The cascading effect of the coronavirus (Covid 19) pandemic will cost the Indian hospitality industry losses to the tune of ₹620 crore. The hotel chain and standalone hotel segment is staring at losses over ₹130-155 crore, whereas the alternate accommodation segment is likely to make losses of over ₹420-470 crore. Layoffs of ‘casual staff’ or ‘contracted staff’ is likely, a research suggested.
Hotelivate, a hospitality consultancy firm has in a report said that the Indian hospitality industry is likely to be hit really hard. The report suggested that domestic hotel companies that follow the fiscal year regime, this amounts to a weak Q4 FY20 and a weaker Q1 FY21.
According to the report, while January was still at par for the Indian hospitality industry. The industry had started to see early signs of recovery from February. “Unfortunately, business for the second half of March seems to have dropped off a cliff, pretty much across the board,” the report said.
“March has borne the brunt of many large-scale cancellations across the corporate, MICE and leisure segments. Notably, the extent of this lost business has primarily been seen across the top eight markets. Various Tier Two and Tier Three hotel markets in India continue to witness a small erosion in business for now, and occupancies in at least the first half of March were only partially lower despite the spread of the virus in some states,“ it added.
The Indian government, just like many other governments have closed their borders, have suspended visas till April 15. Several international airlines have trimmed their operations to Indian destinations. Indian airlines have suspended complete operations to international destinations and reduced their domestic operations. To add on to this, the governments have requested people to work from home.
According to the report, in this ‘best case scenario’ of the viruses impact only being seen devastating for the next two to three months, our estimates are that the weighted impact of this situation is likely to erode the blended nationwide occupancy (in calendar year 2020) by about 18-20 per cent, while the blended nationwide Average Daily Rate ADR may see a drop of 12-14 per cent this year.
The reduced traffic to the hotels will also have an obvious cascading effect on revenue from F&B, MICE and other commissions.
BusinessLine had reported that the overall business and summer holiday bookings are likely to be impacted by 25 per cent on a year-on-year basis, according to industry estimates.
The Indian standalone and chain hotel segment has over 1.4 lakh rooms which accounts for only 5 per cent in the hotel industry segment.
According to the report, the overall loss of total revenue for the around 140,000 branded/organised hotel rooms across the country will be anywhere between ₹130-155 crore. “This amounts to a 27 per cent to 32 per cent erosion in the overall revenue as compared to last year.”
Over 95 per cent of the Indian hospitality industry is dominated by Bed & Baths (B&Bs), Guest Houses, “it is our estimate that there is likely to be an additional loss of anywhere between ₹420-470 crore in total revenue across the alternate accommodation industry.”
It has often been stated that the larger tourism industry in India contributes to about 10 per cent of the GDP (approximately US$275 billion). It may not be an overstatement to assert that almost all of this revenue may dwindle to a painfully negligible amount if COVID-19 does not come to a halt this year.
Adding to these woes is the fact that anywhere between 15 and 25 per cent of the employees of the various branded hotel chains in India are either contracted or casual staff. It may not be evident to many that about 8 to 10 per cent of the total staff strength of the global cruise liners are Indians . These people become the weak link to the whole chain and it is evident that it may break them first.