A recent study by the World Economic Forum talks about close to 90% of the world’s population now living in countries with travel restrictions for the first time in history of mankind. Airlines, travel companies and the tourism sector as a whole are among the most affected businesses. An estimated 25 million aviation jobs and 100 million travel and tourism jobs are at risk globally.
Due to COVID-19, unprecedented travel restrictions and ongoing lock-down, UNWTO predicts 20 to 30% reduction in arrival of international tourist in 2020 leading to a decrease in international tourist receipts by 300-450 billion USD. The pressing impact, of the pandemic however will be loss of millions of jobs. The next colossal threat is the liquidity crunch and dearth of working capital for the travel and tourism industry.
A loss of 4.6 million jobs by May has been estimated by The U.S. Travel Association. Decrease in tourism is being considered a driving reason for job losses in the US which skyrocketed to a stunning 6.6 million. According to Roger Dow, president and CEO of the U.S, “The impact on travel is six or seven times greater than the 9/11 attacks.” With a large chunk of the fleet grounded, the US airlines’ is slated for a revenue loss of more than $250 billion. In the lodging sector companies like Marriott has lost nearly 75 percent in revenue. Sadly, the cruise industry is facing a herculean task ahead. The sector is struggling as reports of the plight of ships carrying infected passengers pour in.
Sign of hope
There seems to be a flicker of hope as China, where the pandemic originated, and is reportedly under control, with restrictions being lifted, has shown early signs of recovery. Bloomberg says hotel bookings in the country have gone up by 40 percent the first week in March. Another thing to remember is that the hotel industry had historically dealt with multiple crises and pandemics. For instance, in 2003 the SARS virus affected the sector radically. It caused 50% drop off in hotel bookings, resulting in a decline of close to 9.4 million in international tourist arrivals, along with losses estimated at $30 to 50 billion. But regardless of these facts, the industry continued to clock immense growth by 2006, and contributed a total of $5,160 billion to the global GDP in the matter of a year.
The reality is that the epidemic is short-term and will surely pass. What is important is to plan for the future, and take necessary steps to lessen long-term harm from coronavirus while driving rapid recovery.
Effective ways to help hospitality overcome the difficulties that COVID-19
- Adopting cloud technologies
- Attracting millennial travelers
- Using the lock-down for hotel maintenance and renovation
- Focusing on meal delivery from the hotel restaurant
- Staying up-to-date on available forms of relief
- Reconsidering existing health and safety techniques, policies, and procedures
- Ensuring the accuracy of the information on the coronavirus
- Focusing on changes in customer experience, switch in customer perceptions, shift in consumption patterns and quality asset management
health and safety measures like to be taken by hoteliers post lock-down
Self-service pay systems
Orders through mobile apps
Non-contact service and order deliveries
Complimentary hand-sanitizer stationed at the entrances and exits
Suspension of unnecessary work-place gatherings
Readiness to deal with staffing reductions
A critical thing to keep in mind is that post pandemic, the business operations in the sector will have a slow pace at the start, with lesser volume of business. Because of this the sector might experience issues like viability in operations, till it attains an optimal volume of business. That said the recovery of the industry will also depend on the health safety point of view after the pandemic, on financial state of important industry players like airlines, hospitality and travel-trade, and also on the industry’s ability to renovate and innovate into the new global conditions.
Government support will be imperative for the industry in numerous ways. Some of these are:
- To make sure ease of liquidity by means of soft loans/working capital at a lesser interest rates.
- To decrease tax burden like lessening of GST and deferred GST
- To provide relief in taxes e.g. a waiver of entertainment and luxury tax and by reduction of the power and water rates by state governments.
- Ministry of Tourism might think of a ‘National Tourism Recovery Committee’ in order to solve the challenges and demands of the industry and launch a ‘Recovery Package’ of short term, medium-term and long term, economic and financial efforts.
Key aspects that hotel industry will need to address
- Availability of cash
- Brand protection
- Cyber threats
- Supply chain issues
- Business continuity
- Assess employee retention and operational policies
In an article on https://www.ey.com/, Umar Riaz, EY Americas Real Estate, Hospitality and Construction Advisory Leader writes – “economic scenarios range from a short, sharp, V-shaped recovery – with impacts only in Q1 and Q2 – to a more sustained lapse in growth over multiple quarters that could trigger a recession. According to him companies need to be prepared for all of these scenarios and take the following steps:
- Build swift and responsive communications with investors and develop trusted assessments of short-term consequences
- Be positioned to optimally capture and leverage government incentives
- Model the impact and timing of the different economic scenarios on property and portfolio performance; the financial hit will vary with segment, location and type of property
- Reallocate capital to affected parts of the business and secure short-term credit
- Develop weekly cash forecasts to verify enough working capital for business expenses and continuity
- Maintain liquidity inflows to the most affected operations by region or function
- Create contingencies for defaults across owners and operators
- Monitor capital markets for stabilization before raising fresh capital for acquisitions or refinancing
The Indian scene
The scene is equally challenging in India whose tourism sector may lose Rs 5 lakh cr, while 4-5 cr jobs could be cut due to the ongoing pandemic. According to Confederation of Indian Industry, the organised sector including branded hotels, tour operators, travel agencies will be most severely affected with an estimated loss of around Rs 1.58 lakh crore. CII predicts the losses as – branded hotel groups about Rs 1.10 lakh crore, online travel agencies Rs 4,312 crore, tour operators Rs 25,000 crore, adventure tour operators close to 19,000 crore and cruise tourism Rs 419 crore. Sources in the Union Ministry of Tourism said the government is considering helping the sector with soft loans, working capital and deferment on loan repayments. Home-stays, bread and breakfasts and small hotel operators and their services are also facing a major blow. As travel and hospitality is a people intensive business, the human impact will be unprecedented. As per available reports and data, a potential loss of 5-7 million jobs are estimated in India. According to 2018-19 statistics, the country’s Travel and Tourism industry with a size of US $247 billion, is one of the fastest growing industries, contributing 9.2% of the country’s GDP and employing 43 million people (8% of all jobs in the country).
According to Arijit Dutta, Eco Adventure Entrepreneur & Managing Director, Priya Entertainments says, in India there is an estimated loss of Rs.125 trillion in aviation and travel and tourism sector in 2020 which is about 40% decline in revenue from 2019 in all the verticals of the tourism sector from various reports that he has accessed so far.
However, Dutta maintains that we will travel again, but it will not be the same. “Even as and when international as well as inter states borders reopen, travellers must trust that boarding a plane, train or a bus is safe. New health safety protocols shall be in place and they are yet to be processed. The safe and secured use of digital identity and biometrics shall restore trust while also ensuring a smooth travel experience. Cooperation among stakeholders is the key to such usage,” says the industry veteran and shares some important steps the sector has to adopt for the road ahead –
Adopt cloud technologies
Remote working becomes the norm for today. Thanks to innovations and technology, even such a people-centric industry as hospitality experiences an increase in telecommuting. In fact, hoteliers can manage all the hotel processes without even being there. With cloud-based Property Management Systems, they are able to control all operations at anytime from anywhere.
Attract millennial travelers
According to the New York Post, millennials are the most eager to get back out and explore the world after the coronavirus ends. Sure, they are worried about the outcome of the COVID-19 pandemic. Yet, they are more fearless and more desiring of unique experiences right here right now. As of now, they are taking advantage of the crazy low prices showing no fear of the virus. What’s more, millennials are expected to be the first to start travelling once the restrictions are relaxed.
Upgrading hotel maintenance and renovation
It’s a perfect time to catch up and improve. Whether it is a spontaneous renovation or completing your Property Improvement Plan, there’s no better time to do this.
Regaining customer confidence
This is the time for the industry to unite and work towards building consumer confidence. A dedicated effort needs to be made by all concerned stakeholders to ensure that the customer starts to come back and help the industry to get back on their feet.
Food will never go out of fashion and the future trends in the food segment are going to be experimental. The only thing people would be wary of is where their food is being prepared and where they are going for consuming the same.
Foremost would be to promote the industry through their platform, as an industry that is safe and must be supported for all. Tax concessions must be offered to the industry for effective revival. Secondly, renewal and extension of licenses must be done at concessional rates, and loans at very reasonable interest should be introduced to support industry post lockdown.
Revise and update on existing health and safety techniques, policies, and procedures
Given the contagious nature of the virus, it is crucial to have appropriate health and safety policies in place. As new information is constantly appearing, not all of it is accurate. Hoteliers should take special care to share verified information and not contribute to spreading misinformation to customers and employees.
Asit Biswas, Founder, Help Tourism feels people will not opt for long-haul travel at least for the next one year or more, particularly because of uncertainty of job and fluidity of income as well as other retirement benefits and also due to fear factor following the pandemic and changing flying and visa protocols concerning inter-state and inter-continent travelling for a holiday.
Biswas further adds –
This situation applies to the domestic and overseas travellers both. So, we have to re-position our products and services, and, I personally believe we can do something good and innovative with our stand-alone Lodges in natural areas and network of rural home-stays across East & North East India where the impact of COVID 19 is much less compared to the rest of India or almost nil. Sikkim and Arunachal Pradesh have been already declared completely Corona-free although travelling to Sikkim is restricted until 31st October 2020.
But, sooner or later, people will travel again. After spending such a long time in isolation and with tremendous anxieties during the lock-down, everyone is desperately looking for a holiday break which presumably will be decided based on the following determining factors:
- The holiday will be of a very short duration (3/4 days)
- The package must be reasonably priced yet of a good value
- The destination/Lodge/home-stay has to be exclusive, boutique and rejuvenating + complying with the Lodge-Protocol prescribed by the National Government & International Organization such as WHO and UNWTO.
- It must be at a very short distance (2-4 hours drive), absolutely motorable, not much affected by the Pandemic so that the guests are able to rush back to Home in case of the breaking out of any extra-ordinary situation and they are not stranded! Bringing real and profound worry to millions of families around the world!
According to Saagar Panchal, Founder & CEO, Hireavilla Hospitality, the effect has just been felt in the urban communities and locales where COVID-19 has struck first, and as the circumstance proceeds to quickly develop, there’s solid potential that a large number of these organizations will endure an overwhelming blow.
He shares some useful information-
- Resorts ought to exhort their benefactors and proprietors to check their own movement protection arrangements intently, on the off chance that they have them. For the time being, resort proprietors and administrators should consider the requirement for a credit extension to help money potentially deficient income because of the downturn in business. They should likewise assess contracts and organize consumptions, removing those insignificant expenses while attempting to adapt stock through synergistic endeavors with neighboring retreats and outside specialist co-ops and wholesalers. Arranging meetings with key partners on how the effects may influence the retreat is without a doubt a judicious thought. Additionally, think about offering incentives to caretakers, drivers, and people providing concierge services.
- As existing flights and routine travel courses keep on getting adjusted or dropped, driving as a method for excursion head out is by all accounts expanding. In the more drawn out term, uses, for example, significant capital undertakings can be placed into suspension until the business starts to get once more.
- While it’s hard to anticipate how the COVID-19 plague will advance, experts have cautioned trip specialists, administrators, hoteliers, and organizations to prepare themselves for the following scarcely any months, if not until one year from now.
- There’s a ray of hope, where India has already taken precautionary steps to fight against the COVID-19 pandemic by announcing lockdown which is proving to avoid the further spread of the disease. If people stay extremely cautions by maintaining hygiene and staying home – it will definitely evince the routine and regular life. It is evident that the world itself is showing positive hospitality by staying home, maintaining physical distance and well-being. If we stick to it, the results will be in our favour and once again the economy of the hospitality sector will thrive.
The travel and hospitality industry is facing an epic challenge in responding to COVID-19. The sector has a massive mission ahead. As the industry respond to the economic reality, it needs to duly consider key issues both for the short and long terms. With a right perspective and focused intent, along with adopting a slew of measures to overcome these unforeseen and challenging times the industry will definitely recover in time and return to the reality of business as usual.
Hasta la victoria siempre!