Exclusive: Hotel Sentiment Survey 2020 (Part 2)

Horwath HTL India conducted sentiment survey with the Indian hotel industry. Here, is the Part 2 of it wherein measures to recovery from the pandemic is discussed.

Hotel Sentiment Survey 2020, Coronavirus impact tourism, Impact of COVID-19 on hotel sector, COVID-19 on hotel’s operating performance, Horwath HTL India survey, Tackling COVID-19 situation

Horwath HTL India conducted a sentiment survey of the Indian hotel industry leaders and hotel managers to understand the depth of the impact of Covid-19 crisis, mitigating measures applied to limit the fallout and the areas requiring supportive measures.

Tackling COVID-19 situation within the immediate term

Cost control is the first and an inevitable element that kicks into every business. Putting Guest and Staff Safety ahead of business issues, of cash flow issues is very commendable.   Several states have adjusted their power tariffs and billing basis which is a big positive. The insistence on paying full wages, and no retrenchment, is also a noble approach though it is not backed by any government’s financial support, not even the deferment of GST dues. The low priority accorded by the industry to the objective of Ensuring Job Security should be a pointer to the government, for the need to provide relief and support – job security cannot be achieved through executive fiat.

Cost control measures has your property implemented

Postponing Capex and partial closures (hotel or F&B outlets) stand out as the main action steps – expected and sensible. Number 4 on the priority list was manpower downsizing – an unfortunate but unevitable under certain situation. Payroll cuts are yet limited – however, if the shutdown were to prolong, this element will gain rapid momentum.

Road to recovery

Major demand segments’ recovery, post COVID-19 outbreak

Domestic travel: India is fortunate to have a large domestic travel base for business and leisure which is expected to expand in 2020, with foreign destinations being shut down.

Foreign leisure travel: Two-thirds not expected it to revive in 2020 due to the health travails in Europe and USA, and the economic impact on demand generator markets.

Foreign business travel: 68% of respondents do not expect it to recover to pre- COVID time in 2020, given the depth of crisis in Europe and USA. 

MICE segment: 50% of respondents believe a reasonably strong revival and business; with 21% even expecting a growth. Large international events still will be off the charts in 2020 – as 35% of respondents expect a slower business level for MICE.

Weddings: Revival in the weddings segment will depend upon the pace with which large group events are permitted. If the May wedding season is lost then things may be harder. Also, NRI weddings, foreign guests will likely be restricted till end of June.

Government aid expected

GST waiver, tax rebates, loan moratorium are amongst top three elements identified as support from government/authorities. Business closures are not in the national interest but will become inevitable as business is stagnant or slow during or after the shutdown. 

Debt defaults are an ownership issue – to a point. But when handled without planning, it will become a problem of the banking sector, particularly when several hotels are in default. Even a business-like approach by the government would suggest the need for deferments, waivers, reductions and restructuring of debt arrangements – for business and valuations to recoup and regenerate, for assets to sustain.

Horwath’s take

The industry has provided its outlook; the expectation of gradual recovery is a realistic and sensible approach –  the pace of recovery may be somewhat quicker at least at the levels where operating cash break-even (before debt service) is achieved. This can help safeguard employment, if the sword of debt service is temporarily lifted. However, hotels finding it hard to survive the shutdown will inevitably lead to job losses and defaults.

The crisis sentiment can be handled by timely and effective support from the government and RBI;  for the long term health of the sector and wealth of the nation.

*Read the complete interview in our upcoming April edition.*

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