Hotel Association of India writes to PM Modi; requests a 5-point revival plan for the industry, devastated by COVID-19
With no air or road traffic, empty hotels, and all restaurants and recreational facilities shut, “the likelihood of the revival in the short term is uncertain,” states the letter to the prime minister
The Hotel Association of India (HAI) has written to India’s Prime Minister Narendra Modi, not just highlighting the impact of COVID-19 on the beleaguered Indian hospitality industry, but requesting for urgent relief measures.
In a letter written to the prime minister on March 30, 2020, HAI states they are standing united in their fight against COVID-19 “and has deep appreciation and support for all the initiatives taken by the government”.
All HAI member hotels across the vast swathe of the country are following the protocols as laid out by ICMR and the government, by ensuring complete sanitization and exclusive accommodation blocks in their hotels, with hygienic meals for all incoming domestic and foreign tourists and travellers, besides local state authorities. They have also taken the onus to provide “hygienic food packets for distribution to the poor and needy as required”.
However, with no air or road traffic, empty hotels, and all restaurants and recreational facilities shut, “the likelihood of the revival in the short term is uncertain,” states the letter to the prime minister.
“The hotel industry is a key pillar of both domestic and international tourism. Globally, it is considered as a major contributor to GDP, foreign exchange earnings, creation of jobs as well as the biggest multiplicator of jobs. In India especially, the hotel industry is a key driver of jobs especially through 90% of its inventory which is in the economy, budget or mid-market hotels. In the current scenario, almost 70% of the jobs are in danger directly within the hotel sector and several in other hotel related support sectors.”
HAI’s letter to the PM requesting for help and a revival package can be viewed in the light of the above situation, given the number of people it employs and the impact any job loss would cause on India’s unemployment figures. In the letter HAI requests for 5-point relief measures, which “are practical and could help the industry to both survive and revive”.
The Top 5 revival plan:
• The deferment of all statutory liabilities, including EMIs, to a minimum of 12 months at the centre, state and municipal levels.
• Subsidise employment for three months by the government, contributing 50% of the salary per employee.
• Lease, license, rentals and excise fees, as well as property taxes should be suspended effective 11th March, till the end of COVID-19 period.
• Enable GST collected to be used as working capital for six months.
• Utility costs such as electricity to be charged on actuals versus the load.
The sheer size and potential of the hospitality industry
To put things in perspective: Industry body Confederation of Indian Industry (CII) has stated that more than half of the tourism and hospitality industry can go sick with a possible loss of over 20 million jobs across both industries if the recovery in the industry stretches beyond October 2020. HAI itself, in its ‘Mitigating the Impact of COVID-19’ report, predicts about 5.7 million jobs just in the hospitality sector.
The report states that India’s hospitality industry size in FY2018/19 was US$247bn, it contributed 9.2% to the GDP, had a CAGR of 8.5% from FY 10-18, employed 43 million people and reported forex earnings of US$29billion, the third-largest foreign exchange earner in the country.
The report talks about the huge potential of the Indian travel and tourism industries. Stimulus packages and support could help unlock the huge population, predicted to grow to the tune of $250bn by 2030. It predicts $96bn is the direct spend on tourism such as F&B, accommodation, travel (air & road), recreation and shopping; the incremental potential is driven majorly by international tourism (assuming India attracts 2.5% of the world’s international tourists, up from 1.4% in FY19); and travel and tourism estimated to be 11% of GDP.
The other significant figures about how the industry supports India’s vast middle class the most to bolster their request: 87% of hotels fall within the categories of unbranded and alternate accommodation, including guesthouses, homestays, etc, while the mid-market enjoys a 19% market share, and budget about 16%, with luxury just enjoying a 12% market share and Upper Upscale and Upscale about 29%.
What other countries are doing
Across the world, the hospitality and travel and tourism industries are considered the backbone of the global economy, creating 10% of total global employment and 1 out of 5 of all new jobs in the last five years. They are expected to create 100mn new jobs in the next ten years and contribute 10.4% of the world GDP. They have the potential of becoming a $13 trillion industry by 2029.
In a bid to drive home the need for help and support from the Indian government, HAI’s report makes some pertinent points:
• International travel could be adversely impacted by up to 25% in 2020, which equals to almost three months of travel.
• As per IATA, global airlines would need US$200bn emergency funds.
• As per WTTC, the pandemic would lead to 50million jobs being slashes, a 14% reduction in travel and tourism jobs.
• The industry could take almost 10 months to recover after the lockdown is withdrawn and the outbreak is over.
• There is very little chance of revival of inbound travel, while corporate travel business could be delayed due to travel bans. Hotels, which are a capital intensive business, will face the biggest brunt with high-fixed costs such as license and lease fees, salaries, etc.
• The impact of the bank, according to the HAI report: potential loss of 5.7 million jobs; drop in occupancy levels to 15-20%; potential revenue loss of US$10 billion; revenue pick-up down by 50%, and high risk of bankruptcy.
The report also has references to the stimulus packages offered by other governments:
While the US has pledged almost $2000 billion, China has pledged $182 billion, Germany $170 billion, Australia $117 billion, Canada $97 billion, Malaysia $57 billion, UK $50 billion, Singapore $34 billion, Singapore $25 billion, India $23 billion and Indonesia $2 billion.
The report talks about how major central banks have front-loaded rate cuts to make capital cheaper: the US has brought the rates down from 1.75 to 0.25%, Bank of India from 0.75 to 0.10%, People Bank of China from 4.15 to 4.05, Reserve Bank of Australia from 0.75 to 0.25% and BoK from 1.25 to 0.75%. Also mentioned is RBI, which has dropped rates from 0.75 to 0.25%.
Among the stimulus packages offered by the different countries, to the economy in particular, and in some cases to hotels in particular:
• Canada has offered a Liquidity Program Options for hotels, offering deferred income tax payments for six-month payment mortgages, US$55bn in temporary tax relief, and working capital loans of up to US$2. Hotels also qualify for up to $100k, 10% wage subsidy program for small business employers, and emergency support program of up to $5 billion in support to workers who are not eligible for EI.
• Scotland has offered 75% rates relief for retail, hospitality and leisure sectors (rateable value up to £69,000).
• Brazil’s Ministry of Tourism has offered US$80 mn financial support and reduction of interest rate by 2%.
• Malta has offered a moratorium on loan repayments to the hospitality industry.
• The UK has promised a 12-month business rates holiday, funding of £25000 for businesses with property, with a rateable value of £51,000, statutory Sick Pay Relief Package for SMEs, and a Coronavirus Business Interruption Loan Scheme offering loans of up to £5 million for SMEs.
• HongKong’s US$700mn package for HKG Tourism Board offers subsidies to travel agents and tourism promotion plans.
• Singapore has waived license/leasehold fees for hotels for the rest of the year. Travel agents and tourist guides will not need to pay to renew their licenses/leases. It has set up a Tourism Recovery Action Task Force. The Skills Future Singapore and government will co-fund 75% of wages.
• Malaysia’s US$ 0.8 million and Philippines US$118 mn economic tourism packages would help spur tourism.
• Indonesia has announced a US$8bn stimulus package and US$725mn incentive for consumer spending and the country’s tourism sector.
• Thailand’s tax measures include an extension of the filing of tax returns and reduction of the policy rate by 0.25%, supporting charter flights for high-spending tourists.
• Australia has extended $1 bn support to sectors impacted worst, including tourism. It includes a waiver of fees for tourism operating in certain areas, targeted measures to promote domestic tourism and a US$430 mn aid, package comprising refunds and forward waivers, on fuel taxes and domestic air navigation.
Shoring up against the economic shock
Given the threats that the hotel and travel industries are facing due to the COVID-19 pandemic and the huge potential the industries offer for growth and employment, HAI has stated, in the letter to the prime minister, that the “potential shock to the livelihood of millions working in our industry is enormous and we will need to think in terms of forming a task force together with the industry and the government to establish a path for normalcy in general and build confidence in this industry in particular”.
HAI is an industry body, with PRS Oberoi, Executive Chairman, EIH Ltd. as founder-chairman, Puneet Chhatwal, MD&CEO, IHCL as President, KB Kachru, Chairman Emeritus & Principal Advisor – South Asia of Radisson Hotel Group as the body’s VP and Fellow Member, and other hoteliers such as Patu Keswani, Chairman & MD, Lemon Tree Hotels as Treasurer and corporate member.