Hospitality will re-imagine itself

Learn to bounce back!

Among the many voices speaking for the hospitality industry, there is one significant representation made by FHRAI, the large representative body of small, medium and big hotels and restaurants across the country. In this interview, Destination India speaks with Gurbaxish Singh Kohli, acting President, Federation of Hotel and Restaurant Associations of India.

How big is the problem, as you see it?

Let us look at the global picture. Tourism and hospitality is $ 28Bn activity employing 6 crore people directly or indirectly. I am being asked often as to how big can the losses be, and I have started saying that to arrive at any figure, we first need to assess what the damage could be. This is possible only after the lockdown ends, and then how does the economy open up, and how travel moves forward. Till then it is anybody’s guess, though we know what costs what, and can see all that loss taking place.

That is much appreciated. What is at stake?

What we are seeing could be leading to the unfortunate and virtual collapse of the sector. We are in the bright red zone, the first to get hit, and it takes us the longest to bounce back. WTO estimates that from 1.4 billion tourists last year we are likely to have 1.02 billion tourists this year, which is well back at 2012 standards/figures.

If you look back, even during the SARS outbreak, there was an increase of 0.4%. In 2001, the year of the unfortunate 9/11, we witnessed an increase of 0.1%. Today, according to the WTO, the impact is estimated at 30-40%, which is also being considered a conservative figure.

When we speak about hospitality and tourism, we also talk about un-classified hotels, as much as 1 to 4 and 5-star hotels. The same is true with restaurants, whether it be a small eatery or a restaurant in a 5-star deluxe or a speciality world-acclaimed one. Establishments may differ in size, the food offered and the patronage they enjoy, but the underlying issues and concerns remain the same. FHRAI, as the apex body covering the entire spectrum of legally run Hotels and Restaurants, is taking cudgels on behalf of all of them.

And to what extent is this bringing loss to the

Indian economy?

Recommendations...

FHRAI in a special req u e s t m a d e t o t h e Prime Minister has suggested measures and support from the govern ment to ease pressure on the hospitality industry across the country. In specific, it has made the following recommendations:

The Hospitality Industry, a key pillar of both domestic and international tourism, besides being a major contributor to the GDP, is also a major Foreign Exchange Earner and a creator as well as the biggest multiplica tor of jobs, however, in these unprecedented and uncertain times, the industry is in dire need of support from the Central Government for its survival, and subsequent revival.  Liabilities be deferred for a period of minimum 6-12 months, including repayment of Loans, Interest, Bank EMI’s and the extended period should be added in the overall tenure of the Loans.  Reduction of bank interest rate by almost 200 basis points with immediate full transmis sion for working capital.  Deferment for fiscal statutory compliance deadlines such a payment of direct or indirect taxes, at the Center, State and Municipal levels.  Complete GST holiday for 6 months (Central and State and Municipal Level).  Lease, Rentals, Property tax es and Licenses such as Excise fees be suspended for the entire period, the nation is firefighting with CoVid-19, effective from 1st March, 2020, till the end of the Pandemic.  Utility costs like electricity and water to be charged on actu als (no minimum guarantee agreements to be valid for this period) and electricity duties be waived off for at least 6 months.  Post COVID – 19 revival soft loans to be made available to re-start Hotels/ Restaurants.  Employment to be subsidized by at least 3 months through govt contribution for at least 50% of the salary, probably through the ESIC reserves.

In addition to the above, we would also like to bring to your notice that the Hospitality indus try was the first one to be hit due to COVID-19 and it will be the last one to revive. As an indus try association, we the FHRAI believes that it will take a mini mum 12-18 months for the revival. Since the Indian economy is going through a recession, all raw materials & service rates will be going up by 15%, and hotels will be operating at 15- 25% occupancies. For the entire industry to get a fair relief we would like to propose to YOU that the ap pended inputs could kindly be included in the requests/ prayers:  50% wages to be paid thru ESI for 12 months.  GST collected to be retained by hotels for 12 months without inter est & penalties.  50% reduction in electricity  50% reduction in gas unit rates & duties.  50% reduction in property taxes.  12 months deferment in pay ing & filing provident fund (PF) amount.  12 months deferment in TDS filing & payments.  Free extension for one year of pollution board certifications.  Free extension of FSSAI li censes for one year.

Hospitality and Tourism contribute nearly 9.2% to our GDP and 10% to the global GDP, account for more than 10% of all the jobs generated in India and globally over 8.5%. For sheer calculation, if India’s GDP is 275 trillion, 10% would be 275 billion on the lower and conservative side. When we are talking of a 30% decline in our business, we are talking about `5 lakh crores that is at stake as regards this industry.

What course correction do you see coming out of this pandemic, apart from monetary losses? This pandemic has brought unprecedented societal changes that may result in long term reduction in travel, be transformative for the entire planet and will dramatically affect tourism. Every destination will need unit rates & duties.

If you look back, even during the SARS outbreak, there was an increase of 0.4%. In 2001, the year of the unfortunate 9/11, we witnessed an increase of 0.1%. Today, according to the WTO, the impact is estimated at 30-40%, which is also being considered a conservative figure.

to re-invent itself and do a ground-up restoration of its tourism. Presently, we are dealing with forced closures even of borders, public health advice to practice social dis tancing, and considerable consumer health concerns. What will follow is low consumer confidence, reduced disposable income and continued health concerns.

Survival is the mantra, given that there are zero revenues on hand? In tourism, one can’t work from home. Our first priority is towards survival, which is how to get working capital back in the hands of this industry, and only then will revival follow. One must first survive to be able to revive.

If somehow term loans and payments including EMIs can be deferred without

interest, all statutory obligations, across municipalities and other lockdown, we will need a sustainable and sure starting support. We agencies, like GST, taxes, etc. could be deferred, electricity and will require policy support from the government! water charges to be deferred and electricity duties, charges, levies And what about jobs, labour, and supporting staff other minimum guarantee charges to be waived, it could get work with their salaries? ing capital in the hands of the sector. Right now, the industry is ensuring that we minimise the impact in

What then is your expectation from the loss of jobs. Our main focus is standing with the government and government at this moment in time? doing our part to drive the pandemic out. The order of the govern We need more clarity on the likely government support and we need ment to ensure wages are paid whether or not the employee attends this stimulus fast. It’s going to be a completely new world and we work and even during the closure as a result of the lockdown is not need support to get back to the starting line, once again. We will sustainable for long. The industry cannot be expected to foot the bill need to think about how to restructure our establishments. Singa without revenues. Some help towards the payment of salaries should pore announced 50% employee support and the US 75% with 650 be forthcoming from the government immediately, for example, US$ to even the unemployed. Social distancing norms will reduce funding salaries at least to 50% from their ESIC reserves which is capacities, turnout in numbers and result in well over `90k crores. much lower revenues in our business. Any specific suggestions, The hospitality industry The hospitality industry depends sig nificantly on migratory labour who have therefore? depends significantly presently left. Whether they return, when Owing to the pandemic and resultant recession, there are bound to be closures even if the lockdown ends today. Stimulus from the government needs to come as of yesterday on migratory labour who have presently left. Whether they return, they return, is another question. This pan demic has redefined all parameters and has invented the new normal. Even after restarting, until there is a positive cure for the and with every single passing day, the casual when they return, is virus in the form of a vaccine or similar, the ties will only keep increasing and will push those struggling to survive, more and more another question. fear of it coming back will always be there and will continue to haunt our industry. towards and into the red. Let us take a simple What impact are you expecting example of restaurants or hotels on the rental in tourism-related activity? arrangement. Either rent needs to be waived off or drastically re Last year, India had 11 million inbound and 22 million outbound duced, or it will be impossible for these establishments to survive. tourists. A lot of this is MICE, conferences and destination wed Revival is another issue altogether. Like I said, only if one survives dings. If we can get the government to incentivise these somehow can one revive. There are hotels which have been operating under so that they can be contained within India, we would have done the OYO rooms, as an example. To make it simpler, such hotels are plenty. We must see how much of the 22 million outbound, we can basically being run under a rental agreement. Oyo being an operator, manage to hold back. We need to think about Tax incentives for has now retracted from their agreement with the owners, invoking this. This could help us in bridging the gap and in bouncing back Force Majeure, that means no minimum guarantee, which again faster. We have requested the Tourism Secretary to form an Emer means no income or revenue for the hotel owner. So such OYO hotels gency task force for survival and revival. For the revival we need are in the red. We will see their retraction to put into effect, policies as of NOW. from the OYO platform and possible closure. We will have to statistically see how many such contracts exist to be able to put a number I foresee a grim future with a reduction in the Any predictions for the immediate future? The future will see different forms of travel. to them. And then there are other operators, franchises and chains; Shorter travel will become more predomi apart from OYO. Similarly, those restaurant chains who have relied on external funding and thus operating with high rentals and salaries are their numbers will reduce and the non profitable amongst nant and it will take a longer time for the long-haul or international travel. There will be new opportunities. We need to identify which are the markets we need to target for going to find it really hard to survive. Which them will be axed. This the domestic segment and how best to grab is why I say that there are bound to be casu alties. Not to say that privately owned estab will directly impact jobs. them and be first-off the road to grab the opportunity quickly. We need to see what lishments will all survive. It will be another products we need to market. India has ev 6-8 months at least before the restaurants erything to offer! will see any credible activity. For hotels, it will be at least one year The government needs to ensure that ‘Incredible India’ stays from now and this is presuming we start in the next 10-15 days, incredible by implementing policies now in a three-pronged ap which is also questionable but we need to be existing at that time, proach: which will depend directly on what stimulus we get now. 1) How can working capital come back in the hands of the in

I foresee a grim future with a reduction in the franchises and dustry – Survival. chains; their numbers will reduce and the non-profitable amongst 2) In the Revival mode, SOPs on how to exit from the lockdown, them will be axed. This will directly impact jobs. When a premise as that happens. shuts or scales down, the workforce is also reduced and that means 3) Form a private and public sector task force, separate from loss of jobs – it’s that simple. Right now, the priority is to keep the each other, to tackle this. kitchen fires burning of our employees. The reserve amounts are Indian Hospitality and Tourism will have to re-imagine itself, being put to good use for that and other statutory payments. Post reinvent itself and see how to bounce back.