Broad Strokes – Where Are We Today As An Industry?

by Apr 30, 2020Covid-19, Travel & Tourism

It is perhaps a moot point to state that the COVID–19 crisis can’t be compared with any other catastrophe in the modern world’s history. This is indeed unprecedented, and we have never had world economies come to a grinding halt due to lockdowns all over the globe. This is why these situations are called Black Swan events – something which is extremely rare and doesn’t happen in the usual course of events. In our opinion, the world is heading towards a New Normal and the entire hospitality industry is at a pivot point. The solutions for post-COVID-19 will be different from those in the past. Business models and value propositions will also change. So, it may be important not to simply follow what worked during SARS, 9-11, 26-11, or the financial crisis of 2008. When observed from a broader lens, it’s not just hotels that are hit hard. Airlines, Railways, Cruise Liners, Travel & Tour Operators, and a wide network of service providers to the overall travel & tourism industry find themselves in the same boat. While various segments of basic economic life are currently closed, they too will have their New Normal. However, it is easy to fathom that amongst the worst hit will be travel and tourism. 

While the situation today remains extremely fluid and with 60%-65% of the branded supply potentially closed, this is the time to develop a game plan for surviving and coming through to the post-COVID-19 era. There is a strong view out there that the bitter pill (lockdowns) is more harmful than the actual disease itself. Unfortunately, for now, we will have to wait this out. Even when we do come back, the hotels will take time to return to any level of normalcy. The economic impact and cost of this lockdown are uncalculatable at this stage and no one can possibly accurately project this out. Also, the impact is going to be across industries and will be more in some than others. This will lead to a change in consumer behavior in the short term or even permanently. That will, in turn, manifest in many ways in hospitality; people will be reluctant to go out in large groups, they may not go to bars, say ‘and’ before in-room dining may be the next in-thing. Buffets could become a big no-no. And a saving grace could be hotels finally giving up that free breakfast they used to serve.

We believe that approximately 25% of the total workforce across different industries could be without jobs for a period of 12 – 18 months, or more. The remaining 75%, if they have jobs, will have much less a lower disposable income, as many will face salary cuts. This means fewer people eating out or traveling as their pockets become smaller. Restaurants supported by smaller entrepreneurs will likely be the worst affected. Hotels, which can offer better social distancing, stand to advantage in attracting customers for both their restaurants and rooms. However, it will not be easy for hotels to sell their rooms; and MICE, especially social events such as weddings, may remain on hold in the short to medium term. A significant opportunity, however, is that Indian outbound travel is three times more than foreign inbound travel. One hopes that at least in the short term those Indians who can afford to travel may choose destinations within India and avail of Indian hospitality.

Some businesses will get shut permanently, small & medium size entrepreneurs across various business lines will be particularly badly hurt under COVID-19, and let’s not forget that this group forms the backbone to many customer bases for hospitality in the region. This, therefore, may lead to unemployment and these groups of people have been a very critical segment for us in hospitality. An economic stimulus package from the government that both protects the financial viability of companies and supports people out of jobs will be necessary to ensure domestic consumption so that spending recovers quickly and that companies are around to take advantage of the recovery.

For more information, please contact Manav Thadani on [email protected]

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