Transformation in the hospitality sector

The magnitude of devastation attributed to events like 9/11 and the ‘Great recession of 2008’ seem bleak in comparison to the havoc wreaked by the COVID19 pandemic. The pandemic-induced lockdown has disrupted supply chains, closedown of businesses and mass unemployment. But the government’s decision to reopen the country in a phased manner brings a breath of fresh air and a hope for a gradual but steady ascent. However, the ascent is contingent upon the hospitality industry’s adaptability to the virus-induced irreversible transformational effect at large. 

With canceled flights, empty hotel rooms, and deserted restaurants, this pandemic has taken a toll on the hospitality industry. The industry’s dependence on the airline, tourism and travel industry makes recovery agonizingly difficult during these unprecedented times. However, as the industry strives to get back up on its feet, stringent rules applicable to hotels in the MMR region, including Mumbai, Pune and Nashik must be followed. Therefore, the hospitality industry is in metamorphosis as they gear up for the post-COVID era. 

At the outset, the entire guest experience from check-in until check-out is likely to be redefined to cater to the current requirements of social distancing and hygiene. Zero-maintenance buildings, contactless interactions, and technology-based sanitization will emerge as the “new normal” for hotels and restaurants at large. Specifically, hotels outside containment zones will be allowed to operate at 33% capacity subject to adherence of social distancing and hygiene guidelines. The rationale behind this is not only to avoid overcrowding but also to convert the remaining 67% capacity into a quarantine facility, as and when required by the government. Reduced operational capacity and increasing costs of running a hotel or restaurant will compel the industry to look for unconventional avenues to keep business afloat during a depressionary phase. 

Moreover, several other guidelines ensuring hygiene and social distancing such as mandatory thermal screening, protective glass at reception tables, sanitizers to all hotel staff and guests, and contactless digital payments, etc. will change the entire guest servicing experience. This goes without saying that only asymptomatic guests will be allowed entry in hotels. As an additional measure, hotels are required to keep each room empty for minimum 24 hours post guest check-out and sanitize the room. Many of the facilities, like bars, buffet, spas and swimming pools, will have to stay shut for now and even though restaurants can open, they will only serve hotel guests for now. The State mandated guidelines will propel the hospitality industry to provide a safe, contact-less experience from the pick up at the airport to the check-in, entire stay and until check-out. 

State-mandated guidelines although necessary for the health and safety of individuals, it is likely to have catastrophic consequences for alternate accommodation such as Bed & Breakfast, Guest Houses and unbranded budget hotels which constitute 95% of the hotel industry. On the other hand, implementation of these guidelines is easier for chain and luxury hotels with deep pockets, however high maintenance costs coupled with less customers may pose as a challenge. In light of this, the low-priced sector on the country can ride on India’s large domestic tourism to kick start the industry. Also, the alternate accommodation industry offers potential entrepreneurial opportunities to small-scale business owners. Seeking out entrepreneurial opportunities is especially important as revival projections do not look promising as on date.

Corporate travel will perhaps revive the chain hotels though the lock down has shown that corporate travel can be limited with the emergence of work-from-home concept. As per FHRAI, hotels are seeing about 15-20 percent occupancy at present. For restaurants, limited number of working hours coupled with restrictions on the sale of alcohol makes business unviable, thereby hurling several small restaurants, bars and hotels towards an empty treasury. Moreso, inbound traffic is bound to be slow due to travel restrictions and recessionary conditions limiting disposable income. Clearly, the prolonged impact of the COVID-19 crisis, even after the lockdown has been relaxed, is likely to have a long-term impact on the sector on account of burdensome guidelines and recessionary conditions limiting disposable incomes of customers.

Driving up sales requires a culmination of strategies including – continuous and effective marketing strategies that communicate with loyal guests through digital and social media during and post the lockdown. In doing so, hotels and restaurants can showcase their contributions and safety measures in wake of the pandemic for its customers. Secondly, it is imperative for hotels and restaurants to maintain adequate liquidity for working capital. This can be achieved through a combination of renegotiation and extension of payment cycles with vendors, adopt RBI’s 3-month moratorium period for existing interest and principal payments to banks, and enforce rigid cost-control measures while supporting the salaries of its staff members. Consequently, a higher budget will be allocated to technology; minimum human interaction is maintained while providing a safe, hygiene and comfortable stay. 

The Finance Ministry’s economic package disappointed the hospitality industry, which came to a screeching halt on account of the COVID-19 outbreak. Unfortunately, the survival of this industry is interlaced with the situation of the aviation, hospitality and tourism sectors, thereby making survival and recovery of hoteliers challenging across leisure, heritage, adventure and niche verticals. The industry is starved relaxations from the government, but more importantly for customers to feel at ease to visit hotels and restaurants once again. It goes without saying that a resumption of economic activity is essential, but the vigil on the virus must remain and in doing so Indians are likely to witness decades of unprecedented transformation in near future. 

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