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Coronavirus lockdown has had disastrous impact on hospitality sector; govt support needed: Industry

"The impact is disastrous. The hotels are businesses which are very capital intensive and also have very high fixed costs," Lemon Tree Hotels Chairman and MD Patanjali G Keswani said.
Apr 12, 2020 / 02:01 PM IST

The lockdown to contain the spread of COVID-19 in the country has had a disastrous impact on the hospitality sector, especially for hotels, hoteliers said. "The impact is disastrous. The hotels are businesses which are very capital intensive and also have very high fixed costs," Lemon Tree Hotels Chairman and MD Patanjali G Keswani said.

The capital intensive component is normally debt and it has to be serviced by payment of interest on debt and repayment of debt. Hotels are also labour intensive, so they have lots of fixed costs such as wage bill, besides paying government levies, minimum load charges, among others, he added.

"Earlier Indian hospitality industry was on average witnessing 65 per cent to 70 per cent or full occupancy till the end of the February. First few days of the March were fine, once the things started accelerating, the occupancy has gone down to a minimum," Keswani said.

Going ahead, occupancy in India is going to be very low. So hotels will have to either shut down or run in a very limited manner, he added.

The government has also requested industries to not lay off staff and cut salary, wherein liquidity is a problem, Keswani said.

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Under this situation, the industry is going to go sick very fast unless you have the external source of capital, like holding company.

"The govt took a good first step to announce the moratorium on interest and principal repayment for three months. But the problem is the period is too short. One can not plan on the basis of three months.

"Ideally government should have done a 12-month moratorium and said the amount you are not paying in these 12 months shall be added in the debt," Keswani said.

The industry is not looking for a dole but is asking for minimum support to survive by pushing back repayment of instalments, some support for paying salaries and waiver in government levies, he added.

In similar vein, Cygnett Hotels and Resorts founder & MD Sarbendra Sarkar said, "The lockdown has adversely affected the hospitality industry...We are experiencing a big drop in new reservations, and increase in cancellations, etc."

While RBI's three-month moratorium has come as a relief, the industry hopes that the government will soon offer schemes that will enable the sector, he said.

In the meantime, Cygnett is reviewing its progress so far and seeks to make necessary changes and strategise for the post-COVID 19 period during this time, he added.

Stating that COVID-19 has severely impacted the industry, Bird Group ED Ankur Bhatia said, "With occupancy crashing to a below 5 per cent against 95 per cent last year due to the unfortunate impact of COVID-19 mayhem, the tourism industry was in the front line and is the worst hit. No wonder a slew of hotels will fold up under pressure."

The Associations have put forward multiple proposals to stay alive as well to ensure the employees are taken care of and retained, he added.

"We welcome government's move to offer moratorium for three months on loans. The moratorium on capital and interest repayments of loans taken by the registered businesses would help for now as some of the payments were due end of March," Bhatia said.

Amatra Hotels and Resorts co-founder and COO Anurag Dua said hospitality and travel sectors have been amongst the worst affected segments, with the businesses coming to a standstill as governments across the world locked down their countries to stop the spread of the coronavirus.

"The moratorium of three months would provide the much-needed relief for the hospitality sector in India provided banks/NBFCs approve it unanimously with no condition precedent following the RBI move," he added.

However, businesses working on rental models with private owners have not received any benefit which might act as a deterrent to operators at large, Dua said.

"We expect the situation to improve once cases of COVID-19 slows and believe that the domestic tourism industry shall grow at a better rate," he added.
first published: Apr 12, 2020 02:01 pm

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