Rahul Pandit, MD & CEO, Hamstede Living shared his valuable insights on how the industry can persist during the present challenging phase at the recently held BW HOTELIER Breaking The Pandemic WebBlast – ‘Future of The Hospitality Industry'.

Rahul Pandit, MD & CEO, Hamstede Living has said about the present times of pandemic crisis, it is the time to exploit silver linings in dark clouds. Pandit thinks that tourism has languished as a state subject, and it is high time that it is added to the Concurrent List. He reasoned that tourism contributes to almost ten per cent of the GDP (Gross Domestic Product) generating more jobs than the automobile sector, or technology sector, or the financial services sector per dollar invested. Pandit was speaking at the recently held BW HOTELIER Breaking The Pandemic WebBlast – ‘Future of The Hospitality Industry: An Outside In View'.

Taking the discussion further, Pandit pointed out a very prominent issue that the sector is not elitist. “It takes care of two basic biological needs – to eat and sleep. It is as important an infrastructure item as are roads and bridges,” he said. Further Pandit added, “At the central level, all loans to the sector should be extended a 2 year moratorium and at the state level property taxes should be held in abeyance for 1 year to support industry at this critical juncture.”

In Pandit’s opinion, in the future courses of action, the recovery would be led by leisure and leisure demand would also be buoyed by the drop in the outbound traffic of 20 million Indians who would now vacation in the country. He explained, “The economy runs on 4 wheels of demand, supply, capital and labour. Covid has sucked out demand, obliterated supply, forced capital into protection and left labour facing unemployment. We are staring at the 4 wheeled car being transformed into a bicycle.”

“MICE will see an 80 per cent demand erosion over the next two to three years with marriages providing some succour, corporate travel will reduce at least 25 per cent and international visitors would drop 80 per cent. The industry would face a massive yield compression over the next five years. It will take two years to regain occupancy, a further two years to gain pricing and profitability in year five,’ he added.

Pandit recommended that capital and technology should be deployed as an arbitrage to improve returns. “We will need to co-opt the gig economy in business. There will be acceleration in the separation of asset ownership, management and distribution since each entails different risks, competencies and returns profile. This is a great time for stressed asset funds to build a high-quality portfolio post accounting for a three to four years negative carry,” he explained.

Suggesting a way forward, Pandit stated that all businesses will need to account for five key risks – pandemics, terrorism, water & food crisis, war, and climate change – while preparing their Business Continuity Plans. He said, “The country needs a sovereign India Reserve Fund to cushion industries. This fund could seek one per cent topline contribution from all corporates. This contribution should be treated as an expense in the India Accounting Standards (IndAS) (effectively dropping cost to 70 paise per rupee), with the government putting in half per cent for each one per cent corporate contribution and earn interest similar to the provident fund. Withdrawal/overdraft limits could be set at 0.75:1.0 for large caps, 1:1 for mid-caps and 2:1 for small entities”.

According to Pandit, constantly upskilling oneself, either in adjacent or alternative industries, holds great importance. He said “This crisis is a great time for personal reflection and for refreshing our business models.”

“It is critical to renegotiate fixed leases to variable or if the developer has construction finance then consider a hybrid lease with minimum guarantees to cover LRD. Establishments should also consider short term leasing to corporates, re-purposing to co-living, student housing and senior living as well as conversion to hospitals and day care centres. Delivering margins would be tough. People, distribution, energy, water and waste costs need to be restructured,” he added.