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Indian hospitality sector's $15 bn revenue target hazy as Omicron threat looms large

Indian hospitality sector's $15 bn revenue target hazy as Omicron threat looms large

The Indian hospitality sector, caught in the Omicron's rising threat and associated uncertainty, is slowly witnessing its hopes for a recovery ebb away.

According to industry estimates, these sectors reported a loss of Rs 15 lakh crore in 2020 According to industry estimates, these sectors reported a loss of Rs 15 lakh crore in 2020

India's hotel and tourism industry, after being hammered by the COVID-19 pandemic, especially during the deadly second wave, was expecting to clock in a minimum $15 billion revenue during the ongoing October-March holiday season. However, with the news of the new Omicron variant having been reported in India, along with the associated uncertainty in the medical fraternity regarding the severity of this new variant, hopes for a recovery seem to be ebbing away for the hotel and tourism and hospitality industry.

According to industry estimates, these sectors reported a loss of Rs 15 lakh crore in 2020 and were seeking a government cushion to help them float through this year. Now, the industry is besotted with another challenge: the government's decision to postpone opening up international flights, which were scheduled to start from December 15 onwards, all in the wake of the new variant having been discovered. Industry stakeholders told BusinessToday.In that this latest government directive is bound to impact low-cost inbound travel as the current air-bubble arrangements with almost 30 countries has made the overseas travel very expensive.

Ashish Gupta, CEO of the industry body Federation of Associations in Indian Tourism & Hospitality (FAITH) argues that the pronounced impact of the new variant will be felt within weeks to come. "We had almost a flat season during 2020 with no sales. In the latter half of 2021, the revenue was almost 70 per cent of pre-COVID-19 levels when it came to domestic travel. However, we were expecting the industry to recover during the peak season which is October-March, 2022 and which conventionally accounts for 50 per cent of annual $30 billion revenues in the hospitality industry. As the uncertainty has again started to kick in, there is a big question on whether the industry will be able to attain its tangible target revenue, have healthy cash to sustain, and pay to the employees," he said.

Gupta is not alone. Rajiv Mehra, President, Indian Association of Tour Operators (IATO), categorically states that the government's decision to impose restrictions on international travel has dented demand, and, going ahead, the way the situation unfolds will determine the future fate of the industry.

"The restrictions in international travel have majorly dented the demand and a lot will depend on how the government decides to resumes the normal flight operations. Instead of the total closure, there is a need to bring SOPs in place and ensure that we are able to live with this new-normal with revised vaccination and travel guidelines. The tour operators, as per our estimates, lost nearly Rs 1 lakh crore since the onset of the pandemic and another year of no business will crush the industry completely," he said.

The reeling hotel sector

The situation with hotels, as of now, is one of exercising caution. According to Pradeep Shetty, Joint Secretary, Federation of Hotels and Restaurant Association of India (FHRAI), hotels have started receiving queries on reservations, especially after the advisory issued by various state governments relating to those travelling to and from designated 'at risk' countries, and which includes procedures such as RT-PCR tests, mandatory institutional quarantines, and so on.

"There are no cancellations yet, but overall, an uncertainty is building up on the back of panic amongst people. The industry which was starting to coming out of the COVID-19 impact is currently on a wait-and-watch mode. Post the second wave of pandemic, the hotels saw booking, that too only in resort/ remote locations and not amongst metros. The large, luxury hotel segment -- which is dependent on the international tourism -- has continued to remain impacted," he said.

Shetty points out that the hotel industry was expecting bookings to reach at least 70-80 per cent of the Pre-COVID-19 levels in during November, and the Christmas holiday season. But now, with the threat of the new variant looming in the air, the bookings could also take a hit, especially if more restrictions come in.

KB. Kachru, VP of Hotel Association of India, and Chairman Emeritus & Principal Advisor, South Asia, Radisson Hotel Group concurs with Shetty that the prevailing mood in the hotel industry is that of caution, and to wait and watch.

“The economy had started recovering well. The mood in the industry was upbeat after a good festive and weddings’ season. The hotels were looking forward to a continued rise of occupancies and revenues given the approaching year-end holidays and the fact that India was to resume scheduled international flights on the 15th of December. However, the government is now reviewing the decision. Agencies like WHO have advised that travel bans will not prevent the spread and hence bans are not a solution. They have recommended open and safe travel with focus on vaccination status of passengers, testing and other safeguards like hand hygiene, masking etc.,” Kachru said.

And although India is still maintaining a no-travel ban stance, Kachru says that he is scared consumer confidence has been shaken yet again.

“There is a lot of uncertainty surrounding the virus -- its transmission, its potency, the efficacy of the vaccine against Omicron. This is bound to impact travel and hospitality. It is too early to gauge the depth of that impact. We are seeing cancellations and amendments in reservations in some hotels and foresee an impact this month and also for January. We will be able to better evaluate the situation only by mid-December. Meanwhile, we have advised all our member hotels to take necessary steps to ensure ‘safety’ and hygiene for travellers. So far, India has not made the existing guidelines any stricter and, thus, domestic travel may remain unaffected but consumer behaviour is predictable only up to a point,” Kachru noted.

 

Also Read: Rebooting the hospitality sector for a post-COVID-19 world