Upcoming Webinar :Register now for 'ULIP as an investment during economic recovery' powered by Bajaj Allianz
you are here: HomeNewsBusiness

Coronavirus Impact: A Summer Of Woes For Luxury Hospitality As Losses Likely To Touch Rs 620 Crore

Most luxury hotels are selling way below their minimum assured room rates and have seen up to 60 percent dip in room bookings.

Mar 20, 2020 / 07:59 AM IST

On March 17, Marriott International put out a statement stating that it would soon begin “furloughing tens of thousands of employees worldwide”. The reverberations are being felt in their India offices too, though no one is offering any information. The group, which runs 84 hotels in India across 15 brands, including The Ritz-Carlton, St. Regis and W Hotels, was meant to take the number to 100 properties in 2020.

Neeraj Govil. Neeraj Govil.

Neeraj Govil, Marriott International’s Vice President, South Asia, stated that the group will postpone its new launches because of a volatile market and patchy supply chains from China. Much like Marriott’s, most senior management offices across hotels in India are buzzing – with large-scale cancellations of money-making events, weddings and MICE. Many, such as Westin, Accor Group hotels and Leela are offering to reschedule and postpone events at no extra cost. But, as a GM of a Bengaluru luxury hotel told me on condition of anonymity for fear of ‘head-office’s displeasure’, “No one wants to reschedule events and weddings four months down the line, even on a much-discounted rate. The fact that COVID-19 is a highly communicable disease and you don’t know what its trajectory will be like makes the situation very difficult. This isn’t like an economic slowdown where the right policies or fund infusion can help revival.”

Representative image. Representative image.

India’s hospitality industry was on overdrive before things went downhill:

Close

COVID-19 Vaccine

Frequently Asked Questions

View more
How does a vaccine work?

A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.

How many types of vaccines are there?

There are broadly four types of vaccine — one, a vaccine based on the whole virus (this could be either inactivated, or an attenuated [weakened] virus vaccine); two, a non-replicating viral vector vaccine that uses a benign virus as vector that carries the antigen of SARS-CoV; three, nucleic-acid vaccines that have genetic material like DNA and RNA of antigens like spike protein given to a person, helping human cells decode genetic material and produce the vaccine; and four, protein subunit vaccine wherein the recombinant proteins of SARS-COV-2 along with an adjuvant (booster) is given as a vaccine.

What does it take to develop a vaccine of this kind?

Vaccine development is a long, complex process. Unlike drugs that are given to people with a diseased, vaccines are given to healthy people and also vulnerable sections such as children, pregnant women and the elderly. So rigorous tests are compulsory. History says that the fastest time it took to develop a vaccine is five years, but it usually takes double or sometimes triple that time.

View more
Show

*India is the third-largest globally in terms of investment in travel and tourism. In 2018, US$ 45.7 billion was invested in the country, says World Travel and Tourism Council (WTTC).

*KPMG estimates that the tourism and hospitality sector accounted for 7.5 per cent of the country's GDP in 2019.

*KPMG expected the hospitality sector to grow at 16.1 per cent CAGR, to reach Rs 2,796 crore in 2022.

Now, WTTC estimates up to 50 million jobs in the travel and hotel industry are at risk due to the global COVID-19 pandemic; several of those are likely to be in India.

The mounting losses

Rajesh Radhakrishnan. Rajesh Radhakrishnan.

In India, the losses could run into several crores, as the lucrative summer travel season gets completely trashed, says Rajesh Radhakrishnan, Director, F&B, Radisson Blu Resort Goa. “Every part of the operation, from hotel bookings to destination weddings, restaurants and family entertainment venues has been left badly crippled for at least a quarter.” Puneet Chhatwal, Managing Director and CEO, IHCL (parent company of hotel groups such as Taj and Vivanta) maintains that COVID-19 impact will be felt more in the next quarters, rather than this one. “People are worried and will travel less.” IHCL, which has reported a profit before tax of $1.9 million in the nine months to December, after reporting losses for four years, will only be able to gauge how badly the business has been hit by March-end.

However, Hotelivate, a hospitality consulting company, estimates a figure: 2020 may see a loss of up to Rs 620 crore across hotel chains, standalone hotels and alternate accommodation segments due to the cascading effect of coronavirus, across the top eight markets.

City hotels are facing bigger losses and cancellations, says Sarbendra Sarkar, Founder and Managing Director, Cygnett Hotels and Resorts. “We have had to slash rates and implement other cost-cutting measures, which may continue for a while.”

According to Westin Pune Koregaon Park, even Tier II metros such as Pune has seen a spate of cancellations going up to at least two quarters and are not in a position to fully estimate the financial impact to our business. The Leela Group has waved off cancellation fees for hotel stays up to 30 April, anticipating the crisis to last much beyond March. A Bangalore-based boutique hotelier, with resorts across Kerala, Rajasthan, Goa and the north-east told me, again off record, that their booking registers have been wiped clean right till the first week of May.

Apurva Chamaria, Chief Revenue Officer, RateGain, estimates that room revenue declined by 16 per cent in February 2020, compared to January. March has seen not just further decline in the room rate, but also huge losses caused by cancellations of destination weddings, MICE and other events. Suhail Kannampilly, CEO at Concept Hospitality, which runs the home-grown Fern Hotels, says that the loss for the group because of cancellations of events and banquets could amount to Rs 1 crore in revenue.

Surviving COVID-19

Most hotels, for now, are focusing on dealing with immediate health issues. Ankur Bhatia, Executive Director, Bird Group, says their Roseate Hotels and Resorts have seen occupancy dip by 50 percent. They are now ensuring proper training for their team on the right protocol to follow based on WHO directives.

Ravi Rai. Ravi Rai.

If Atmantan Wellness Resort, in a secluded spot in the Western Ghats, near Pune, is ensuring that vendors do not enter the resort and the loading and unloading of goods is done by their team, Ravi Rai, GM, Hilton Mumbai International Airport says the Hilton group has “activated its regional and global response teams to provide round-the-clock information and assistance, particularly in case a guest or team member shows symptoms”.

This almost feels like war. For now, many hotels have offered work from home, as well as paid and unpaid leave to their staff. Nikhil Kapur, co-founder, Atmantan believes, “If you ask my professional opinion, the low is yet to come. It will change things: The way we live our life, our buying decisions, the way we travel.” The wellness resort, which has witnessed cancellations or even bookings for December 2020, has asked some of its ‘non-essential staff’ to stay home “in a bid to negate the threat of infection transmission if any” to current guests.

Interestingly, resorts, more than city hotels, continue to field enquiries from a guest who can drive down rather than take a flight or a train. “We continue to receive enquiries from cities such as Mumbai and Pune, from where people can drive down,” says Kapur. Atmantan is offering what they call an ‘Isolation Getaway’, “a sanctuary for not more than 75 guests on any given day. No guest who has travelled overseas in the last two weeks is unfortunately welcome at the property; we have a large team of doctors who conduct check-ups when the guests drive-in and we have largely moved to a vegetarian diet since we are not sure about the freshness of the meat stock we are receiving at the moment.”

Roop Pratap Choudhary. Roop Pratap Choudhary.

Hotels will be banking on domestic tourists once the epidemic flattens out. Roop Pratap Choudhary, Managing Director, Noor Mahal, a luxury hotel near Chandigarh, says, “As people are avoiding air travel, exceptional properties in and around key metro towns of the country will rise in demand right after everything opens. At Noor Mahal, we have witnessed no decline in wedding bookings or staycations, but the MICE segment is experiencing the heat. We expect it to revive over the next two months.”

Most experts and consultants advise hotels to eschew knee-jerk reactions, such as dropping of room rates, for a more thought out plan. Manav Thadani, founder-chairman of Hotelivate, argues, “The coronavirus outbreak is a unique one-off incident and needs to be treated in context. Dropping room rates drastically is not going to improve the situation, particularly if you are in a business location. If you need proof of this theory, note what hotels in Hong Kong have done over the past six months in the face of protests. Most hotels had their occupancies go off-the-cliff but decided to hold on to their rates. People who were coming to Hong Kong needed to be there anyway and it was not because they got a hotel discount.”

Representative image. Representative image.

Travel industry’s summer of woes

Much like hotels, the luxury travel industry is facing the worst of the brunt. An operator, on condition of anonymity, says that he has been forced to send some of his employees on unpaid leave. “We have had to pay back the entire amount to our customers, sans just the service tax. We are fighting with airlines to also refund the money, but they have been frightfully insensitive,” he says. “The entire April to June quarter, which is the best quarter for travel because of the summer holidays, has been completely washed off. I don’t anticipate a revival before Diwali, and that too if we can curb the spread of the disease.”

Even as the travel industry grapples with the enormity of COVID-19, comes the news that from April 1, the Indian government intends to levy a 5 per cent TCS (tax collected at source) on every travel package sold. “Customers are already paying a 5 percent GST; another 5 percent TCS, particularly at a time when we are facing such massive losses, will wipe out India’s luxury travel package industry completely,” rues Abhay Deghi, CEO of Delhi-based boutique travel company, Experiences Beyond Borders. “This way, the government is sending out business into the hands of global travel companies and killing the indigenous Indian industry.”

More than mid-segment or budget hotels and restaurants, it is the luxury end of the business that is likely to stay depressed for a bit. Jaideep Dang, Managing Director- Hotels and Hospitality Group, JLL said contends that luxury hotels, particularly, will be badly hit since about 60-65 per cent of their business comes from foreign travellers. “Luxury hotel rates are also likely to decline in both quarter one and two. We could see some recovery signs in the third quarter depending on the wider situation. Most domestic travel locations are seeing de-growth for the moment but may revive if things are brought under control.”

COVID-19 and its aftermath are likely to force the luxury hospitality and travel industry back to the drawing board, to look for more innovative solutions and more importantly, as Thadani says, lobby with the Indian government for tax breaks and incentives.

Deepali Nandwani is a journalist who keeps a close watch on the world of luxury.
Deepali Nandwani is a journalist who keeps a close watch on the world of luxury.
first published: Mar 20, 2020 07:59 am

stay updated

Get Daily News on your Browser
Sections