the outbreak of the virus is contained and the world is set to travel again, it is suggested that any plan of re-opening must be done keeping long-term benefits and safety compliances in mind. It is imperative that hospitality companies reach out to deferred and cancelled bookings and give due attention to domestic travellers. The hotels and airlines must slowly roll out their services rather than starting everything instantly and to not get caught up in spending.
A Way Forward: Recommendations for the Government of India
The government is already taking measures to combat the effects of the pandemic on the country. Here are the multiple measures, if taken by the government of India, can help the Indian hotel industry weather the current storm.
Stimulus package to stabilize and support the hospitality sector in the near term, including a workforce support fund to ensure that there are no job losses.
Provide a moratorium of ~ 6 – 12 months on all loans (principle & interest), including working capital payments and overdrafts.
Ensure that credit rating agencies do not down-grade ratings of businesses, due to the expected volatility of the business in the short to medium term.
Provide a 12-month corporate tax holiday to travel, tourism and hospitality sectors.
Defer all statutory dues such as advance tax, custom duties, excise duties, PF, bank charges etc. at central and state level for 12 months.
The government authorities must ensure that there is adequate availability of collateral-free and interest-free credit for organizations in the hospitality, travel and tourism industries.