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Expecting a W-shaped recovery curve

The ongoing COVID-19 crisis has brought the travel and tourism industry to a total stop. The global restrictions on travel by almost all destinations across the globe has pushed the industry to deal with unprecedented challenges at every front. Industry is yet to find out the recovery plan amidst a totally uncertain environment. These are unprecedented times that have impacted every individual and businesses across. Travel sector has been one of the worst hit sectors, with operations shut but fixed costs to be taken care of. Hospitality and aviation sector have come together to decide the way forward. At the same time, hotels and restaurants continue to do their bit by helping communities and extending their services to those in need.

According to hotel consultancy firm Hotelivate, the solutions for post COVID-19 will be completely different from those in the past. “Business models and value propositions will also change. So, it may be important not to simply follow what worked during SARS, 9/11, 26/11 or the financial crisis of 2008… While various segments of basic economic life are currently closed, they too will have their new normal. However, it is easy to fathom that amongst the worst hit will be travel and tourism,” Hotelivate said and added that the economic impact and cost of this lockdown is uncalculatable at this stage and no one can possibly accurately project this out. Also, the impact is going to be across industries and will be more in some than others. This will also lead to change in consumer behaviour in the short term or even permanently.

Envisaged exit strategy

Experts are of the opinion that a V-shaped or U-shaped recovery, as seen after the financial crisis a decade ago, will not be the case this time around. “Post the lockdown, when domestic and possibly some international travel is feasible again, movements will occur causing a small uptick for the industries. However, in the absence of a vaccine for the disease, this is likely to cause a resurgence in COVID-19 cases which will eventually lead to a second decline. Hence, we anticipate a W-shaped recovery curve for the hospitality and aviation industries. Recovery for the Indian hospitality industry is dependent on factors such as spread of COVID-19 in the country, extent of the ongoing lockdown and subsequent zoning exercise, lifting of travel bans in India as well as internationally, availability of the vaccine and possible relapse of the virus in typical feeder markets. The advent of recovery, in some form, in the coming three to four months is the best-case scenario for the industry now. In the worst-case scenario, this recovery may take close to two to three years,” said Achin Khanna, Managing Partner, Hotelivate and Shailee Sharma, Senior Associate, Hotelivate in an article ‘Potential Scenarios to Exit COVID-19’.

According to Ankur Bhatia, Executive Director, Bird Group, hotels and airlines will start operations with limited inventory once the lockdown is lifted. “Social distancing and sanitisation will be at the core of the operations. We have designed ‘touchless delivery’ for our restaurants through an app. We will restart with protocols such as checking temperatures of our staff and guests. We are assuming the demand would be from travellers for whom travel is essential. This would also include those who are coming in the city or country and don’t want to risk going home lest they infect other family members. They would be checking in at a hotel with isolation facilities,” Bhatia says adding that the second phase will look at leisure and MICE travellers. “By next year, we expect travel returning to normalcy. At every stage, we will have to follow government and WHO’s guidelines and protocols,” Bhatia adds.

Jaideep Dang, Managing Director, Hotels & Hospitality Group, JLL India opines that business will pick up slowly and in phases – certain trade centres which are dependent on agriculture, warehousing and logistics will pick up earlier than say tier I cities which are dependent on financial services, IT/ITeS, automobile manufacturing etc. “On the other hand, leisure destinations could pick up earlier than business hotels. Therefore, hotel companies – big or small and SME’s such as travel agents, tour operators will have to prepare their sales strategy accordingly and in a phased manner,” Dang adds.

Subhash Goyal, Chairman - STIC Travel Group and Hony. Secretary, Federation of Associations in Indian Tourism & Hospitality (FAITH) says that there is no time frame when this crisis will be over but hopefully by August, September this year we hope to see some light in the end of the tunnel of darkness. “However, if the world is able to come out with the vaccine then I am confident that tourism will bounce back with the bang,” Goyal adds.

Need for fiscal support

According to Goyal, it is not sure how many travel agents and tour operators will be able to survive after this COVID-19 pandemic. “Still we are trying our best jointly with all the associations under FAITH by writing to the Prime Minister, Finance Minister, Commerce Minister, Civil Aviation Minister and Tourism Minister on the following lines: The Indian tourism industry is looking at pan India bankruptcies, closure of businesses and mass unemployment as a result of this pandemic. It is estimated that around 70 per cent out of a total estimated workforce of 52 million could get unemployed (38 million in the first phase and 50 million direct and indirect) if a bailout package is not given immediately,” Goyal said and added that a large per centage of total tourism business activity of India, which is estimated at US$ 28 billion+ in forex and upwards of Rs two lakh crores in domestic tourism activity will be at economic risk through the year. Thus, in excess of Rs five lakh crores of direct tourism industry and almost double that of total economic activity is at risk, Goyal added. He further said that if the demand is met by the government and timely action is taken then we will not only be able to survive but also successfully revive the industry.

Mahendra Vakharia, MD, Pathfinders Holidays and Imm. Past President, Outbound Tour Operators Association of India feels that the government should definitely look into doing a lot of hand holding exercise to our Industry and give the exemptions / tax rebates, etc., as demanded by the different associations of our industry. “Sadly, the government has always ignored the tourism and travel industry in spite of it being one of the highest contributors to the GDP growth, creator of employment, contributor to GST coffer, income tax, foreign exchange earner and many more. Failing this then as always and in the past, the industry will have to fall back on its own means and strengths to sustain themselves for the moment and then restart again,” Vakharia feels.

Bhatia is hoping not just exemptions but some long-term corrective measures as well. “In aviation bringing ATF under GST’s ambit and rationalising airport charges has been a long-term demand. Similarly, in hospitality, reduction in GST last year bought some relief and we were hoping it to translate to business gains this year before pandemic struck. The strategy right now should be best customer experience without compromising on quality and safety as well as looking after our employees as travel industry as the industry employs crores of people across hotels, travel agencies, airlines and restaurants many of which are SMEs,” Bhatia adds.

Echoing the similar sentiments, Dang says that financial stimulus and exemptions by Central as well as State Governments are needed more than ever before. “The biggest problem that SMEs and even big players would face in the next two to three months is depleting working capital to operate their businesses and to pay salaries. In absence of revenue, debt servicing will become more challenging. All these factors would likely have a long-term negative impact on the sector and could create unemployment across levels,” Dang adds.

Expected timeframe

Bhatia feels that travel and tourism are the worst hit sector no doubt and will take time to recover. “While foreign travel might take time to recover and leisure travel (international) will pick up only once we have a vaccine, cure or very few cases of COVID-19. We do expect domestic travel to pick up this year itself. This means travel industry will have to go back to the drawing board and rework strategies. However, we are also a very resilient sector that has weathered many storms such as 9/11 attack, SARS and Mumbai Terror attack (26/11). We have always emerged stronger. Just like security checks at hotel that became the norm post 26/11 there will be new norms like medical certificates, Bhatia opines.

According to Dang, no one knows the bottom yet! “We all will have to wait and watch. In my view, volume of travel will only pick up seriously once we have the vaccination that will provide confidence to travellers to take short or long-haul flights,” Dang says. Goyal feels that unless and until the governments start giving visas and airlines start operations, tourism is not going to revive so soon.

According to Vakharia, domestic tourism will start in next couple of months and it will be in the order of local (self-drive destinations), regional and international travel. “International Travel will start depending on the upliftment of border restrictions and operation of the international airlines. Also, lot of consulates / countries are looking at imposing visa restrictions correlated with COVID Clearance Certificate etc. Within next three months or so, domestic local travel will be the one that will start for sure. Going forward, regional and inter state tourism will start and international travel does not look to start before October/November. South East Asian Countries, Sri Lanka, Bhutan, Nepal, Maldives are some of the countries that look to be the destinations that will open up for travel,” Vakharia informs. 

Domestic as a savior

According to Bhatia, domestic travel will see the green shoots first. “People will be wary of taking flights or boarding trains. Hence, road trips will be the new trend and weekend destinations will see traction. Dang also feels the same when he says that domestic tourism is going to be the key for revival. “It is likely to begin with road journeys led by what many would call ‘Revenge travel’ – when you are stuck at a given place for a long time and naturally you would like an escape to a short holiday over shorter drivable distances. Air and rail travel may not be preferred as means of travel unless it is critical. Secondly, a lot of outbound travel from India will also be hampered. Therefore, this outbound foreign travel will get consumed in domestic leisure markets,” Dang says.

Vakharia feels that domestic will kickstart the travel but it will also have its own challenges as the hotels at destinations will have to follow a lot of protocols to adhere to prescribed standards of hygiene and cleanliness. “Post COVID, social distancing, hygiene and cleanliness, are parameters that will have to be taken into consideration strongly. How many hotels (small standalone hotels) will be able to fulfil this? So, there will be some challenges for sure in domestic tourism as these will be concerns from the clients,” Vakharia adds. 

“If we will be able to survive with the help of the Government, we will have to completely restructure and reorient our businesses. International Outbound & Inbound Tourism will take at least six to seven months more or may be an year, so the only segments which will bounce back fast are: domestic tourism, yoga & wellness, spiritual and medical tourism,” Goyal opines.

MICE

According to some industry estimates, there are approximately 700 destination weddings planned in 2020 that have been booked overseas. “Most of these are towards the winter months. High probability that such social MICE business could get consumed in India. However, it is also likely that such affairs are cut short with limited gatherings. So, hotels in India may not get its entire benefit. On the other hand, business conferences and marketing events would give negligible business this year as most businesses will cut travel and entertainment costs,” Dang informs.

Bhatia feels that there will be some movement like off sites, conferences where usual teamwork is done albeit maintaining social distance. However, wedding business will take time to recover and that might not happen this year, Bhatia says. Vakharia opines that international MICE travel will not happen this year. “In fact, the government can give a lot of tax rebate to corporate for hosting the MICE within India and this can also help in kickstart the travel,” Vakharia suggests. Goyal opines that MICE will only bounce back after the vaccine has been found, government start issuing visas and airlines start operating domestic and international flights.

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