Hotel owners shed light on the requirements that will help them bounce back post-COVID

The post-COVID scenario may see the owner-operator relationship turn a lot more fraught at a time when hotel occupancy and average daily rates are likely to suffer from continuing travel restrictions, even after the lockdown opens

Owner operator, Ranjit Batra, Panchshil Realty, Aria Hotels & Consultation Pvt. Ltd, Sandeep Gupta, Vineet Verma, Brigade Hospitality, Sanjay Sethi, Chalet Hotels

Even in normal times, the owner-operator relationship in the hospitality industry requires walking the tight rope.

A post-COVID situation makes the situation a lot more difficult, the relationship a lot more fraught at a time when hotel occupancy and average daily rates are likely to suffer from continuing travel restrictions, even after the lockdown opens. Hotels will have to put in place rigid codes of safety and health compliance. Not to mention the added pressure on the bottom line and revenues.

Sandeep Gupta, MD, Aria Hotels & Consultation Pvt. Ltd (owner of JW Marriott Aerocity)

Sandeep Gupta, MD, Aria Hotels & Consultation Pvt. Ltd (owner of JW Marriott Aerocity) says, “I expect the tourism industry to be badly hit for the next four to five months and the climb back to profitability will be slow. At this stage, we can only hope for containment of the contagion. Post that, we need to step up national and regional marketing efforts.”

Controlling operating expenses will a topmost priority for an owner. It is unlikely that hotels are going to be able to forecast the cost of running accurately, given how dynamic the business is. Besides, once the lockdown opens and flight resumes, hotels may require to be flexible and experimental on how they can attract their regular customers back, besides finding new opportunities to earn, requiring them to be nimble-footed. That may need some amount of spending.

Ranjit Batra, President, Hospitality, Panchshil Realty

Ranjit Batra, President, Hospitality, Panchshil Realty contends that the owners carry the maximum risk in such a dire situation since they are not just staring at the prospect of equity erosion, but even bankruptcy. “We are staring at 2020 being a year of loss, and the break-even happening only next year. Besides, we will have to spend on operating costs once the hotels open post-lockdown.” Globally, owners have often accused international brands of taking too much of the profit, and too little of the pain of slow market conditions.

Vineet Verma, ED & CEO, Brigade Hospitality

Owners and operators will have to work on mutual trust and relationship to see them through these tough times. As Vineet Verma, ED & CEO, Brigade Hospitality, says, “Our operators are our partners and we have to travel together, both during good times and when times are bad as they are today. With almost zero revenues and unchanged fixed costs, we are looking at some trouble ahead. It is time for both sides to come up with a contingency plan that can help us tide over the crisis and emerge stronger. While brands have rolled out a range of measures to help control costs, the owners’ interests must be protected, particularly when they are left with the burden of still discharging their liabilities towards debt repayment, property taxes etc., besides funding the hotel with working capital requirements. A deeper analysis of payroll costs, relaxation in various fees charged by operators, innovative and more cost-efficient ways of doing business when we finally open, are some areas that will engage the attention of all operators.”

Restructuring costs

Sanjay Sethi, MD & CEO, Chalet Hotels Ltd

This would be the first step towards opening the hotel in the post-COVID phase. Sanjay Sethi, MD & CEO, Chalet Hotels Ltd. suggests measures such as curbing all fixed costs to ease marketing, IT cost and per-employee training cost. “Restructure the cost structure of operation in line with the new normal. For instance, the manning structure needs to be flattened, the way it has been done in the west with the manning ratio between 0.6-0.75 per room. Currently, it is two employees per room as per industry standards in India.”

Often, in slow market conditions, while the hotel owner loses money, the brand continues to make a healthy fee. Batra believes that brands should try and support owners in such tough times by relaxing brand standards and take a waiver in fees until the operations turn significantly profitable. “Most large brands have announced pausing of expiry of loyalty points and status extensions,” says Batra. “That is a good move to retain customer loyalty. But why stop short at that? Why not fund the owners from the loyalty amounts collected over the years?”

Gupta believes brands should consider not just deferment/waiver of FFE reserve creation during the COVID crisis, but also deferment/waiver of international marketing And loyalty programs fee. 

Other measures

Cutting and curbing costs is just one of the first things. The hotels should do a lot more on their canter towards normality post-opening.  Sethi says brands will have to seize the opportunity and convert most of the traffic to OTA websites into direct bookings, given how expensive OTAs prove to be. Loyalty programmes are a good way to attract patrons and guests back to the hotel once things settle significantly.

Putting the lockdown phase to good use is important, says Gupta and suggests stepping up of online platforms to train staff who are on leave or working from home.

To deal with the situation, hoteliers—both owners and brands—will have to eschew implementing anything they might regret later, such as dramatic price cuts to attract guests from non-targeted profiles or giving too much business to opaque channels. A long-term view of what is best for their business is crucial at such times.

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