HAI highlights three pronged strategy for hospitality industry
In an exclusive interaction with BW HOTELIER, Madan Prasad Bezbaruah, Secretary General, Hotel Association of India (HAI) shares insights on the recovery plan of the hospitality sector that rests on three pillars. He also talks about the support required from the government, sectorial lenders and stakeholders for the industry to thrive.
As an experienced senior bureaucrat with around four decades of experience, what according to you are the measures the Government could initiate for the revival of the hospitality sector?
Starting from UNWTO globally to every single assessment like the McKinsey in India and the latest RBI review has pointed out that the hospitality sector is among the worst affected sectors due to the unprecedented revenue and job losses caused by the pandemic Covid-19. The pandemic has led to demand destruction in excess of 90 per cent for the tourism and hospitality sector and possible revenue loss of Rs. 90,000 crores by the end of the year. The more worrying thing for the country is that if a sector that accounts for the employment of over 4.5 Crore people and provides livelihood to around 16 crore people contributes 9 per cent to India’s GDP remains crippled, the national recovery plans will also be hugely impacted.
The National Recovery Plan is massive. It takes care of the key issues at the macro level. Unfortunately, the Tourism industry felt their specific problems were not addressed. True, emergency response for national economic recovery cannot go into all micro issues. But, I think now the time has come to draw up segregated sectoral revival strategy for key sectors like tourism within the overall national plan. The government and RBI have rightly announced a moratorium on interest and principal repayment for 3 months which was later extended to 6 months. This was a good short-term survival strategy which needs to be dovetailed to a long term 24 -- 36 months strategy. HAI has outlined such a transparent long-term interest rate regime and strategy for restructuring of debts. As I can personally see it, as we move from survival to recovery, the basic problems will continue to revolve around liquidity -- the need for working capital, managing fixed costs, payroll support -- these are some of the issues to bother the industry. At the recovery stage, it will be important to look at the plethora of pre-COVID regulations and procedures that inhibit enterprise and can be relaxed in the unusual post-Covid existence and make ease of doing business really meaningful.
What is the roadmap ahead and what are the strategies going to be implemented?
The last few months have been the most difficult times for hoteliers in the country. The pandemic has hit everyone in the hospitality business and we believe it is time to devise a strategy that can help the hotel industry evolve from the crisis. We have been extensively working towards creating a lasting solution and building a roadmap that helps in the recovery of business and long-term sustainability. Our three-pronged HAI 2020 Strategy is based on a solid foundation that stems from years of experience and expertise of the Executive Committee of HAI. Broadly, HAI’s vision for the industry’s resurgence will rest on three pillars:
* Creating an ecosystem that works on greater collaboration with influencers and opinion makers,
* Deepening reach through a hub-and-spoke model to establish presence and prominence for HAI inregional markets thus creating influence for the benefit of the local economy.
* Initiate inclusive programmes that protect and promote the interests of small, medium operators and the larger employee base of the hotel industry contributing to the survival and thus revival of the hotel industry.
Will there be new standard operating procedures (SOPs)?
We are currently working on a fresh set of SOPs in addition to the existing ones that will enable a higher degree of safety and help bring occupation rates to a certain high in the sector. These operation procedures will also enable trust among people who have been waiting to go to outstation destinations or travel for business. One UNWTO officer mentioned in a webinar that trust is the new currency. HAI will direct its energy to create that trust among the travellers about our hotels.
What are the main challenges for hospitality in the trying times of COVID 19?
There are four key factors that are currently working against the sector. Number one is the extinguished hotel demands that are highly discretionary. This has been aggravated by the absence of air travel, corporate restrictions, cancelation of holidays, state lock-downs, and the imposition of quarantine on travellers. Secondly, 70 per cent of costs of hotels are fixed in nature, mostly towards payroll expenses and Government levies. Looking at the current situation, the hotel industry will take the maximum time to go back to its former levels of normalcy given the capital-intensive nature of the business, and the high cost rending the sector is highly sensitive to demand destruction. Third, the current debt levels in the organized part of the industry (which is less than 10 per cent of the total) stand at ₹45,000 Crore. And lastly, is the negative perception of the lenders leading to a liquidity crunch and increased rates of interest to cover for the perceived risk. The need for capital is likely to be even greater in the future--hotels will have to go for AI, more use of IT, virtual reality, more staff for doing all the health safety drills, etc. Availability of capital at rates that allow economic investment will continue to be a major concern.
What is your vision for the association?
We are working on Vision 2025 -- realizing that a long-term vision is much needed. The Hotel Association of India (HAI) should become the voice of hoteliers in India -- small, medium, and luxury brands, make that voice heard in the right quarters as we strive to keep the best interest of all the stakeholders from the industry at the core of everything that we do. Personally, I would like the role to go beyond. Hotels are part of the bigger tourism industry. We do well if the industry flourishes. It is best when all sectors work in an interlinked way. I would like HAI to play a key role in building that togetherness -- in our prosperity as well as in our difficulties. Tourism is a 'people' centric industry. The hotel industry puts people at the core and ‘Care’ as the motto. I would like HAI to bring this role to focus and rid the industry of the tag of elitist, sometimes unjustly and undeservedly attached to it.
As I can see the future will be a totally changed scenario of responsible tourism, tourism that is alive to existential issues of humanity like environment, climate change. I would like the hotels to be at the forefront of it, leading the world as a role model in commitment to such concerns. It would be so good if their exemplary roles in creating local supply chains and employment could be recognized as contributions to PM’s call for Atmanirbhar Bharat.
Indian Hospitality Industry holds immense potential to be a global leader in the sector and our vision is to provide all the necessary elements that will push the sector towards heightened growth in the years to come. We want to secure the hotel industry, its due place in India's economy and highlighting its role as a contributor to employment generation and sustainable economic development.
Please share your past experience and how will it help you excel in your current role?
There comes a time when personal ambitions become merged in the larger goal. Achievement is always teamwork. It is my love for tourism that has brought me to HAI. It is a fraternity of people high caliber and of great experience. My role will be to bring insight from the other side of the fence and also the insight into National and International Tourism development to strengthen their efforts. What HAI is trying to do -- get the place for the Hotel Industry that it deserves-- is what I tried to do for tourism when I was Secretary. It was a low priority-- I used to say tourism is what everyone talks about, but no one cares. We started the campaign-- tourism touches everyone. Things have not changed much.I hope my experience in the Ministry, in UNWTO, as a consultant to ADB, World Bank, etc. will help me to guide HAI to achieve the objectives that it has placed before itself – to celebrate excellence in all that we do and do so well.
What representations have HAI given to the government requesting relief for the hospitality industry?
We have made several representations from the time of the lockdown until recently where we have reached out to the Reserve Bank of India seeking financial reliefs for the sector and to lay the ground for normalcy going forward. These suggestions include all the steps that we feel are necessary for the revival, survival, and thrival of the industry. Under this, we have developed a set of recommendations – for those companies with good credit history as of 31st March 2020. We have suggested an extended tenure and strategic phased approach which we think will be the three stages for a return to normalcy. This includes:
* Survival Phase (next 9 months): Under this, the moratorium on interest and repayment of the principal shall be extended for the entire FY21 i.e. till 31st March 2021, the interest due is added back to the Total Principal Outstanding and the loan term extended by 12 months. This will solve for the current cash crunch as there is expected to be almost no demand for FY21.
* Revival Phase (following 18-24 months): In this phase the interest rate should be at Repo Rate + 200 bps: the lending institution can fund this by borrowing from RBI without being out of pocket.
* Thrival Phase: At MCLR as the market improves and performance of the industry reaches 50-70 per cent of Pre-COVID levels (expected 30+ months): We have represented to the government that the SOP issued by the government should be implemented across states, otherwise tourism recovery and hotel recovery will be fragmented. We have asked that as the restaurants in malls have been allowed to be opened, so should be in hotels. PM has given a call for business tourists to come to India. The Tourism Ministry has given a call for domestic tourism to lead revival. Both can be functional only if hotels are also opened, of course following the strictest SOP needed for safety of the lives of people.
How do you from your personal perspective feel that the hospitality industry will grow again. As in how long it will take and what will be the key changes?
If we see the global tourism industry, it had continuous growth till the end of the century. Then we had major setbacks like 9/11, SAAR, Tsunami, global financial crisis. Each time tourism bounced back to be on line with the 2030 projection. But Covid-19 is unlike any other challenge so far. Never before the industry came to a complete halt globally. UNWTO sees recovery taking place earliest next year but getting back to the normal growth path maybe longer. The situation is so uncertain that no one knows, and it is unwise to venture a guess. But we should be in continuous preparedness. Stage of survival is not yet over for many and they need handholding.
The key challenge for us would be to enable domestic staycation or travel opportunities. The implementation of the survival, revival, and thrival approach would need strong backing from the government as well as sectorial lenders and stakeholders.
Lastly, the hotel industry has reported about 80 per cent job losses in recent times and over 50 per cent faced pay cuts. What is HAI doing to support these people? Is there anything being done to curb the layoffs?
We are currently in talks with various industry players and are working on an effective and long term solution in this direction. We are seriously concerned about this problem and are looking at various options. There are no easy solutions. But we hope to come up with some positive news soon. Personally, before I came to this position I had advocated that we should think of some social security network or insurance for these vulnerable people, just like the government is thinking of a safety network for migrant labourers etc. If we all put our thoughts together, something good may come out in the long run.
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