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Hospitality sector faces double whammy of low consumer confidence, inconsistent policies

Manu Kaushik     August 11, 2020

The impact of COVID-19 on the hospitality sector refuses to moderate. The sector is expected to lose about Rs 90,000 crore in 2020 as against revenues of Rs 1.58 lakh crore in 2019, as per the latest estimates by hospitality consultancy firm HVS Anarock. The worst hit is going to be the unorganised segment which is expected to post losses of over Rs 41,000 crore in 2020.

Overall, the occupancy rates are likely to be 34.5 per cent in 2020 as compared to 66.2 per cent in 2019. This level of occupancy rates are primarily driven by reluctance of people to travel as pandemic grows bigger in size.

Hotel industry experts say that the confusing policies at the state level are affecting the potential demand for hotel stays. For instance, air travel from Pune to Mumbai would require stamping on the passengers' hands followed by 15 days of home quarantine. However, if the travel is made through road, the stamping is not mandatory.

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"We have requested the tourism minister to have a better coordination between Centre and states. There are towns and districts within states who follow different rules. For instance, Mahabaleshwar, which is a five-hour drive from Mumbai, is completely shut.  There should be uniformity in rules. At a time when consumer confidence is low, this can be detrimental," says Gurbaxish Singh, vice president of the tourism body Federation of Hotel & Restaurant Associations of India (FHRAI).

While the estimates vary, there are just about 40 per cent hotels operating across the country since the unlock phase started in June. The percentage of hotels operating in the organised space is much higher at 60 per cent. Also, the numbers vary from chain to chain. For instance, Club Mahindra, which is largely operating resort properties, has just 20 of its 69 properties operating in the country. Accor, which has more city hotels than leisure properties, is operating 46 out of 51 properties in India and Sri Lanka.

"About 30 per cent of the hotels are going to shut forever. We expect this number to go up to 50 per cent if no relief comes from the government," says Singh of FHRAI. HVS Anarock expects that it will take about two years for the occupancies and three years for average daily rates (ADRs) to reach the pre-COVID levels.

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Hotel sector experts say that Indian government had formed a task force in May to look into the crisis in the tourism sector. But this task force has met just once, and that meeting didn't yield any results.

At this juncture, domestic travel operators believe that they have a fair chance of attracting tourists who usually travel abroad for holidays. But with the lack of consistency in policies, the sector might be losing out on this huge business opportunity. In 2019, the country had an estimated 22 million outbound tourists.

"We will again be likely losing business to neighbouring countries like Sri Lanka, Thailand and UAE who have pulled up their socks, and have started campaigning," says a hotel executive.

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