Adapting to the New World Order

Prior to joining Duet, Naveen has worked with leading hotel companies namely, The Oberois and The Leela Hotels, leading several functions including hotel investments, treasury, corporate finance, operational finance, project execution and general management making significant contribution and adding value to the organizations.

COVID-19 has been a great leveller and it is undeniable that the impact is felt across the world, industries and geographies. Travel and Hospitality along with High Street retail are the ones who will bear the most brunt, but we have seen this time and time again that we always tend to emerge stronger from a crisis, much more innovative and malleable, having relearnt the art of survival. The year 2020 started in a very buoyant note with the Industry operating at peak levels. No-one had imagined the extent and depth of the crisis, and today as we are aware, we have a very weak outlook, with most of the businesses expecting to clock 50-55% of the business compared to FY 19-20.

As in any business, Darwin’s Theory of Evolution will always hold true. The rules of doing business will change and we will see that the industry will adapt to the new world order. The travel may not be the same at least till we get a vaccine in place or develop a herd immunity; the stays at the hotels will be more need based than leisure; and efficiencies will increase manifold to avoid multiple contacts. In this process of evolution, the ones who exhibit flexibility and innovation will be the leaders and winners, and the rest will follow their footsteps.  

As we always evolve and emerge stronger, though COVID-19 has raised fair amount of questions, and brought the world to a standstill where many are talking about a total reset and a change of thought process,  I am much more optimistic. Many economists feel that the recovery will not be a V or a U shaped recovery but it will be like the Nike Swoosh. We will see that there will be a very quick upturn though the growth may take 8-12 months to gain momentum. On a long term basis, 2022 should be the year to look out for. We would have not only fully recovered, but also set a strong foundation of growth in 2021.

The thought leaders and the professionals should use this time effectively to redraw the business strategies and rework on the SWOT, Business Plans and retraining of the teams. This is the time to shed all inefficiencies, look into the new way of doing business, get rid of old habits that entail non-essential expenses. The leaders should look at ways of converting fixed costs to variable costs, multiskilling of teams across the skill sets, redevising the SOPs and plan the operations for a new normal. The maintenance and housekeeping should be the focus as the inhouse teams should be prudently used to bring the properties back into a great shape without depending on external agencies. In next 2 weeks’ time, the teams should be practicing re-opening though.

In the next 4-6 months’ time, to aid recovery and to be a successful hospitality professional, following steps need to be taken:

* Very clear focus should be on Top-lines and developing alternative sources of revenue – e.g. food delivery and in-house luxury dining experiences, Laundry on Wheels, Housekeeping solutions for residential and corporate offices, leasing out spaces in premises, creating space for Seniors Living within the Hotel

* Rework on the time and motion studies and reduce manpower by inducing more efficiency. This will help bring fixed costs down

* Flexibility in handling various market segments without diluting positioning and maintaining price sanity

* Make every Line Manager a Business Manager who should be responsible for a small section of revenues and expenses

While the industry professionals and veterans are taking all necessary steps to get back to form and start operating with full vigour, I feel that the government can be instrumental in helping us namely by:

* Enhancing the SEIS benefits from the current 5% to 10% as this helps Net Forex Earners to generate extra income

* Give a blanket 3 year holiday on EPCG commitments

* Ensure speedy redressal of various tax related matters be it GST filing or Income Tax refunds

* Assist industry in meeting working capital requirements by way of CC’s and short term loans on repo rate plus nominal spreads

* Generate consumption by giving SOPs to the end user.

As a Summary

Cash rich and under-leveraged hospitality companies will be the ones who will have clear advantages. Some of the new age well-funded start-ups and hospitality giants such as Oberoi Hotels, ITC come to mind.   I feel a consolidation and movement is likely to happen between the traditional and new-age businesses. Most of the traditional businesses would want to dip their toes into the digital universe. Oberoi Hotels and Hilton have started their online delivery of fine dine food. The new-age start-ups such as Thick Shake factory are pivoting into opening cloud kitchens and shifting their focus from opening franchises to more online delivery. Several restaurants have started delivery of groceries and thinking of innovative ways of increasing their top-line and at the same time reducing their overall overheads and costs. Contactless check-in and room service is going to become the norm at major hotel chains. Marketing efforts of both tourism and hospitality will move towards safety first. Social distancing measures will increase costs by 5-10%, and with discretionary spending going down, it will need the restaurants and hotels to find new and innovative ways to increase their revenue.  Many of the cash-rich companies would go for building out their brands, by acquiring cheap assets, at the same time shutting down unprofitable businesses. 

We as humans are the most adaptable race. We can survive at -40 to 50 degrees. We have survived and have come out stronger from the Spanish flu, the Great Depression, the World Wars, the Great recession, and I’m sure we will emerge better and more robust from the present COVID crisis. It is just a matter of time before everyone will again start going out and eating in restaurants, travelling by air and staying in the hotels, but there is a need to staying positive and staying fit during these testing times.