Among the many voices speaking for 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, TourismFirst 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?
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 30% decline in our business, we are talking about Rs 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 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 distancing, and considerable consumer health concerns. What will follow will be 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 then only revival will 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 agencies, like GST, taxes, etc could be deffered, electricity and water charges to be deffered and electricity duties, charges, levies other minimum guarantee charges to be waived, it could get working capital in the hands of the sector.
What then is your expectation from the government at this moment in time?
We need more clarity on the likely government support and we need this stimulus fast. It’s going to be a completely new world and we need support to get back to the starting line, once again. We will need to think on how to restructure our establishments. Singapore announced 50% employee support and the US 75% with 650 USD to even the unemployed. Social distancing norms will reduce capacities, turnout in numbers and result in much lower revenues in our business.
Any specific suggestions, therefore?
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 and with every single passing day, the casualties will only keep increasing and will push those struggling to survive, more and more towards and into the red. Let us take a simple example of restaurants or hotels on rental arrangement. Either rent needs to be waived off or drastically reduced or it will be impossible for these establishments to survive. Revival is another issue altogether. Like I said, only if one survives can one revive. There are hotels which have been operating under the OYO rooms, as an example. To make it simpler, such hotels are basically being run under a rental agreement. Oyo being an operator, has now retracted from their agreement with the owners, invoking Force Majeure, that means no minimum guarantee which means again no income or revenue for the hotel owner. So such OYO hotels are in the red. We will see their retraction 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 to them. And then there are other operators, apart from OYO.
Similarly, those restaurant chains who have relied on external funding and thus operating with high rentals and salaries are going to find it really hard to survive. Which is why I say that there are bound to be casualties. Not to say that privately owned establishments will all survive. It will be another 6-8 months at least before the restaurants will see any credible activity. For hotels it will be at least one year from now and this is presuming we start in the next 10-15 days, which is also questionable but we need to be existing at that time, which will depend directly on what stimulus we get now.
I foresee a grim future with reduction in the franchises and chains; their numbers will reduce and the non profitable amongst them will be axed. This will directly impact jobs. When a premise shuts or scales down, the work force is also reduced and that means loss of jobs – it’s that simple. Right now, the priority is to keep the kitchen fires burning of our employees. The reserve amounts are being put to good use for that and other statutory payments. Post lockdown, we will need a sustainable and sure starting support. We will require policy support from the government!
And what about jobs, labour, and supporting staff with their salaries?
Right now, the industry is ensuring that we minimise the impact in loss of jobs. Our main focus is standing with the government and doing our part to drive the pandemic out. The order of the government to ensure wages are paid whether or not the employee attends work and even during closure as a result of the lockdown is not sustainable for long. The industry cannot be expected to foot the bill without revenues. Some help towards payment of salaries should be forthcoming from the government immediately, for example funding salaries at least to 50% from their ESIC reserves which is well over Rs 90k crores.
The hospitality industry depends significantly on migratory labour who have presently left. Whether they return, when they return, is another question. This pandemic has redefined all parameters and has invented the new normal. Even after re-starting, until there is a positive cure for the virus in the form of a vaccine or similar, the fear of it coming back will always be there and will continue to haunt our industry.
What impact are you expecting in tourism related activity?
Last year, India had 11 million inbound and 22 million outbound tourists. A lot of this is MICE, conferences and destination weddings. If we can get the government to somehow incentivise these so that they can be contained within India, we would have done plenty. We must see how much of the 22 million outbound, we can manage to hold back. We need to think about Tax incentives for this. This could help us in bridging the gap and in bouncing back faster. We have requested the Tourism Secretary to form an Emergency task force for survival and revival. For revival we need to put into effect, policies as of NOW.
Any predictions for the immediate future?
The future will see different forms of travel. Shorter travel will become more predominant and it will take a longer time for long haul or international travel. There will be new opportunities. We need to identify which are the markets we need to target for the domestic segment and how best to grab them and be first-off the road to grab the opportunity quickly. We need to see what products we need to market. India has everything to offer!
The government needs to ensure that ‘Incredible India’ stays incredible by implementing policies now in a three-pronged approach:
1) How can working capital come back in the hands of the industry – Survival.
2) In the Revival mode, SOPs on how to exit from the lockdown, as that happens.
3) Form a private and public sector task force, separate from each other, to tackle this.
Indian Hospitality and Tourism will have to re-imagine itself, reinvent itself and see how to bounce back.