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‘Optimism amongst industry players and the upcoming vacation season looks promising’: Gurbaxish Singh Kohli

Thursday, May 26, 2022, 16:49 Hrs  [IST]
HBI Staff | Hyderabad

The hospitality industry is among the most affected sectors due to the ongoing pandemic. After 2 years of suffering the industry sees a ray of hope due to the slowdown of the deadly pandemic. In a conversation with Asmita Mukherjee, Gurbaxish Singh Kohli, Vice President, Federation of Hotel & Restaurant Associations of India (FHRAI) said that if no other unfortunate situation of restrictions arises and things go on as of today, or improve further.

Battling zero occupancy for nearly two years, the Indian hospitality business has seen some improvement for the last few months. How soon do you think that the industry will manage to rebound?

The last two years have been one of the toughest phases for the hospitality industry. Business was at an all-time low due to the pandemic led restrictions which resulted in liquidity issues and businesses getting squeezed. The restrictions were eased out in phases and it was always a stop-start-stop nature of lockdown for the hospitality sector which did not help either. However, post the second wave in 2021, the industry has witnessed some sort of recovery. From the third Quarter of 2021, there has been a strong demand with people preferring leisure trips after prolonged COVID restrictions. If everything goes on as present I would hazard a proper revival to pre-pandemic levels of restaurants within the next year. For hotels, it depends on travel allowances and how much of travel from which parts are opened fully. I presume travel should open completely by June – July so by next March we should see the upswing to near pre-pandemic levels, if no other unfortunate situation of restrictions arises and things go on as of today, or improve further.

In 2021, the occupancy rate stood at 45 per cent which was still better than 2020. Since October 2021, the RevPAR also improved at around range of INR 1,800 to INR 2,100 with the ARR at around INR 4,300 to INR 4,600, an increase of around 24 to 27 per cent as compared to 2020. Dining out is seeing consistent footfalls and business at restaurants is at 80 per cent of pre-COVID levels. For that matter, restaurant brands with chains are doing well with some having opened new outlets over the last quarter. Luckily, the third wave of the pandemic between December 2021 and January 2022 did not last long and hence, the damage was less severe compared to the first and second waves. Unless we face a grave threat from another variant of the virus in the near future, the industry is looking forward to decent business in the coming months. The next three to four months are of utmost importance to the hospitality industry, as people would increase their travels owning to vacations during summers. Also, we expect a surge in MICE events and business travel that would give further boost to the overall business.

There is strong momentum in hotel bookings and the occupancy rates are also progressively improving since the last couple of months. Across a majority of holiday destinations hotels are witnessing over 80 per cent room bookings. So yes, there is optimism amongst industry players and the upcoming vacation season looks promising. If the trend continues without any interruptions, the industry will witness good recovery in FY 2022-2023 and 2023-24.

As an association how are you planning to leverage the rebounding process of the hospitality Industry?

As the apex Association of the hospitality industry in India, we have relentlessly worked towards enabling survival and revival of the hospitality industry. We have not left any stone unturned for facilitating some life-saving support and relief measurers from the Government for the highly beleaguered industry. We also worked hard during the COVID restrictions to sensitize our members and other stakeholders about key happenings in the industry. We conducted several webinars and virtual sessions to maintain the communication with our stakeholders and lift their spirits up when the going was really tough.

Now that the industry has entered into some sort of a recovery mode, it becomes very important for FHRAI to garner every possible support from the Government and policy makers to help in creating an environment that can strongly back the hospitality industry. We are continuously communicating and trying to connect with key ministries and departments to push for more industry-friendly policies and schemes. At the same time, we have also recommended the Ministry of Tourism to make tourism a priority sector and formulate a robust tourism policy that focuses on new areas of generating revenue and also recognize the role played by the restaurants in partnering other stakeholders to boost tourism activities in the country. We have been requesting the Government to maintain two slabs of GST rates for the restaurant industry specifically. One is a composite at the present 5 per cent GST where no Input Tax Credit (ITC) can be availed of and the other, at a more reasonable 10 to 12 per cent max wherein the ITC can be availed of. 
FHRAI shall continue to work towards the cause of hospitality industry in the country, bring to fore the concerns of the industry players and suggest the best possible solutions to the Government.

With no or little help for the industry during COVID times, do you think that the Government could have helped in some way at least?

The industry had really high hopes that Government would announce some industry-specific relief package in the Budget for 2022-23. However, that did not happen and the overall Budget was very disappointing for hospitality industry. The sole relief for the industry came in form of the announcement of extension of ECLGS with additional allocation to the hospitality sector and provisioning an outlay of INR 2 lakh crore through the CGTMSE.
But this is grossly insufficient for an industry that had to suffer continuous hits due to COVID-19 pandemic. The massive damages decimated the entire sector’s ecosystem, and so the industry expected some strong measures from the Government to back and support hospitality and its allied activities. During the pandemic, to give boost to domestic travel and create demand in an otherwise dormant industry, we had requested the Government to allow domestic travel for individuals and corporates to be a deductible expense in IT returns. We have also been asking for Infrastructure status and Industry status for the industry, allowing Input Tax Credit (ITC) for restaurants along with rationalization of the GST structure. None of these came through. The industry has been requesting long-term credit facilities for industry players to be able to sustain the tough periods and receive extended time to repay the loans. Unfortunately, none of these came through and the industry has been fighting on its own.

What is your opinion about giving industry status to the hospitality sector? How will the hospitality sector benefit from this?

FHRAI has been requesting for this for almost two decades now. According Industry status to hospitality is the need of the hour. Industry specific reliefs, much on the lines of other industries that have been able to garner bailment from the Government should be extended to hospitality too. 

Hotels and restaurants are not classified under the RBI’s Infrastructure lending norms for access to long-term funds. Therefore, the loan to the sector is available at 12 to 16 per cent. Industry status is required for the hospitality sector to avail long-term funds accessible at suitable interest rates along with other benefits for the overall development of the sector.
The tourism and hospitality industry is in dire need of long-term credit facilities in view of the vulnerabilities, huge capital investment and high operational cost to manage a sustainable business. Access to soft funding and longer periods to repay loans will make hotel investments more attractive and sustainable.

Hospitality and its allied activities have had to face the toughest times over the last two years or so. Business plunged to unprecedented levels, affecting liquidity and resulting in millions of people losing their livelihood. Hospitality is a vulnerable business due to the capital-intensive nature and long-gestation periods. In such a scenario, if there are prolonged phases of zero to miniscule business, businesses are ought to be adversely affected. Had hospitality enjoyed an industry status, the damage could’ve been limited. It would have helped industry players to survive operationally and at the same time hospitality would have also attracted more investment. 

What is the current investment prospect in the Indian hospitality industry?

There has been a surge in the domestic leisure travel in the country. It could be attributed to the fact that people, who have been forced to curtail their travel plans due to COVID restrictions cashed on the opportunity to travel as soon as there was some improvement. There has been an increase of around 24 per cent in brand signings by keys in 2021. Travellers today are more conscious and particular about hygiene and safety, which has led to a boost in demand for premium properties, including heritage hotels, resorts, cottages, villas and luxury hotels. There has also been significant improvement in demand of hotels in the budget segment due to increase in business travel which resulted in a surge in room bookings.

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