The Owners perspective…
2020: Retooling and restructuring the business
Elaborating on 2020 in hindsight, Arun Saraf, MD, Juniper Hotels, articulated, “We all know that the tourism industry has been severely disrupted and not just the tourism industry, but travel itself has got disrupted and people would have to learn to cope with this disruption going forward. We have taken this as a kind of a learning, we have learnt to manage and retool ourselves for the future. We know that this was something that has hit us extremely hard, and it was easy to keep crying and worrying about it, but we did not take that kind of an approach. We said that this has now happened, and this kind of a disruption has to become an opportunity for us.”
In the hotel business, over the years, people had become extremely wasteful and many things were being done because that is the way it was being done, as repeat practices had been followed over the years. Thereby a lot of bad practices had crept into the business. Pandemic was truly the eye-opener, where hotels were forced to take another look at the situation.
Saraf added, “So, in my own 12 hotels, we have taken this as an opportunity to cut down costs, to become more efficient and all that has led to my whole team, trying to look for solutions and trying to overcome the challenges that have been posed by it. I am optimistic. I know business will come back. I do not want to make a timing on this return. This is something that I am not expert on. We have too many conflicting views going out there. The virus is there, and the vaccines have to come out for the comfort of the travelers. Till the comfort of the vaccine does not come, till then our business will not return.”
Sharing his viewpoint, JB Singh, President & CEO, InterGlobe Hotels said, “It indeed was an exceedingly difficult year for the industry but also one of learning and one that opened new opportunities for us. We along with our JV partners Accor worked tirelessly to ensure business continuity, health and safety of our staff and guests and on cash conservation. It was towards the end of January that we first realised the global nature of the pandemic and anticipating the worst we started work on a contingency plan to brace for the impact. The first hit came the moment the lockdown was announced. Our plan was put into motion we cut over 60 per cent of our costs and moved our focus on securing the business and working with the governments in different states. We signed up with the government to assist with quarantine passengers across several cities and worked closely with health workers assisting them in their endeavours to manage the pandemic.”
The InterGlobe Hotel teams did an amazing job of hosting the long stay corporates and other customers impacted by the sudden lockdown and ensured the hotels were compliant and secure to host the Vande Bharat repatriation groups and quarantine guests for over four months. Even at a time when the business was minimal their teams managed to secure over five major business segments which was brilliant.
“We have also used this time to brainstorm and looked at various restructuring opportunities to make our business more efficient and to commit ourselves to drive productivity with courage and resilience. We now see a strong upward trend in occupancies as businesses improve considerably with the corporates moving again, social banquets coming back, leisure travel, sporting events etc. While costs have been in control the focus has been on improving our occupancy, exploring new F&B opportunities and growing ancillary revenues all, of which put together would make the next year very promising.” Stated JB.
Sonica Malhotra, Joint Managing Director, MBD Group, India elaborated about her hotels, she said, “This pandemic has had huge ramifications on our industry and currently, our true assessment is based on how well one could manage. Despite month-on-month improvement in top line, The Gross Operating Profit would remain stressed at least for the financial year ending 2021. Availability of vaccine is incredibly great news and post it’s availably perhaps by March – April next year, there will be a skyrocketing impact on hospitality. The confidence of guests is enhancing every passing day and we are hopeful that this proposition will change every passing month. Our hotels started at a sound pace and are witnessing positive progression month-on- month. However, the stress created by far is quite deep routed and has impacted overall spending habits and therefore, it’s vital to re-calibrate operations to not only maximise guest safety but to streamline operations for maximum efficiency.”
While Vineet Verma, Executive Director & CEO, Brigade Hospitality Services, shared his viewpoint as, “COVID19 has impacted our industry like never before and the year of 2020 is going to be a year that we will want to forget yet may not be able to. To an extent it has been a pivotal year for the World. We have been compelled to think differently and act even more differently. What was earlier deemed unconventional has become the new normal today. The way we have gone about conducting our business over the years suddenly seems so foreign to us.”
“Digitisation, particularly in the hospitality sector that was ‘work in progress’ has had to be fast-tracked to meet with new norms. What has been impressive is the speed at which we have adapted to the changed scenario, be it introduction of contactless experiences within our properties, digital payments, QR code-based menu options, Assisted buffets, hybrid wedding events, to name a few.”
Brands bring ‘bandwidth’
On learnings from the lockdown, in terms of expectations from the brands, Arun Saraf said, “Brands are actually as lost as we individual hotels are. So, nobody has an answer to any of these questions that have come. We have our own prejudices, and we make decisions based on our projected expectations. So, brands are in a similar situation, if you compare the brand to another brand. But if you compare a brand with an individual hotelier, then the brand has much more bandwidth to understand what is going on globally. And they can see and predict trends much faster in terms of business recoveries, in terms of how the expectations of a customer is changing in terms of hygiene practices and all that. So, brand per se is definitely adding a lot of things to our own understanding of what we are doing.”
"Brands also bring a large amount of cost and all that, most of the brands have calibrated their costs and they have passed on certain cost savings to the hotels, but it may not be enough. We have a very deep long-term relationship with our brand Hyatt. And we have now 10 hotels with them. I have signed up a new hotel, which we are going to open. So, from my perspective, brands are particularly useful, especially for individual hoteliers. They may be more costly, but definitely they contribute a lot than they take away from us.”
Multi functionality & Multiskilling
Sonica Malhotra said, “Every cloud has a silver lining and due to pandemic, all of us have done what was required for the sustenance and reengineered ourselves. This situation demands experimentation with innovative concepts and discovering incremental revenue streams. Most of the leading brands of hospitality have gone out of their way in showcasing the safety and security protocols ensuring that whenever the guests checks in they will have safety barrier without compromising the guest experience. We have also learnt that multi-functionality is the name of the game to reposition. Multiskilling will be imperative and therefore, there is a need to inspire people, whether they are from the front office, housekeeping or engineering department, everyone must work in silos in the future. There is a deep need to focus on capital investment for energy saving, accelerating technology adoption, minimal inventories with respect to par stocks and par levels basis consumption patterns. The brands should focus on conservative expansion plan and acquire units having conservative capital structures including optimal debt and creation of internal accruals.”
Delivering high quality engagement experiences
Elaborating on trends being witnessed post the pandemic, JB Singh added, “Our key observation over the last two years has been the changing demographics and consumer behaviour which were undergoing an irreversible shift driving expectations which are very different. The use of technology, service expectations, F&B preferences and the look and feel of a hotel are changing for the customers. The current pandemic has further accelerated this rapidly changing consumer behaviour which now needs to be recognised and therefore will force the customer back in the centre of business. The collisions of the physical and the virtual world have accelerated too driving network commerce which is further amplified with the massive increase in the power of computing. The customer lifecycle from acquisition to execution has moved onto a virtual platform driving experiences and creating a competitive edge for industries that understand this medium. This poses a new challenge to an industry that has remained insular to this powerful medium and now needs to envision and redefine its customer and their aspiration and their business through completely new and a powerful digital environment.
Therefore, quality and quantity need to merge delivering high quality engagement experiences faster than ever before. We have made several interventions to manage our development and operational platform more efficiently and engage our stakeholders.
We strongly believe that the consumer experience must have superior technology intervention right from guest acquisition to the product consumption. The entire distribution processes, user interfaces, sales and marketing and end user connect all have been compelling experience for us to acquire and retain our customers. Use of technology in the entire F&B ordering and production and contactless buffets, contact-less check-ins and geo-targeting advertising have been some innovations that we have carried out. We remain committed to continue to evolve on the tech platforms and look beyond our traditional segments to grow our customer base and guest engagement in the coming year.”
Product design with high-tech interventions
Sharing his views on the hospitality and tourism industry in 2021, J B Singh said, “At no time in recent history has the world waited for a year to end as it does for 2020. As the year passes into history books it is bringing some much-needed cheer through the hope of vaccine and improved performance than what it was a few months back. We expect this momentum to carry on in 2021 and expect the industry to build-on the learnings from this year and implement their strategies in full force to connect with the end user. There are big learnings from the operations, compliances and guest connect point of view and we expect all our hotels to work on these focus areas while getting even more innovative with their marketing campaigns. Hotels have found ways to survive without industry specific relief measures from the government. As the impact on the sector deepens, we now expect the government to look into both immediate and long-term policy issues to redefine a long-term vision for the sector. The Maharashtra government has already taken some steps towards it and we expect this is just the first of many more that are on its way.
The peak domestic tourist season from November has started off well and now we are noticing the corporates, social events, leisure guests and even the manufacturing hubs opening. This should continue to grow in volumes next year also so in 2021. Lastly, we also firmly believe that the product designs for many hotels are being revisited. New genre of hotel products will emerge, and high-tech interventions will also go into the BOH to bring in greater efficiency.”
Sonica Malhotra, added, “Optimism would be the key and we should aim to be agile and inventive. Domestic tourism will continue to witness boom as people will avoid international travel on safety and regulatory concerns. Hotels would take this opportunity by offering packages and facilities to attract family and group travellers while following high standards of safety protocol. There is a likelihood of early recovery if the coronavirus vaccine arrives in India and hospitality industry will bounce back as there is huge potential for business and leisure travel, large social events and wedding industry will also help in revival. Additionally, distinct hotel associations across the country should unite to strengthen industry and aim towards getting infrastructure status to this sector that will go a long way in attracting investment and development of the sector.”
DO MORE WITH LESS
While Vineet Verma, stated, “One of the biggest learnings that this pandemic has taught us is to ‘DO MORE WITH LESS’. Due to a sudden drop in business and with almost zero occupancies, we had to severely cut down on our fixed costs in order to survive. This included temporary rationalisation in salaries and reduction in staffing. Idea was to bring back the staff count as & when business recovered. Much to our surprise, we have realised that the earlier ‘staff to room’ ratios may never be required to be restored to pre-COVID levels. We can be as efficient and in fact more productive than before even with lesser numbers. This has indeed been a revelation for us as the earlier benchmarks in staffing in hotels have been turned completely upside down. We will continue to operate as efficiently with lesser staff than pre-COVID levels even after this pandemic is behind us.”
"We are glad to see a month-on-month improvement in hospitality business particularly in Food & beverage sales, as more & more people regain confidence in venturing out to safe dining and social environments that the hotels provide. Unfortunately, the rooms business is much slower in picking up except for Leisure destinations. It may take us longer to get anywhere close to pre COVID levels, as room occupancies are dependent mostly on International & domestic travel that is yet to pick up speed. But improve it will!
Having said that, we remain ‘cautiously’ optimistic for the coming year and on the situation turning for the better. While our confidence has received further boost with the announcement of the vaccines, the recurrence of fresh COVID19 cases in USA, Europe and other parts of the world, may result in further delay in resumption of International travel. This may impact our prospects, as most of the business class hotels particularly in the 4-star and 5-star category are largely dependent on International guests. But in the interim, we do see good potential in our domestic market particularly in the social space.
COVID 19 has been most hostile to the most hospitable sector but bad times will not last. While we may have been temporarily crippled, we will bounce back with vigour & strength. It is just a matter of time."
In the pipeline for 2021
On future plans, Arun Saraf said, “2021 plans are very simple. Save yourself, save your cash and try to become more efficient. So, my plans are basically trying to take care of my properties, keeping them relevant, becoming more efficient, bringing in more equipment. Energy efficient is our number one goal and the labour efficiencies, trying to bring in technologies and multitasking on all these features. These are all things that you have all heard all over. Our only effort is that relentlessly keep following up on this. On these three fixed costs: human resource cost, heat, light, and power costs, and obviously interest cost, which is not really a purview of the hoteliering, it is basically on a more of a funding issue. So, if these three costs, anybody can manage, he comes out winner. Almost all 12 of my hotels, except the two in Nepal, all of them are in GOP (Gross Operating Profit). They are not in GOL. Operating profits even if they are two, five lakh rupees, I mean, they are all, I mean, not bleeding money in the sense of in up since October, they're all positive.
If I may say, Hyatt Place Hampi is my best performing hotel at present. For the size and investment. It is touching the revenue of a crore a month. What has happened is we have become more efficient. Hampi has had three important things happen. One is driving distance from Hyderabad and from Bangalore has given a lot more traffic into that property. Secondly, JSW where the steel plant is there. They have also brought in more business into it. So, we are having an occupancy of almost 75 per cent plus for the last five months. Hampi has done well and I would say overall in India, all the properties, which are in leisure destination with a drivable distance from Metro (city) have done well. I mean the hotels in Himachal have done well; Dehradun has done very well after it has opened.
On future investment plans, JB Singh said, “The lockdown certainly shifted priorities for us temporarily and right so. This does not move us from our medium- and long-term goal to build supply in India. Our new gen product is powerful and meets aspirations of the discerning Indian traveller and has seen a strong uptake. We are continuing to build on our product design and quality raising the bar for the industry. At the same time our current six projects under development are being built at full swing to make up for lost time. We will continue to scout for brownfields that could fit well with our constantly evolving product vision around design and value.”
As to whether they would be taking on greenfield projects or some low hanging acquisition opportunities or deals that make for attractive acquisitions in a distressed industry, Sonica Malhotra stated, “Seeing the micro-economic situation of decline in consumption, the segment to look would be the budget hotels. Via MBD EXPRESS brand we are aggressively looking at expansion in economy segment by going very lean and yet offering quality and professionalism in terms of guest experiences.
Our MBD EXPRESS Hotels and Resorts provide a value-oriented business model backed by the strength of a well-recognised and regarded consumer brand. Friendly, efficient, and comfortable, the innovative MBD EXPRESS brand with its modern urban hotels meets the expectations of price-conscious business travellers and city tourists alike.
With price rationalisation it is the right time to acquire the hotel or pick some struggling projects regarding MBD Steigenberger brand as we envisage a great opportunity for expansion through management route. MBD Steigenberger is the best fit brand as the owners want their assets to be in professional hands and we understand Indian region backed by international brand and sales and marketing network and reservation system.”
Be careful about dropping rates
Inspiring as a leader and a visionary and sharing his message with fellow hoteliers, Arun Saraf concluded, “For hospitality, my colleagues and my friends and my fellow hoteliers, I would say, this is not doomsday. This is an opportunity to re-examine the way we do our business. Business will come back; it is only a matter of time. So please do not think that this business is gone forever, it is not. You are sitting on valuable pieces of real estate, and hotel beds will always be required. People will travel, the population of India is growing, and they are becoming wealthier. So just take it as a respite that we have a chance to relook and re-examine internally, rather than focus externally. Do not cut down the rates more than they are necessary because over competition is going to be more difficult for us to come back to the rich rate structures. People do not mind paying rates. People would like to pay rates, but please give them a safe environment and give them the confidence that we are safe for them and for ourselves.”
