Impact of COVID-19 on the Indian hospitality sector

Impact of COVID-19 on the Indian hospitality sector

The Indian hospitality industry is undoubtedly one of the biggest casualties of the COVID-19 outbreak as demand has declined to an all-time low. Global travel advisories, suspension of Visas, the imposition of Section-144 (prohibition against mass gatherings), India like most other countries are on lockdown, the ramifications of which are unprecedented. Foreign Tourist Arrivals (FTAs) into India (particularly leisure travelers) started softening in February, as the spread continued its unabated movement to other countries. Following suit, the Indian Government suspended travel visas (with a few exceptions) till 15th April 2020, which in all likelihood will be extended. Even if it is not, the paranoia surrounding the events will continue to have a major impact on travel.

India first started feeling the ripple effects of the global COVID-19 turmoil towards the end of February 2020, which worsened at the beginning of March. Occupancy across hotels in key cities declined rapidly and as per our estimates has declined by a staggering 45 percentage points compared to the previous year. Such a steep decline in such a short period has never been witnessed by the sector. The overall occupancy in the branded hotels segment in 2020 is estimated to decline by 16.7 – 20.5 percentage points over 2019. Besides the actual business loss, the hotel owners will also incur losses due to fixed operating expenses, debt repayments, interest payments, and several other compliances required to be undertaken as part of the sector. This sector employs 12.75% of the country’s workforce. India’s COVID-19 may cause 38 million (which is 70% of the total workforce) job loss in the hospitality industry.

The purchasing power of clients will differ as income will decrease and prices will increase. This outbreak will cause greater income inequality and unemployment. Clients will spend less on non-essential activities which will directly hamper this industry.

Post COVID-19 Scenario:

A business will suggest employees work from home, People will refrain from traveling which will impact the travel business post-pandemic till the end of the year. The industry could take up to 10 months to recover after the outbreak is over. The same goes for the restaurant and hotel business as well, people will hesitate to eat outside immediately post the pandemic scenario. It will take some time for people to update their perception about eating outside, traveling, or staying at a hotel. Safety/Hygiene will be of utmost priority for customers to post the pandemic, so business owners will have to reform their policies and come up with strategies to survive in the industry and gain competitive advantages.

Some of the changes that will happen post-COVID-19 scenario: -

  • Digital Transactions will increase in this industry
  • Tourism will increase in the domestic sector whereas international travel will see a significant decrease
  • Hotels will start offering heavy discounts
  • Restaurants will increase prices
  • Essential product prices will increase
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