Rise Of The Phoenix - A Case For Immediate Opening of Hotels

Posted On: May 8, 2020 | Author : Siddharth Thaker & Ritu Chawla Mathur

“Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat” - Sun Tzu

On 24 March 2020, the Government of India ordered a nationwide lockdown for 21 days, limiting movement of the entire 1.3 billion population of India as a preventive measure against the COVID-19 pandemic. Since then we have had two further lockdown extensions and its day 45 of the lockdown today. It is now time for the government to accept that it will be a while before many things get back to ‘normal’. Relentless pursuit of this ‘normal’ is a fallacy, it’s almost like chasing a mirage in a desert. We humbly need to recognize that a lot about everyday life has probably been changed forever. The current situation is extremely fluid and continues to unfold. Empirical evidence clearly suggests that while lockdowns could assist with possible suppression of the virus and save precious lives, it also results in high degree of disruptions in economic activity. It is now time to consider immediate opening up of hotels, at least to a "semi-normal" state.

In what ways, and to what extent, will the industry be impacted? Will hotels continue to be perceived as a ‘safe’ environment? And will developments – internal and external – allow a turnaround anytime soon? What lies ahead is a guess as there are no precedents. In this article, I enlist my reasons to make a case for immediate opening up of hotels and justify the rationale on why there exists a logic for the same.

Capacity to Deliver Sanitized Eco-Systems

A majority of hotels and restaurants have already put processes in place to implement detailed protocols to ensure health and safety for its guest and employees. They are capable to meet the highest standards of sanitization that have been pre-approved by any competent agency. The hotel and restaurant staff are already sensitised to wear gloves and face masks while on duty to reduce risk of transmission as well as maintain social distancing norms to protect themselves against possible contamination. We have all witnessed the frenzy around opening of liquor shops recently, have we not? While comparisons are not fair, if any industry has the capacity to deliver a sanitized eco-system it’s the hospitality industry and there exists no reason why at least partial opening of business should not be permitted for hotels and restaurants. If factories, offices, construction, shops can open partially so can hotels and restaurants!

Rome Cannot be Built in a Day

Even when the current restrictions are eased and the government says it OK for hotels and restaurant to resume business, it will be foolish to expect the demand side to miraculously re-emerge overnight. Rome was not and cannot be built in a day. "Will guests want to travel again and how soon? Will they want to go out and dine at restaurants? These are questions that don’t have easy answers and businesses need to re-open to get a factual, on-ground assessment. They need to reach out to their customers and welcome them back.  Sufficient lead time is required to allow hotels to adjust their business models and plan for the future. Until social distancing restrictions ease up, restaurants can migrate to a robust pickup and delivery service model that is safe. Hotels can keep adjacent room vacant to every occupied room as a safety measure. Restrictions can be imposed on doing large MICE events or even restrict their restaurant to only 50.0% its cover capacity. All-encompassing ban on business is not sustainable and not a wise economic decision.

Resumption is a Journey, Not an Event

For the first time in history, close to 90% of the world’s population lives in countries with some form of travel restrictions. The task of ensuring the safety and well-being of the employees and customers while managing sales, realigning revenues and restoring market demand is a long journey and not an event. The first step towards resumption and recover for hotels will require travellers to feel safe and confident that their health is protected. New health and safety protocols will need to be in place, and these have yet to be defined in India for the hospitality industry by any competent authority. Regaining customer faith and confidence is a long drawn process and resumption of business will allow hotels to embark upon this journey and reach out to their customers. Allowing a phased opening also allows for better and quicker re-alignment of service delivery and operational processes within hotels and hence the earlier they are allowed to resume business the better it is.

Roving Heads Need Beds

According to World Bank an estimated 40 million internal migrants have already been impacted by the lockdowns and their plight has been well known. Further, under India’s historic and the biggest ever exercise to bring back its citizens stranded abroad christened ‘Vande Bharat Mission’ an estimated 2 – 3 lakh Indian citizens will return back to India within the next two weeks and might need to be undergo mandatory self-quarantine for upto 14 days. Until our fellow citizens reach their homes safely their roving heads will need beds and hotels are a viable option to offer them as an alternative quarantine facility. For people who can afford it and have the propensity to pay why not give them the option to self-quarantine in a hotel as against having state governments and district administrations engage in setting up mandatory quarantine facilities from scratch. The branded and stand-alone hotels across India has a combined capacity in the range of 3.8 to 4.0 million beds. Why not augment this capacity to provide temporary transient accommodation?

NPA & Liquidity Crisis

Even prior to the COVID crisis, the gross stressed loan value for hotel industry was estimated at Rs11,000 crore which constituted 27.0% of the total lending exposure of approximately, Rs41,000 crore. Post the crisis, the NPA situation at highly leveraged hotels is likely to get acutely chronic. With demand falling off a cliff, there are no short-term solutions or magic fixes. It is our estimate that it will take at least 3 years for hotels to undergo the process of cleaning-up of balance sheet and recapitalization to fully take effect, in the interim hotels will have to implement a mitigation plan to prevent chronic and widespread bankruptcies. There is an urgent need to address the cashflow, liquidity and working capital finance related problems. Allowing partial re-opening and resumption of business activity will resume cash flows. All efforts need to be made to ensure that liquidity problem does not snow ball into a solvency problem. A continued lock down risks industry-wide closures, ballooning of delinquencies and large-scale job losses.

In Conclusion

As I fondly re-collect my journey of almost 20 years as a proud hospitality industry professional, I am amazed and awestruck by the resilience and sense of responsibility that the industry has always exhibited in trying times. The Indian hotel industry has, in the past, overcome the challenges posed by tectonic global events such as 9/11, the SARS/MERS/Ebola health crisis, 26/11 attacks and the Global Financial Crisis. Whenever times are tough the industry has always remained resilient in the face of crisis. As I ponder over my years of service my heart goes out to every humble hotel and restaurant industry colleague who has always delivered extraordinary service with a smile. What we need today is to allow the hospitality sector to deliver the healing hand, radiate that human smile and warm ‘touch’of services. No more lockdowns of hotels please! We don’t need relief packages or freebies what we want is to get back to business.

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