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Covid is a crisis not Armageddon

I am always a little intrigued by the casual ease with which politicians discuss the fate of the hospitality industry.

When the industry does pop up in their consciousness it is nearly always in the context of safety.

 

This is a valid concern (and more about that later) but it’s strange that hospitality is rarely discussed in terms of the jobs that are at stake or the potential damage to the economy.

 

   It is symptomatic of this attitude that while Civil Aviation gets bright ministers (Jayant Sinha and Hardeep Puri are two recent examples), Tourism is usually left to the dullards (with a few notable exceptions like KJ Alphons in the last government). Somehow, we think the Tourism Ministry doesn’t really matter.

 

   But, of course it does.

 

   By some estimates, the hospitality sector accounts for around 10 per cent of our GDP. That’s travel (including airlines) restaurants, tourism, hotels, etc.

 

  That estimate is based on a figure of ten million tourist arrivals a year. It sounds like a lot but Spain has 85 million arrivals a year. Even Singapore (which is just one city) gets 19.1 million visitors. The city of Bangkok got 22.7 million visitors last year.

 

   So ten million tourist is peanuts. And yet that accounts for ten per cent of our GDP.

 

   Obviously, if the city of Bangkok can get 22.7 million tourists to our 10 million, there is massive scope to grow. And while we have been fortunate to have outstanding civil servants who understand this (Amitabh Kant is the obvious example), the political establishment really could not care less.

 

   I can’t understand why this should be so.

 

   Tourism earns us revenue. It is labour intensive so it gives people jobs. Unlike manufacturing, where more and more jobs will be lost to mechanisation and robotics, tourism will remain an employment generator for the future. And it is an example of India’s soft power --- a way of spreading goodwill.

 

   Imagine for a moment that Tourism/hospitality boomed even slightly --- say by two million. Think of the effect it would have on GDP, on the jobs it would create and the overall addition to national prosperity.

 

   Unfortunately no government sees it that way. Which is one reason why no one is bothering to help the hotel and restaurant sector.

 

   Unlike the airline sector which wants cash aid and official sanction for ripping off passengers by refusing them refunds, hotels don’t seem to want much. All the requests I have seen are for things like GST waivers, interest moratoriums and the like.

 

   These are not necessarily cheap (for the government in revenue terms) but they are not demands for cash bailouts either and as far as I can tell, most hotel chains are not ripping off guests in the way that airlines are. (For the record, my view is that even airlines should be bailed out but after they guarantee salaries and refunds and pledge their shares in return for cash bailouts.)

 

   What’s worse is the conviction among many people who count that the hotel and restaurant industries are done for and that tourists will stop coming to India.

 

   This view is just silly.

 

   Yes, if you force hotels to close and shut down your airports, then everybody is in trouble. But once you begin gradually re-opening the economy (in the case of the hospitality sector, between June and July, I reckon) things will begin to improve quickly.

 

   The first big mistake we make while looking at the hospitality sector is in assuming that the world will stay static. It won’t. Things will get better.

 

"And hotels are preparing for how they will handle the situation in this short to middle term scenario before a vaccine or new drugs are created."

   All pandemics end. China seemed finished after SARS but it bounced back in six months. Even the Spanish Flu pandemic of 1918, which killed five per cent of India’s population, eventually ended. And today it is not even mentioned in many history books. (Did you even read about it in school?)

 

  Covid will end sooner than we think. A drug that treats the disease should be available by the end of the year. (As I write, Remdesivir, a drug developed by Gilead is faring well in trials.)

 

   A vaccine developed by Oxford University has worked well in monkeys and is currently being tested on humans.  The most optimistic predictions talk about it being available by September. (Drug companies are so confident that they have already been manufacturing and stockpiling the vaccine).

 

   Another vaccine, developed by Pfizer seems promising --- it could be ready by the autumn. And at least six other vaccines are under development.

 

   Vaccine development is a notoriously difficult business. But you would have to be a super pessimist to believe that all of these projects will fail and that no vaccine will be developed.

 

   So a likely scenario is that guests who want to travel will be vaccinated by the spring. (Think of it like the Yellow Fever vaccines we had to take when we went to Africa.) And judging by the quantities in which the vaccine will be manufactured, availability may not be a problem.

 

   After that, we will be as scared of Covid as we now are of polio, TB, smallpox, mumps, typhoid, chicken pox or God alone knows what else. The disease may not disappear. But it will not be a pressing concern either.

 

   Once that happens, hotels, planes and restaurants are back in business. So, the logical worst case scenario is a financial crisis for the hotel/hospitalities sector from July (when establishments start to re-open) till April next year.

 

  It’s bad. But it is hardly an end of the world scenario.

 

   In effect though, the hospitality industry has about eight months (or less) that it needs to worry about. And hotels are preparing for how they will handle the situation in this short to middle term scenario before a vaccine or new drugs are created.

 

 I asked Nakul Anand of ITC, who is now the doyen of the hotel industry (after Biki Oberoi, of course) how bad he thought things would get. Anand believes that during the pre-vaccine phase, there will be a recovery that will take several stages.

 

   First of all, he says, people may be reluctant to hang around at crowded airports or to take long flights. During that phase, guests may prefer destinations they can drive to or those that are a short flight away. If you live in Delhi, you might drive to Jaipur, to Agra, or if you are happy with longer drives, Shimla or Mussoorie. From Bombay, the hill stations in the Western Ghats are an obvious choice. And if you don’t mind a short flight, then Goa (where Covid rates are astonishingly low). From Bangalore you could drive to Coorg. And so on.

 

  Secondly, Anand explains, we know that millions of Indians travel abroad. (Some estimates say we have 26-30 million outbound travellers). Many of those travellers will be reluctant to go abroad now for a variety of reasons: fear, the higher cost of air travel etc. And yet, many of these people will want to holiday at some stage, over the next few months. (Don’t you feel you deserve a break after this traumatic lockdown?)

 

   The Indian hotel industry (at all price levels) will target these guests. Yes, we will lose a large portion of the ten million tourists who came to India from abroad. But there are at least 26 million (probably more) Indians who can make up for this.

 

   Anand’s analysis is shared by much of the hotel industry. I spoke to Neeraj Govil, Senior VP and boss of Marriott International for India and South Asia. He said, “The domestic market and associated business opportunities in rooms and local F&B will recover first, followed by international travel.”

 

   Until vaccines or cures are discovered, all hotel guests will be obsessive about hygiene. “Travellers are likely to demonstrate preferences for hotels that have and are able to effectively communicate enhanced sanitation and hygiene protocols,” adds Govil.

 

   Marriott has prepared new SOPs for when the hotels re-open which make significant departures from current practices. All rooms will be left empty for a day after guests check out so that they can be properly sanitized, restaurant tables will be kept far apart, guests  will be able to check in and check out with no physical touch points with staff, and if demand is not massive (which it won’t be in the next few months) then rooms next door to those occupied by guests will be kept empty and so on.

 

   Anand and ITC have an advantage because the group has always been the most environment and hygiene conscious chain (its symbol, since the 1970s has been a namaste, not a handshake or anything more personal) so the new post-Covid hygiene rules come easily.

 

   Apart from Neeraj Govil and Nakul Anand, I spoke to other heads of hotel chains. Everyone has written the next two months off. But they are all set for the end of the lockdown. And nobody seriously doubts that by next spring, some semblance of normalcy will have returned.

 

   It’s a crisis, not Armageddon.

 

 

Posted On: 05 May 2020 11:13 AM
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