The world is facing an unprecedented pandemic which is impacting our lives and economies in an unparalleled and unforeseen way. Among various sectors, the hospitality sector has been one of the worst hits. To investors with deep pockets, the crisis presents some buying opportunities like distressed assets in hospitality sector at lower valuations.
However, as the hospitality sector resets itself after the pandemic, it becomes vivid with each passing day that unless companies invest in increasing resilience of their businesses the recrudescence of viral disease outbreaks and pandemics such as SARs (2003), Swine flu (2009), Nipah virus (2018), COVID-19 (late 2019 to present) will render their businesses unprofitable for longer periods.
Thus, it becomes imperative to put forward a strong mitigation and preparedness plan of actions to help reduce vulnerability of hospitality sector. Some proposed initiatives are described below:
Financial Provisioning: Provisioning an emergency fund which can be used during non-business period to pay salaries to staffs, vendors and to meet basic operational expenses. Government can become a contributor in this scheme. Making this provisioning norm as mandatory for sensitive industry like that of hospitality will be a blessing in disguise.
Flexible and Innovative Product Offering: It is the time hospitality industry adopts a flexible and innovative product offering to attract & retain customer base. Travellers always value ease and sense of security. Hotels, tour operators, travel intermediaries (offline and online) can provide 6 months to1 year free reschedule option during usual business seasons which may help attract more customers and faster bounce-backs after any pandemic related non-business/ lock down periods.
Identification of Sensitive Areas using Vulnerability index (for authorities): Tourism hotspots should be mapped with ‘Vulnerability Index’. Parameters of measuring vulnerability index can be based on factors such as number of tourists per 1000 number of local populations, population density, history of viral disease spread, health-care infrastructure in the region etc. Most vulnerable areas must be subjected to stringent monitoring and stricter scrutiny such as mandatory requirement of fitness certificate for airway travellers etc.
Local government of cities and towns with well-established and large hospitality industry, must maintain a comprehensive pandemic preparedness plan of action basis its vulnerability index. This must be meticulously planned for a worst-case scenario, so that during a pandemic administration operates to combat smoothly.
Putting a “Cap” (for authorities): High Value Low Volume based tourism policy is the need of the hour especially for highly vulnerable places. Putting a ‘cap’ on the number of tourists’ arrival to vulnerable places and levying a ‘Sustainable Development Fee’ on tourists can help make the hospitality industry more profitable in long-term.
Intervene, Incentivise & Promote: Apart from above-mentioned initiatives, certain short-term measures are also highlighted below for fast recovery from COVID-19 like crises.
These measures may include (i) increased promotion for regional tourism, (ii) compulsory provision by airline operators to postpone travel with ease and without additional charges, (iii) substantial reduction in service taxes levied on hotel charges, airline tickets by Government etc., (iv) minimum 6 months moratorium on principle and interest payments of existing loans. (v) Provision of incentives by public and private sector companies to their employees to travel which may include mandatory half-yearly leaves, travel and accommodation coupons, gift coupons etc. (vi) Travel agencies, hotel chains can actively collaborate with corporate sector and public enterprises to provide offers which results in win-win scenario for companies involved.
Authored by – Saunak Kumar Das, Associate, Valuation & Advisory Services & Digbijay Das, General Manager, Valuation & Advisory Services
