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'A third of the hotels might close down forever'

July 31, 2020 20:55 IST

With demand drying up, hotels are surviving on quarantine centres and isolation facilities.

Almost a month after re-opening, occupancies across hotels remain at a fourth of the original capacity, with this too, largely coming from the Covid-19 induced quarantine business.

Hotel associations and industry executives say that in the absence of government support in the form of an extension of the moratorium that ends in August, at least a third of the hotels might close down forever.


“It’s a grim situation,” said K B Kachru, vice president, Hotel Association of India (HAI) pointing out that a lack of consistent and uniform policy has been one of the biggest hurdles in the smooth operations of hotels.

Lease money for a property that is shut and a license fee for something that is non-operational are hurting the businesses.

Therefore, there is an urgent need to bring out a policy reform for a sector that has been one of the worst hit, he said.

“If something is not decided soon, it will have a huge cascading impact,” he added.

HAI pegs the current debt levels in the organised part of the industry-- less than 10 per cent of the total -- at Rs 45,000 crore.

The hotel association that comprises 237 hotels across all categories, including heritage, economy to 5 start luxury hotels in 70 cities, is seeking a longer term solution spanning the next two to three years.

"Given the high fixed costs and the current demand scenario, a short term measure like an extension of the moratorium by a few months will not help," said Kachru.

With demand drying up, hotels are surviving on quarantine centres and isolation facilities.

“Delhi, Bangalore, Mumbai occupancy has picked up largely due to Vande Bharat flights,” points Anil Chadha, chief operating officer at ITC Hotels.

"Simultaneously, there is demand for hotel’s Welcombreak Staycation packages, especially at ITC Grand Bharat," he added.

"Until restrictions are lifted on travel and hotel stays allowing for a greater sense of normalcy, an uptick in the industry will not be as desired," said Chadha.

Agreeing with Chadha, Ajaya Bakaya, managing director at Sarovar Hotels & Resorts, said that he doesn’t see occupancy rates at his hotels going beyond 35 per cent in 6 months.

“Presently 60 of out of 90 hotels are open and 80 per cent of the demand is Covid-19 related,” he said.

The pandemic-induced services will pave the way for recovery, said Zubin Saxena, managing director and vice president - operations, South Asia, Radisson Hotel Group.

“We are seeing new segments such as quarantine emerge which will continue contributing to recovery,” he said.

Kerrie Hannaford, VP - commercial, Accor India & South Asia, echoed a similar experience.

“We have seen an increase in demand from our hotels in Delhi and Mumbai which can be attributed to requests from health workers, repatriation flights and firms working on their business continuity plans,” he said.

On July 15, Accor launched ‘Let Us Take Care of You’ – a discount scheme, in a bid to lure guests.

It has seen an increase in bookings and traction on its website, especially for the month of August, said Hannaford.

Even as demand at weekend get-away destinations has started showing signs of recovery, properties at leisure destinations such as Goa, Kerala, Himachal, Uttarakhand, which were showing brisk demand before the pandemic, will take longer to recover.

“We are seeing the demand trickle in,” said Vibhas Prasad director at Dehradun-based Leisure Hotels that owns and operate premium hotels in the state.

It also is the asset owner for Taj Hotels and Club Mahindra properties in the hill state.

“If the situation doesn’t improve in the next six months, we’ll have to divest some of the properties,” said Prasad.

Nandivardhan Jain, CEO Noesis Capital said that while the hotel industry has to brace for a long road ahead, “It’s a good time to be in the business for those who have a long term view on the sector,” adding that it is only a matter of time before good assets will come up for sale at a discounted price.

The real picture with regards to debt positions at firms will emerge only after the moratorium ends.

Image used for representation purpose only.

Photograph: Amit Dave/Reuters

Shally Seth Mohile in Mumbai
Source: source image