Resurgent India Knowledge Series Presents
Webinar On Hospitality Industry- The way forward
Speakers- Mr. JB Singh, CEO- InterGlobe Hotels
Speakers- Mr. Ashish Kumar, VP-Corporate Finance & Treasury- InterGlobe Enterprises
Speakers- Mr. Dilip Puri, Founder, and CEO- Indian School of Hospitality
Moderated by- Mr. Jyoti Prakash Gadia, MD- Resurgent India Limited
● The hospitality industry which comprises travel, tourism, and accommodation had created 4.2 crore jobs which accounted for 8% of the total employment of the nation. It also ranks third globally in terms of investment in travel & tourism, with national investment in it up to 6%.
● Tourism & related business activities are worth over $28 billion. As per the reports, around 70% of the total estimated workforce is likely to be unemployed. The profitability & revenue will also plummet down to 20-25%.
● The ability of the hoteliers to institutionalize massive changes in the organization in multiple ways will serve as a barometer of how successful they will be going forward. They may also see significant improvements in the margins & the way hotels operate once lenders/bankers can mitigate the risk to overcome the survival time.
● Even with SOPs of health and safety becoming more defined in big branded hotels, the business of bed & breakfast models will also pick up speed in India, like the west, alongside.
● Repurpose hotels have different lenses attached to it and one has to think out of the box as to how existing hotels can be repurposed into different real estate models if their survival is at risk for another 3 years.
● The industry runners will have to probe distinct ways and means to preserve and conserve cash in all aspects while taking enough support from the regulators & socializing the issues with stakeholders. It will look at things from quantitative and qualitative facets, against issues faced by the industry because of the COVID 19
● Businesses with the presence of more than a decade will have some mechanism of cash element being diverted in the business, equity support that has to be demonstrated.
● In the long run, one has to keep an eye on the best practices happening globally.
● Support from the banks/financial institutions are legitimately huge in the international market for this industry. Separate funds have been created in the past.
●Reinventing of the wheel in terms of cost management, manning ratio, cash management & support from stakeholders like banks in form of short-term working facilities/OD, EPCG scheme, GST, a waiver from the property tax, liquor taxes, and many more ways which can give sufficient breathing time to the industry to jump back on its original level.
● The industry is currently averaging out close to 8-10% occupancy depending on which part of the country it is operating in.
● Hoteliers will have to be mindful of the CAPEX, they will incur in the process of making their hotels safe and hygienic. There is a possibility that these solutions are for the short-term pre-vaccine era which might become redundant in the future. One should not go overboard & have a balanced approach for incurring CAPEX.
● The organized players, because of scale & enough intervention, usually can recover 60-65% of the cost faster than unorganized players. They have structures and processes that unorganized players lack & hence impact will be far-reaching.
● As the customers will increasingly prefer compliance, independent operators will have to ramp up to get them in order. India is going in a direction where the need for compliance, transparency, sustainability, responsibility is growing.
● This crisis will force the unorganized sector to obtain a level of compliances in terms of hygiene & safety in the near-term. Government & regulators might enforce certain guidelines or we may even see certifications that will take care of safety issues.
● Social changes brought about because of this pandemic in lifestyle will also affect travelers and tourists while booking accommodation.
● Technology will remain a big differentiator and young professionals will have to be friendly with the fact that AI, machine learning & automation are not here to take their job but make them more distinctive & unique.
● The re-skilling of staff and professionals will require them to embrace digital and online learning. Their mindset will have to be aligned with the new future that will prepare them for COVID -like the environment of uncertainty.
● Payroll forms a tremendous part of P&L for this industry, and cost-cutting measures in this area are to reduce the room to staff ratio. This has to be done while enhancing the productivity of the staff so it does not affect the business. And this is by identifying ways to adopt technology in operations.
● For structured hotels, health & hygiene specifications were already in place except for few basic changes, the change that may be forthcoming may be in a plethora of other forms like sustainability, energy saving, staffing & recruitment, & many other ways.
● There is a digital explosion that has opened up fresh opportunities amid uncertainties. It will be interesting to see how this will affect & benefit the industry as a whole. India is in a unique place at the moment. It is demarcated as the one that will lead the future as the economic shifts happen.
● With the emphasis on bringing down the manning cost, there is a need to re-skill the manpower. Re-skilling will be important because the time & expectation will differ from what it was a pre-COVID era. This industry has also lagged in an adaptation to technology as compared to other sectors.
● Companies will have to learn to effectively communicate in this virtual environment and identify non-verbal cues in the absence of physical nuances.
● Only businesses with enough reserve will be able to weather this storm. Hotels who were doing well, owners & management would take out cash & invest in either upgrades or CAPEX, expansion & growth. So if they have not kept a pile of reserve or contingency aside, they will be greatly challenged in upcoming times.
● As the numbers are quite terrifying because of the shutdown of business, the government has offered respite by being considerate and proactive in their response. However, this industry will need more aid by a combination of solutions because it is sitting on close to $8 billion of the loan book, organized & unorganized combined.
● Financial institutions and bankers need to back up this under-penetrated industry, which has an enormous amount of potential for growth and expansion by placing the right bets on a calculated class of assets.
● International capital markets are more flexible in decision making as they are not dependent on regulators for guidelines. Banks in Germany, UK & New Zealand are taking independent decisions based on the history of the borrower and providing all the essential support.
● Second, international sovereigns are also providing support to corporates in the form of reimbursing the payroll, which is a key expense anywhere.
Recommendations by industry
● We aspire for an extended moratorium of a year. As deferment of interest is announced till March 2021, the industry recommends capitalization of it.
● One time restructuring of the accounts with details to be worked out about the qualification of account & etc.
● Creation of an AIF, similar to the fund for reviving real estate projects, stuck for funding reasons
● Mid-scale operators cannot recover excise fees from the sale of liquor & are paid through cross-sales of F&B, hence deferment of the fees can help with the liquidity crisis.
►Watch the webinar here: https://www.youtube.com/watch?v=EEpB-6OQo68