Impact of COVID-19 on Hospitality Industry and How Industry is Going to Handle it.

The world is now focused on the COVID-19 epidemic and the pandemic will certainly change the world as we know it. With the globalized world entering a partial or full shutdown, the potential effect on human life, economic development, and industries are unmeasurable, both in the short and long term, due to the uncertainty as things evolve.

To examine the effect on the hospitality industry of the COVID-19, HVS has published a comprehensive study on how to solve this issue and to be healthy after the virus has been contained. Although most economists and analysts currently expect a recovery in the global economy, the exact timeframe cannot be determined by any calculation during the latter part of 2020 until the virus is present globally.

Source: IMF, RaboResearch, MacrobondS

The Indian hotel sector has been hit hard by very few potential reservations, coping with significantly low demand. All transitory demand effectively vanished – the remainder mainly because the government prescribed certain long stay guests or hotels for foreign visitors to India.

The global economy, for the first time since the financial crisis of 2008, is predicted to contract in the first quarter of 2020. Even if the pandemic is contained shortly, the ripples would lead the entire world well into the year, leading all global economies to the recession. The number of cases is increasing steadily daily.

The worldwide travel & tourism sector is, without a doubt, the biggest victims of the COVID-19 pandemic. Many countries have made travel announcements and are locked-in, and since February, all big global business, social and sporting activities have been canceled. 

Effect on The Global Tourism and Travel Industry-A Few Disturbing Figures:

• IATA reports that global airlines need an emergency fund of up to US$ 200 billion to fight for survival.

• According to the World Travel and Tourism Board, the COVID-19 pandemic could cut 50 million jobs worldwide in the travel and tourism industries, representing a 12-14 percent reduction in jobs.

• This year, international travel could be adversely affected by up to 25 percent, which is equal to this year.

• After the outbreak is over the industry could take up to 10 months to recover.

COVID-19 & Effect on Hotels in India

The hospitality industry in India is without question one of the biggest casualties of the COVID-19 outbreak, as demand has plummeted to an all-time low. Global travel advisories, suspended visas, the enforcement of Section 144, India, and most other countries are locked in, with unparalleled repercussions. As hospitality sector is directly proportional to tourism, and due to this pandemic tourism is completely banned. There is overall decline in growth and revenue of ITC Hotels. Right now all hotels of ITC have been shut down. 

Global Tourism Arrives at A Grinding Halt and Limited Room for Rapid Regeneration:

• In February, Foreign Tourist Arrivals (FTAs) in India (particularly leisure traveler’s) began to soften as its spread continued to other countries.

• The Indian Government subsequently revoked travel visas (with a few exceptions) until 15 April 2020, which is likely to be extended. The anxiety about the events will continue to have a significant effect on travel, even though it is not.

• FTA demand is not expected to pick up any time soon. Travel bans around the globe will, in our view, only come down entirely by the end of the year, even if such a procedure will begin much earlier.

• Besides, most potential winter travel bookings i.e. In the summer months, October-March – the good season for our industry – has largely evaporated. 

Domestic Journeys Should Be Crucial to The Revival

The infiltration of the COVID-19 virus in India has resulted in mass hysteria, new confirmed cases being recorded regularly, with reverberations expected to continue long in the second quarter of the calendar year 2020. The current situation is extremely poor, as domestic flights have been ordered to shut down on 25 March 2020, and for the near future all other segments of demand, including MICE, industry, social or sporting activities, have been canceled or postponed indefinitely.

It has led several representative bodies from travel, tourism, and hotels together to make representations to the government and the Office of the Premier. As we come to print, the Government will possibly announce steps to revitalize and fund, in particular, the hospitality industry. 

The Effect Will Be Major on The Indian Hotel Sector

Following a record year in 2019, the Indian hotel sector sailed smoothly to January 2020, which will be "much larger" in 2020. At the end of February 2020, which intensified at the beginning of March, the nation first began experiencing the shock effects of global COVID-19 chaos. The hotel occupancy in major cities has decreased steadily and has declined, according to our figures, by an astounding 45% compared to the previous year. The sector has never seen such a drastic decline in such a short time.

The study predicts the worst impact in the second quarter of the year. Hotels would not be able to push prices and will also attempt to gain profound business discounts.

It is projected that the total occupancy of the Branded Hotel segment in 2020 will decrease by 16,7–20,5 percentage points compared to 2019, and that ADRs will decrease by 7–8% annually. RevPAR would, therefore, suffer a major 31% decline to 36.2%. 

Scenario 1: July demand recovers

 Source: HVS Research; *Analysis based on data available as of 23rd March 2020

Scenario 2: October-November demand picks up 

Source: HVS Research; *Analysis based on data available as of 23rd March 2020

Therefore, the Indian Hotel industry's total revenue will decrease from US$ 8.85 billion to US$ 10 billion, representing a deterioration of 39% to 45% compared with last year. In addition to actual business losses, the owners of the hotel will also be liable for losses arising from fixed operating expenses, debt repayments, interest payments, and several other compliance requirements for the sector. 

Recommendations for Hotels:

According to recent news, at the end of February 2020 over 90 percent of domestic hotels in China had resumed operations, just two months after the country had confirmed the first case of COVID-19. Business travelers forming the largest segment have increased hotel reservations. The famous choice was hotels located near transport hubs.

All this information is given as a silver lining as it gives the Indian hotel sector a window to look for in the future in terms of travel restrictions and cancellations relating to COVID-19.

Hotels must take advantage of the opportunity to devise and implement a Stop Gap Strategy to ensure that hotels are prepared to take advantage of the recovery when demand recovers. The Stop Gap Strategy will include among the most relevant items:

• Small operations are enough to be started easily when the chance comes.

• Implement a subtle marketing plan for digital and social media to maintain customer engagement.

• Engages suppliers/sellers to measure their willingness to restart the start-up with the hotel.

• Establish and maintain lines of communication with key clients and team leaders.

• Continue talks with the local government authorities concerned.

• Establish a timetable and budget for reopening.

• Using this time to enforce Ken-fix-it / update as far as possible.