The hospitality industry is among the hardest hit by the COVID-19 pandemic, more so from the severe second wave. We lay out the roadmap on how the COVID crisis has affected the industry and what it needs to do to sustain and transform.
The financial year in India commences on April 1 and ends on March 31 next year. During the first wave of coronavirus, most cities were under complete lockdown from April 2020. Hotels were allowed to open only from July onwards. Thus, in the first quarter, the hotel revenues in India dropped by almost 96 percent when compared to the previous year.
The revival of resort destinations
The second quarter (July to September 2020) began with a slow recovery. However, the recovery pattern was very distinct for two separate categories of hotels. The city hotels were still almost 90% below the pre-COVID numbers, but the resort hotels in destinations closer to cities recovered almost 40% of business over the previous year.
Destinations such as Goa saw a large recovery in business as most Indians either travelled or wanted to travel to Goa on a vacation. The mountain vistas of Himachal Pradesh opened to guests in August and many escaped to the hills for vacations.
The third quarter of the financial year (October to December 2020) was one of the best for resort operators as business picked up strongly. Despite the rising number of COVID cases in October, resorts did brisk business. The trend continued till the end of February 2021. The reason was simple: people were tired of being housebound. A good resort offered the option of working remotely and enjoying a vacation.
And then, a descent into a black hole
Just when things were looking up, the second wave of COVID hit India. With the number of cases rising in March and early April 2021, it was clear that India was under a severe second COVID wave. As I write this article, India is witnessing an average of 300,000 cases a day, with close to 1600 deaths per day which is amongst the highest cases and death rate per day globally.
The wave shows no signs of abating, leading to lockdowns across the country. The hospitality industry is the first to feel the heat. Occupancies in hotels, which had recovered to 75% of the pre-COVID levels in the fourth quarter of the financial year, are down to less than 5%. City hotels in mega-metros such as Mumbai, Pune, New Delhi and Bengaluru have taken the biggest hit. Unless a hotel has been turned into a COVID quarantine centre, occupancies across city and resort hotels are less than 5%.
The impact of the second wave and lockdowns
Analysing the trajectory of COVID’s second wave and after conversations with hospitality experts, here are some thoughts about the impact it will have on the Indian hospitality industry
- Revenue loss: Larger chain of hotels such as IHCL, EIH Limited and Marriott International have seen a drop in revenue in the last financial year from anywhere between 60% and 80% across the board. Experts had forecast a good recovery in the new financial year, which began on April 1, 2021. However, the year has started on a bad note as large swathes of hotels are located in lockdown zones. Even if the hotels are open, they have minimal occupancy.
- Layoffs: The first wave of COVID resulted in wide-scale layoffs, with city hotels retrenching up to 40 per cent of their entire teams and resorts up to 20 per cent. Hiring in hotels had picked up in the last quarter of the financial year (January to March 2021). However, with the devastation caused by the second wave of COVID now prevalent, there will be further layoffs.
- Loss of talent: The travel and tourism sector contributes nearly 7 per cent of India’s GDP. However, this sector suffers from government negligence and its failure to recognise the industry as a significant contributor to the economy, jobs and foreign exchange.
No relief or unemployment allowance has been provided by the Indian government. There are widespread job losses and the hospitality industry will find it difficult to acquire the right talent.
Many within the hospitality industry have begun pursuing newer and more attractive options, such as education and e-commerce retail, which are well-funded by global venture capital funds and have faced no salary cuts or wide-scale layoffs.
A faint light shines through
Although there is a lot of gloom all around, there is always a silver lining.
The government has imposed lockdowns in specific areas, unlike last year when there was a blanket shutdown from April onwards. A lot of hotels and resorts are still open. Big-city residents, where there is a major COVID outbreak such as Delhi and Mumbai, are escaping to destinations where there are lesser cases like Himachal Pradesh and Goa.
They are not just isolating themselves in these destinations but also working from there. The hotels in these destinations are following very strict hygiene protocols.
The growth in the leisure segment is fuelled by a transformation in travel habits. People are now taking frequent holidays by driving four to seven hours. Also, working from home has resulted in more disposable income in the hands of young professionals, who are taking short trips within drivable distances.
What the future holds
Despite the leisure segment boost, the hospitality industry will not have a great 2021. The organised hotel industry inventory is heavily skewed towards business hotels.
The leisure inventory may not be more than 10-15 per cent of the entire inventory in the branded space. Even if leisure has done well in one particular year, it would not be enough to compensate for the loss of the entire industry. Going by the vaccination schedule, not more than 8% of India’s population has been vaccinated till now.
With the vaccination opening to all from May 1 onwards, I believe the COVID wave will start subsiding by the third week of May, leading to some respite for the hospitality industry. With more people getting vaccinated and some queuing up for the second shot of the vaccine, I am of the firm view that things will start getting better in the next 30 days.
What hotels can do once things begin opening-up
The key lies in ensuring that everybody is safe. The primary concern of the hospitality industry should be hygiene and sanitation processes, which must be followed very diligently and without any flaws so that people feel safe.
People, who are right now scared of moving out, will begin travelling to resort destinations again by the first week of June. However, there is likely to be no recovery in city hotels or corporate conferencing. The only way that city hotels can survive is by innovating their F&B offerings, ensuring that their restaurants follow strict hygiene protocols and offering outdoor dining to attract more non-resident guests, thereby becoming a choice for safe dining.
As travellers seek socially distant experiences, the use of technology to handle consumer relations is more important than ever. Some businesses have leveraged Artificial Intelligence to support guest needs through the pandemic, for example implementing FAQ Bots to answer customers’ COVID-19-related questions. When guests (and potential guests) can get the information they need with a minimum of hassle, they are more likely to come back.
Among the technologies gaining ground in the hospitality sector is visual recognition, a solution that is used by the proptech industry for keyless entry into buildings. It is more widely by companies such as Apple for their smartphone unlocking features.
Visual Recognition tools have the amazing ability to track the use of face masks and users’ movement in buildings and supervise the distance between users. It allows businesses to offer cashless payments.
Another technology increasingly being deployed in the hospitality industry is robotics, which, when combined with other technologies such as AI or IoT is a great tool that can not only provide personalised service to customers when necessary but also help minimise contact with staff for reasons of social distancing.
An example would be providing self-check-in and applying regular customer preferences such as an automatically served cup.
Ultimately, the secret to getting through this crisis is for hotels to adopt a customer-centric and technology-leveraged approach. I have never been more positive about the hospitality industry in the last 12 months than I am now. There is a lot of short-term pain for the next few months but the best will become better and sustain.