Jammu Hotels Time for relief and business remodel

Rajan Gandhi
With the present lockdown and prior travel advisory Indian tourism and hospitality industry is staring at a potential job loss of around 38 million, which is 80% of the total workforce employed in tourism and hospitality sector as of on April 15. If this trend continues as the Covid-19 crisis progresses, it will be a major setback for national employment as this sector accounts for 12.75% of employment- 5.56% is direct and 7.19% indirect. Total domestic tourist numbered 1.8 billion in 2018, a 12% increase from 2017 but this is one of the worst crisis to hit the tourism industry which has impacted all its segments -inbound, outbound and domestic, leisure, cruise, adventure, corporate meetings, conference, and exhibitions and fears are more visceral for the tourism industry. As those in the industry point out, information technology, banking/financial services, pharmaceuticals or for that matter every sector have no doubt felt the sting of the virus, but they are not as dependent on the physical mobility of people as it will take nothing short of a vaccine for people to feel confident enough to undertake non-essential travel again. The Asia-Pacific region may lose 49 million jobs due to the pandemic, causing a loss of nearly $800 billion to travel and tourism, most recent analysis suggests. In the worst-case scenario, the hotel industry – in 2020 – would not be able to claw back even 20 percent of the previous years’ revenue as corona virus takes a toll on business. The hotel industry may see only 15-20 percent of the Rs 37,000-crore annual revenue in 2020. India has 125,000 rooms housed by less than 1,000 branded hotels and the organized sector. In addition, there are lakhs of stand-alone, unbranded hotels mainly of 1, 2 or 3-star category belonging to the unorganized segment. India’s branded/organized hotel market may completely go under in a matter of months, unless several dramatic, atypical and urgent steps are taken immediately.
The tourism sector was already in trouble before the rise of the pandemic, experiencing the impact of the global economic slowdown. Growth decelerated in 2019-20 with weaker growth in foreign tourist arrivals and consequently in foreign exchange earnings from tourism. But problem with Jammu Hotels is of totally different magnitude as since last week of July, 2019 when GoI planned abrogation of Article 370 and subsequent long lockdown just made the things untenable as for months together almost negligible tourist visited J&K and things were further complicated by absence of internet services. 4G mobile internet ban is still there even after nine months. Credit/debit cards just became irrelevant in the absence of POS machines due to internet ban. No relief measures were offered to the hotels and when things got a bit stable in the month of November- December, then comes the Corona scare. With the International travel advisory issued as early as January whole optimism just got punctured with occupancy going below 30% immediately.
Come March with declaration of lockdown, the Government called for suspension of all hospitality services with exceptions only for those who were accommodating tourists and people stranded due to the lockdown and those designated as quarantine facilities. It is important to mention that banquet halls of hotels, small as well as large parties, conferences contribute to F&B business which accounts for almost 80% of revenue. With lockdown in one go everything has just gone and there is no scope of an early revival. Many hotels in Jammu are offering some of their rooms for free or at heavily subsidized rates to healthcare professionals while also utilizing their kitchens to prepare meals for the needy. However, the massive impact of covid-19 on the hospitality industry has put the sustainability of these initiatives in doubt as hotels struggle to overcome the crisis amid strict Government restrictions and strong emphasis on social distancing. Part of the reason for offering rooms for quarantine to those who have returned from abroad or to the medical fraternity is not to utilize their near empty properties but it is very much driven by a sense of social responsibility as most of hotels have taken a humanistic point of view in rendering these services, but the larger question is how long they will be able to continue them. Offering even social obligation costs a lot as running full capacity AC plants, kitchen, PPE Kits, sanitization equipment according to WHO guidelines, recurring cost of material and training the staff on their own expenses has just left Jammu hotels drained to last drop. On top of it authorities at the helm of affairs have adopted a unique policy of distributing quarantined staff in a batch of 10- 20 scattered all over Jammu without taking into account the recurring cost of maintaining entire hotel for ten room occupancy as well as scattering the staff all over Jammu raises the risk of pandemic. On a visit to one of the leading hotels one can really feel the efforts put up by the staff to safeguard everyone with thermal scanner and sanitizer at the entrance gate, sanitizer at reception, no direct contact with customers, tooth picks and sanitizer in lifts, only two person allowed in lifts for social distancing, PPE kits to waiters and other staff members and most importantly giving home comfort to our Corona Warriors without compromising safety with international norms in place.
But this nationwide lockdown, preceded by a series of travel curbs, have left most hotels struggling with near record low occupancies, which is unlikely to improve much until September, according to industry executives. Several small hotels have already let go of all contractual labour. While there are discussions on pay cuts, but no permanent labour cuts yet, however, a prolonged down cycle could lead to pruning and the indirect impact in the unorganized sector, including tourism, hospitality and transport, would be much bigger. The restaurant industry in India, with an annual turnover of approximately Rs 4 lakh crore, provides direct employment to more than seven million people but the sector is fighting a grim battle for its survival with almost zero revenue in the immediate term. For restaurant owners, one of the uncertainties lying ahead is how comfortable people feel with the idea of eating out, even after the lockdown, when fears about hygiene and infection have taken root.
The Hotel and Restaurant Industry of Jammu as such require immediate relief measures from both the state and Central Governments such as interest-free loans from banks, waiver on all license fees, supply of subsidized food grains and a tax holiday for a period of one year in order to maintain jobs and support the industry. Government should also consider restoring input tax credit on Goods and Services Tax – i.e. claiming the credit paid on the purchase of goods and services which are used for furtherance of business – which will help them bring down fixed operating costs. Though certain measures have been initiated like deferment of GST payments, concession extended on PF contribution and permission to employees to partially withdraw from their PF accounts, moratorium on EMIs and easing of interest rates, all steps are in the right direction but too little for hotels/restaurants to sustain.
Without working capital or short term loans, such small establishments are at the risk of getting wiped out. Salaries, wages, and other direct payroll-related expenses are major expenditure along with running expenses with electricity bill itself running in lakhs per month. These costs are largely fixed. Most reputed hotels of Jammu have almost two hundred plus employees and there are lakhs working in unorganized hotels, lodges and guest houses. Hotels are in a pressing need for working capital to ensure salaries continue to be paid. Some newly built hotels have taken loans to fund expansion or renovation. Just the monthly obligation of principal and interest repayments, therefore, runs into lakhs. A deferment of these obligations for a six to nine-month period is an urgent need and lending institutions, with the aid and direction of the Government, should immediate consider this for sustaining this important employment industry of UT.
The least our J&K administration, like in many other states, can do immediately is to allow the restaurants of those hotels which have occupancy of medical staff to at least start home delivery. These hotels have already invested a lot in safeguarding the guests to cater; their staff is well trained to handle the situation and all these hotels know their responsibilities very well. This will not only be a little bit boost to these hotels but will be a major relief to those old age people who are living all alone without any help or to those who can afford it as well as for those serving in the state without their families right now. All these hotels are ready to follow social distancing norms as well with requisite sitting arrangements. It will be a sense of assurance in larger prospect to the public that things are moving in positive direction. Keeping in view the prolonged impact of this pandemic administration has to think of out of box alternatives and hotels on their behalf have to devise methods to remodel their business, the sooner they do the better it is.