Industry Should Focus on Domestic Travel Post Crisis
WITH THE cases closing towards 2 million worldwide, the coronavirus is spreading at a fast pace and is affecting economies exponentially day by day. The tourism sector is expected to be on of the hardest hit of all sector given its reliance on people travelling which has come to a complete standstill and apprehension to travel post the lift of the lockdown when that happens. The impact is going to be widespread and it is going to be some time before we can expect a full recovery as corporates will probably choose to travel less initially. There may be an uptick in domestic leisure business as soon as the cloud begins to clear and given the fact that international travel may take a while to get back, it's footing which will limit options for domestic travellers.
However, in the long term, the hotel industry should be able to get back on its feet. But in the short term, there will be a pain.
India was actually slightly behind on the supply curve compared to other economies which are a positive in these times. However, further, an increase in supply will be predicated on how quickly the industry can recover.
In addition to the hospitality industry, I do believe that there could be a reset in other industries especially manufacturing where large MNC’s etc. may want to shift or balance their reliance on countries such as China and consider options such as India or maybe even vertically integrating into their own countries.
Utilising the Lockdown for Planning
The industry leaders should plan out how they will re-open and be ready for the possible different outcomes that are possible from the information we presently have on hand. Hotel budgets should be revised to take into account the new scenario so hotel owners and other stakeholders are well prepared to tackle all the issues that are likely to come up in the short term. In addition, this will allow for owners to manage the hotels' cash flow either through owner contributions or renegotiating with lenders for additional working capital etc.
It is also a good time to execute long-standing Capex plans if any. However, any major expansion of capacity etc still may be a risky proposition as so much is still unclear.
The lockdown could also be used to train staff, not on furlough in current SOP’s and new SOP’s that will now need to be devised as humanity is possibly looking at changes in behaviour (social, hygiene etc.)
F&B planning will also need to be looked into in lieu of possible social distancing norms that we are already seeing established in other countries. It is highly likely that the banqueting and
convention industry may take longer to recover than hotel room night demand. Hence thought will need to be put into the utilization of current conference/convention space.
Recovery Plans
Apart from basic steps of reducing costs such as energy, manpower, sales and marketing etc. some other major points include: negotiating temporary relief in brand fees/standards, re-visiting working capital requirements from banks, renegotiating payment terms with banks for term loans to allow hotel sustainability, joining industry lobby to pursue any form of government relief efforts to assist the industry and be prepared to start operations in a phased manner as occupancies will initially below.
Government’s Support
In these unprecedented times, the industry requires government’s support more than ever. To mitigate the impact of the pandemic and accelerate recovery, GST relief and refunds, tax relief, assistance with employee remuneration and lowering of essential utility costs (power, water, fuel, etc.) are some of the needs of the hour.
The government will also need to tread a fine balance between the countries health and safety concerns and keeping the economy from slipping into a recession.
The government will need to play a big roll in attracting investment back into the country, this could be a make or break move from the governments perspective as the global ecosystem has and is continuing to change post-COVID. Policies to take advantage of this situation is what will set the country apart and attract the right flow of capital and resources.
Post Covid19 Strategy
Hotels should focus on how to increase penetration within domestic travellers (corporate and leisure) post the crisis as international traffic will be a fraction of the erstwhile arrivals in the near term. Fortunately, we are a far more domestically driven market than some other countries so hopefully, our short-midterm pain will be bearable. The hotels that come out on top are those that are going to be able to adjust their strategies to suit the new normal post COVID19.
Making use of resources available (manpower, real estate etc.) to the Hotel that is not being completely utilised due to COVID will make the difference between performing and underperforming hotels.
