‘Hotel Companies Will Emerge Stronger On The Other Side Of The Battle-Scarred Slowdown’
The spread of the pandemic and the subsequent reactions to control it through social distancing leading to an unprecedented lockdown has left the economy in a very fragile state. Most businesses, barring a few have taken a hit on their top as well as bottom line.
If one were to study the impact on various industries on parameters that the customer is likely to be mindful of when the lockdown opens up, its easy to assess why travel and hospitality professionals and investors are most worried. (see pic below – source: board of innovation)
At IGH we have had to bear the brunt as well with 6 out of our 17 hotel operations temporarily suspended. All segments have been effected as no interstate travel is allowed. However, this crisis has also created some new sources of business which hadn’t existed before. As a company we decided to partner in the efforts of the government very early on and making our own contribution to their commendable efforts by offering our facilities for the following:
* Quarantine facilities for Indians returning from abroad
* For health workers for nearby hospitals
* For foreign nationals returning to their own countries on special flights
* For guests who have got stuck due to the sudden lockdown
During these times our focus has never wavered from Health and Safety of our employees and our guests. We have put in place strict SOPs to ensure that we do not compromise on this front. Mandatory temperature screening, doctor on call, new standards of cleaning and laundry management are just some of the measures we have put in place.
Realizing that the recovery curve is likely to be slow and painful, we have taken several actions to conserve cash which includes a complete clampdown of all discretionary spends such as refurbishment, FF&E, and travel etc. whilst chasing down every receivable. We have also agreed strategies to share the pain with all our vendors and are pleased with their response in partnering with us in wading through these troubled waters.
During this downtime, we have also spent considerable time and effort on planning for the future. Our approach is directed towards restoring consumer confidence. The pillars on which this will rest are as follows:
* Health and Hygiene: The guests need to feel safe in the hotel premises and for this new standards and SOPs are being put in place.
* Social Distancing: Though contactless check-ins, app-based food ordering, disposable and single use crockery and cutlery, staggered timings for food and beverage outlets are some of the actions we take.
* Booking with confidence: Flexibility in cancellation and until the last moment.
* Customized offerings: Needs and holiday patterns are likely to change and hence customized offerings are going to be important.
* Communication: Clear communication and a lot of it with our potential customers.
Several experts are trying to come to grips with this situation and predict scenarios of when the industry is likely to see the first semblance of returning to normalcy. How the owner/investor community will react to this deep wound remains to be seen. However, one can safely say that new capex investments and refurbishment plans will be shelved (for most part) for the next 1-2 years. One can only hope that the incomplete active projects can have access to enough capital to get through to completion and opening.
Having been hit to an extent where the very survival of the industry has come into question the role of the government becomes quite significant. In my assessment the government should take a 3 pronged approach:
* In immediate term deploy an economic package to breathe life into the industry and save the 3.8 Crore jobs that are at risk. This money can be used in paying part salaries of employees, deferring/waiving interest and principal pay outs on loans, deferring/waiving statutory payments, etc.
* In the medium term increase spends on marketing India as a safe destination for tourists and as an alternate to China for manufacturing. This can be coupled with income and corporate tax sops on travel related spends. The focus would therefore be on spurring demand.
* Also in immediate term look at easing the long term pains of the industry around approvals and licenses, building norms, access to long term low cost capital, input credit on GST on civil structure etc. which all lead to 25-30% inefficiency on project cost. This should all ensure that long term investor confidence in the industry resulting in quality supply additions.
While there is no doubt that it is a very difficult time, one that has not been seen in last several decades there is no doubt that the companies which are able to survive this will emerge on the other side and start much stronger second innings. But right now it’s all about hunkering down and seeing this through. In the words of Jack Ma, “For people in business, 2020 is really just a year for staying alive. Don’t even talk about your dreams and plans. Just make sure you stay alive. If you can stay alive then you would have made profit already”.
