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Hospitality

Landmarks Happened for Hospitality Industry in India

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Landmarks For Hospitality Industry in India

It is no news that the hospitality industry in India has been weathering the covid storm and is critically passing through a critical, unprecedented phase.

This has been specially made arduous for the industry to cope ever since the Covid-19 pandemic has come into the picture. The hospitality sector in India specifically saw a large loss of revenue.

To put the assertion in terms of statics, the RevPAR (Revenue per available room) for the industry had seen a massive decline during the first three quarters of the financial year 2020.

growth of hospitality industry in india
Even though the pandemic led to the ravaged hospitality sector in India, the silver lining that came with it cannot have been missed or ignored. But what kind of silver lining was offered during the Covid-19 you ask?

The odious pandemic had offered an incredible opportunity to the hospitality sector to fine-tune and ensure operational efficiency.

Such operational efficiency of the highest standards could have been achieved in the important departments such as HR, finance, engineering housekeeping, beverage, and food. This could have been efficiently achieved through the best-in-class training and stringent adherence to all brand standards.

hospitality sector in india
Given the fact that covid had presented various opportunities for the sector, one can state that the hospitality sector in 2020 and 2021 had achieved many milestones and landmarks. This was made possible through many innovative products that led to the reshaping of the hospitality industry.

The government has been sagaciously working for the advancement of the hospitality sector in India. The Maharashtra government had effectively conferred ‘industry’ status to the state’s hospitality sector. This was a major step in the revival and the renewal of the sector in the state.

The industry status emphatically allows the hospitality establishments in the state to be levied electricity charges and rates, property tax, water charges, development tax, increased carpet ratio, and non-agricultural tax at industrial rates.

This efficiently results in a reduction of the operating costs for the hospitality players in the state that provides impetus to the battered sector in the state. In fact, it is highly expected that the government will significantly reduce industrial tariffs which will further boost the industry in the state.

tourism and hospitality industry in india
Another landmark decision that was taken by the government in the financial year 2021 was that it had significantly reduced pre-establishment licenses for the sector from 70 to 10. Given the cumbersome licensing hassle that the establishment has to go through, which effectively affects its efficiency, such a step is welcomed by the hospitality sector.

Given, what all is being achieved in the state of Maharashtra, other states are bound to take cognizance of what is being done and follow the suit. This could definitely be the harbinger of change for the industry which will have a significant impact on its fortunes, which at the moment are faltering.

Talk about the technology integrated economy in India and the hospitality sector has been making a sagacious use of the same. A landmark that had been easy to achieve by the hospitality sector was the integration of Smart In-room Technologies Smart in-room technology.

This certain technology has taken the hospitality industry by storm. With a high percentage of over 20% of hotels worldwide already on board, this top-notch innovation in the hotel industry in India will certainly lead to the reinvigoration and reshaping of the hospitality sector in India in the next decade or so.

Gone are the days when lounging in the hotel meant services available at your disposal, any time and any day with no need of serf service. Self-Serve Tech Serf Service Technology has made an imprint on the hospitality sector.

The hospitality industry has emphatically come a long way when it effectively comes to automation of services, and it is here for all the good purposes. Thus, with automation integrated hospitality sector, automated check-ins and checkout options are now the norms.

Though the phenomenon has been long due, one can effectively state that the arrival of covid has fastened the process of transformation from manual services to automated services.

But one might ask what is the most efficient and beneficial innovation or landmark that has been integrated into the industry? The answer to that has to be the use of robots in the Hospitality Industry. This is an area where a lot of innovations have taken place and has huge potential to boost the industry.

Given the fact that the Indian hospitality sector will be contesting against the world hospitality sector and will face stiff competition more than ever, it is absolutely no wonder that technological innovations are now ruling the roost in the industry.

This will emphatically help the industry to stand out in a sea of competition. In fact, a series of robots have been introduced by the HOSPITALITY INNOVATIONS. Today 11 introduced a series of robots tailored for the hospitality industry.

It is no news that India is one of the fastest-growing travel & tourism (T&T) economies in the world. This is mainly due to its immense, diverse landscape and rich heritage. Its cultural diversity emphatically and significantly attracts tourists from across the country and the world.

impact of covid-19 on hospitality industry in india

However, if one closely scrutinizes the sector, it might not be hard to notice that the sector has still not tapped into its full potential.

This is especially true for leisure tourism, which lacks mainly due to the lack of good quality hotel infrastructure in the country and low technological advancement of the same.

But, given the aforementioned technological advancement that has been achieved by the sector, one can argue that the hospitality sector is on the road to advancement and improvement which is much needed by the industry.

Though, highly capital intensive and the high cost of capital makes investment in the sector quite cumbersome and unattractive, the government’s efforts to attract the same are needed in the industry.

It is to be noted that the sector is a major contributor to the country’s GDP growth and consequently employment, thus its revival is of the essence and required.

To make the sector more appealing and easier to work in granting infrastructure-lending (infra) status to the sector, which is in fact a long-pending request by key stakeholders, will be a first step on the path of growth.

Thus, will the government take cognizance of the fact that work is needed in the most crucial sector in India? I guess we’ll have to wait and see.

 


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consumer protection act 2019

Company’s Unfair Trade Practice With Special Reference To Consumer Protection Act 2019

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Unfair Trade Practice With Reference to Consumer Protection Act 2019

In recent times, the topic of consumer protection law has garnered much attention company’s among the authorities and the citizens around the world.

Recently, the consumer protection Act of 2019 replaced the decades-old Consumer Protection Act of 1986. It is to be noted that the newer act was enacted with a promising view to widen the scope of consumer rights.

This was emphatically done to bring under its preview the field of e-commerce, teleshopping, direct selling, and other multi-levels of marketing.

This is quite crucial due to the fact that India is entering into the age of digitalization with no well-formulated laws to guide and protect consumer interest.

Thus, the newer laws bring into effect the scope of consumer protection in the day and age of digitalization which might turn out to be a nightmare for the users.

The act tries to enact stricter provisions that will aim at revamping the settlement and administration process. This will be done by emphatically and effectively imposing stricter penalties.

unfair trade practiceIf the newer consumer protection act is to be scrutinized, the arbitrariness surrounding the definition of the consumer has been cleared.

As per a certain Section 2(7) of the 2019 Act, a consumer is any such person who effectively buys and ultimately consumes his or her purchases or avails services for his or herself.

This comes in contrast to the consumer who has availed of such services or goods for the purpose of commercial use and resale.

As a matter of fact, the definition specifically and strategically makes use of the expression “buys any goods” and “hires or avails any services”. This effectively includes all online transactions that are specifically conducted through electronic means or teleshopping or direct selling.

As aforementioned, the main jewel of the act is online transactions. Thus, one can effectively argue that the newer laws have been drafted keeping in mind the growing e-commerce business in India that is providing impetus to the advancement and usage of technology in the economy.

unfair trade practices consumer protection act 2019Unfair Trade Practices

It is worth mentioning here that talks about consumer welfare and protection, also bring to the fore the discussion about unfair trade practices.

Thus, given the importance and the certainty of the issue, how have the unfair trade practices been represented in the act? Section 2(47) of the Consumer Protection Act, 2019 largely and mainly defines ‘unfair trade practice’.

An interesting twist of events presents the fact that the scope of the definition of ‘unfair trade practice’ has been emphatically broadened. But what does this broadened scope of the definition encompass?

It is to be noted that the definition now includes the practices such as strategic manufacturing or offering spurious, deceptive, or bogus goods for sale.

Thus, the act takes into consideration the adaption of deceptive practices for providing services that might be adopted by the corporations that might lead to lower utility or welfare of the public.

The act also takes into consideration the factor of accountability as its definition also takes into consideration the act of not issuing proper cash memos or bills for the services that are effectively rendered and for the good that is sold.

The inculcation and adaptation of the healthy receipt and cash memo practice will effectively help the authority to track the bogus corporation and companies that could be conducting felonies.

In fact, the law has gone even further to include provisions to protect the identity of the public or their personal information. This is needed as the bogus corporations etc. usually share the customer’s intimate details with any other person not in accordance with the prevailing laws.

consumer protection bill 2019It is to be noted that the repealed consumer Act of 1986 did not include in its definition the scope of online misleading advertisements. Thus, these have been added to the 2019 consumer Act.

In addition to all the malpractices that are conducted by bogs organizations, the definition now also includes the concept of an unfair contract.

It is to be noted that the ‘Unfair Contract’ is defined under Section 2(46) of the Act. To define this aspect of the law, it effectively refers to any contract that is between a consumer and a manufacturer.

This can also be between the consumer or the trader or the service provider whose terms bring about a significant change in the consumer rights under the Act.

Given the aforementioned provisions, it is necessary that there is an authority that enables, monitors, and regulates the laws and protects the rights of the consumers.

To enable the same, under the Act of 2019, the law effectively had set up a Central Consumer Protection Authority (CCPA).

The body was established to effectively monitor and regulate matters involving the violation of consumer rights and unfair trade practices aforementioned.

In addition to both, the body will also monitor the misleading or false advertisements by bogus organizations and will help in the enforcement of consumer rights. Here, the members will be effectively appointed by the central government.

the consumer protection act 2019Though, there are certain discrepancies that have surfaced since the inception of the fact. These allegations pertain to the undue influence of politicians the consumer rights and the authority of censorship that the government will effectively enjoy.

With growing dissent in the economy in different spheres of life, the dissenters feel, such undue authority might lead to the discrepancy and undue censorship that might lead to curtailment of freedom of speech.

Though, in spite of certain lacunas in the Act, one should strongly note that the Consumer Protection Act of 2019 is a largely positive step toward the reformation and development of consumer laws in the country.


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oyo rooms ipo

After Zostel, FHRAI is The Newest Abrasive Hurdle in OYO Rooms IPO.

By Hospitality, Economy No Comments

FHRAI Abrasive Hurdle in OYO Rooms IPO

Trouble has been brewing in OYO’s rooms IPO world as, after Zostel, the Federation of Hotel and Restaurant Association of India has effectively and emphatically urged the Securities and Exchange Board of India to suspend the IPOs proposal for Initial public offering.

Given the ripe market for India’s startup culture, with various mind-blowing IPOs being launched, OYO’s path to being a public entity is fraught with difficulties.

But on what grounds are objections being raised against OYO’s ambitious vision of entering the IPO market? In various pleas, it has been adamantly stated, that OYO has not adequately disclosed everything in its draft prospectus.

Such claims against Oravel come on the grounds of unfair practices and how it is effectively resorting to unfair, fraudulent, and anti-competitive practices and dealings.

These include claims that point toward the narrative of entering into anti-competitive agreements by Zostel to capture the market and abuse its dominant position.

To top off all the anti-competitive narrative that has been demonstrated and articulated by the FHRAI, claims over inadequate disclosures of critical court cases and the valuation of the company have been raised too.

According to the reports, it has been claimed that all the valuation that has been disclosed is not sound or feasible.

Given the humungous amount of backing the company wants to raise, amounting to around a whopping Rs 8,430 crore through an IPO, such hurdles do not seem trivial or less maligning.

Such claims by FHRAI do not speak well of OYO’s growth model which is facing resistance in its very first stage of growth.

The seriousness of the claims can be conjured from the fact that the anti-competitive claims made by FHRAI against Oravel are being investigated and scrutinized by the Competition Commission of India.

oyo ipoThe CCI’s investigation had commenced after a preliminary hearing. According to the reports, the investigation will be directed by the Director-General.

But what do such claims and complaints registered under CCI by FHRAI mean for OYO? It is to be noted that exposure to such a discrepancy can unveil the possibility of a penalty that can be levied effectively by CCI. In fact, CCI also has the power to direct behavioral changes that need to be undertaken.

This can effectively and emphatically have a tumultuous effect on the anti-competitive practices being engaged by Oravel.

Given the aforementioned situation, it would not be an understatement to state that allegations of such levels, with CCI involvement and investigations by the Director-General, can heavily lead to panic amongst investors.

The market is highly speculative that runs on news and environment rather than rationale. Thus, given the recent maligning of the image, it can possibly set a very bad precedent for OYO and help develop a prejudice against the company.

What sets aside OYO’s case more than any other is the fact that to date there has not been a single case where a company that is being investigated by the Director-General of the CCI for anti-competitive practices has been actually permitted to initiate an IPO by the SEBI. For OYO, this can definitely not martialize well.

On top of all the allegations that have been made by the FHRAI, it has also claimed that the company has attempted to avoid a large number of contractual payment obligations.

Such a claim can prove to be the last nail in OYO’s coffin as such contractual payment obligations were to be made towards hotels that are members of the travel body.

In a fiery statement, the FHRAI has even brought Interim Resolution Professional into the picture, where over 113 claimants have registered claims of Rs 160 crore with it. On top of it, OYO again has not disclosed the matter in its filings.

Thus, it can be effectively stated that the cumulative effect of such litigation will not materialize well for the future financial health of Oravel.

Talking about all the corporate discrepancies what about the criminal ones? It might come as a shock to many but the company has been alleged to not disclose the various criminal investigations that are effectively pending against it.

These include its directors and promoters along with its subsidiaries.

oyo ipo newsAll this comes after Zostel’s efforts to plague OYO rooms IPO dream. It is to be noted that the former rival namely, Zostel, is in a more than five-year-long legal battle with OYO.

Thus the recent happenings have led the IPO festivities to be suspended till the discrepancies have been thoroughly scrutinized and examined. According to the reports, this has been done to effectively protect the interest of all the stakeholders as well as the general public.

As aforementioned, OYO’s path to its realization of the IPO dream was already fraught with Zostel. This is due to the fact that even it had approached the market regulator to halt OYO’s IPO earlier this month.

fhrai hotels and oyo rooms ipo

The grounds of its allegation were based on the company’s capital structure, which it claimed was not final. In addition, filing of the DRHP was effectively illegal, in relation to the litigation between OYO and Zostel.

Thus, will OYO be able to overcome the blatant uncertainty and be able to stand its ground in such adverse situations? Given the revelations and the uncertain circumstances, it will be interesting to watch how the case plays out in the future.


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hospitality business

Investment in The Hospitality Business Dries Up Due To Regulatory and Covid Concerns

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Hospitality Business Dries Up Due To Regulatory & COVID

It is no news that the pandemic has taken the world by storm. The economies around the world have kneeled under the pressure of economic disparities and havoc that were inflicted on their growth. Many countries saw an unprecedented contraction, of which India was effectively one of the worst-hit counties which had been hard hit by the pandemic.

But the effects and spread of the devastation caused by the pandemic were unevenly spread across various sectors. It can be rightly stated that these were effectively exacerbated in some sectors like hospitality and MSME sectors that are contacted intensive sectors.

 As the virulent and highly recurring COVID-19 spread across the entire world, the primary and sole focus of the businesses and governments got diverted towards the safety of the public. Though such measures will be continued in the long run, implications for economic growth have been severe. This is due to the fact that the sharp corporate profits have effectively led to a sharp sell-off in equity markets across the globe. It is to be noted that there has been an immense impact on both supply chains and revenue.

The hospitality sector has been effectively affected also due to restrictions in the traveling sector. The decision that was taken to effectively shut down restaurants, hotels, cinemas, and theme parks all have had a significant impact on the worldwide tourism and hospitality industry.

The Discovery of New Ventures

Given the maturity level that was exhibited by the hospitality sector offering their venue available for hospital employees and beds has led to an effective rise in newer business opportunities and models that can take the world by storm if developed carefully. But given the present circumstances, it will be sagacious to maintain that the economy is in the nascent stage of recovery.

Given robust predictions of the third wave for India, it is quite likely that the hospitality sector will have to bear the brunt yet again. On the other hand, the consumer and producers’ confidence are at an all-time low. this does not spark much confidence in the future prospects of the hospitality sector.

Given, that the financial standing of the public has been crippled by the odious pandemic, healthcare spending, and burgeoning inflation in the economy, the hospitality sector for many can still be an item of luxury. Thus, such low demand responses in terms of the services of the hospitality sector don’t provide much encouragement to the investors to invest and help the hospitality sector recuperate.

What could help mitigate the disaster?

Various economists and analysts have recommended that having an extended cash flow for the next six months will be quite prudent for the sector in mitigating the debacle. On the other hand, developing resilience is the need of the hour. Given covid 19 has the characteristic of recurring, developing resilience through robust supply chains and amicably managing operators through payments to suppliers would indeed be effective.

In the scenario that presents itself, it is quite sagacious to cut down on all discretionary operational and capital expenditure. Thus, postponing maintenance and other not-so-important capital expenditure will effectively conserve cash.

the hospitality businessThough the pandemic might have crippled the service-oriented sector like the hospitality sector quite immensely, it is to be noted that the second source of woes in the sector is related to the government. This is due to the Government’s interventions that are significantly leading to uncertainty in the business. It can be rightly stated that given the government’s policies to revive the economy, there has been a great deal of ambiguity in the market.

The ambiguity is in the context of the economic and non-economic consequences that the government interventions might cause. In addition, the fear that has gripped the public’s attention is the uncertainty about whether the government has planned more future interventions that might effectively stall the business again.

In this spirit, various empirical studies have projected and shown that increased government policies ambiguity and spending have a direct correlation with the steady state of many macroeconomic variables. These macroeconomic variables include variables like GDP, debt, and consumption.

To summarize the arduous and odious problem, it can be rightly stated that during a crisis, the government has the most crucial role in reviving the economy. It is when the uncertainty prevails in the market or producers’ and consumers’ confidence is at a record low, that government investments need to be made. This is due to a very pertinent fact that the government faces the leading challenge in reducing both types of uncertainty i.e. economic and confidence.

Also, doing so is quite crucial and vital for industries as they are particularly sensitive to such uncertainties, such as the hospitality sector. To mitigate the ambiguity crisis, policymakers might as well just impose measures with detailed transparency even if they are long-term plans. This will promote certainty in the market. Certainty is quite crucial as ambiguity is loathed by businesses. Thus, ambiguity about future and current government spending including the stimulus packages even creates uncertainty in the volatile stock market.

This effectively disrupts, as aforementioned, many macroeconomic variables such as the GDP, debt, and consumption. In addition to its hospitality revival scheme, the government should also fine-tune its aid policy and help the tourism sector, as both, are interconnected. This will emphatically provide much-needed support for the hospitality sector.

For the consumers, the first step to reviving their confidence can be cutting taxes on fuel and managing inflation. This will help them prepare better for possible future government interventions if similar, subsequent epidemics such as COVID-19 plague the system ever again.


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hospitality sector

Hospitality Sector Laments: A Pitch-Black Friday Despite Reopening of Industry

By Hospitality No Comments

Hospitality Sector Laments: A Pitch-Black Friday

The virus-induced lockdown and social distancing norms incinerated the revenues and survival of the travel, tourism, and hospitality industry. Mass unemployment, business disruptions, and vacant hotel rooms have further aggravated the woes of the hospitality industry. On a business level, the impact of the crisis has percolated across verticals from luxury to niche and budget market players jeopardizing their survival in these turbulent times.

The redemption of the crippled hospitality sector is contingent upon people and their urge to socialize, which has been thwarted on account of the pandemic thereby hurling the sector into an unfathomable abyss of debt and losses. In addition to this, the sector’s dependency on the aviation, tourism, and travel industry makes its recovery agonizingly difficult.

To ease the wounds of the sector, the government introduced an array of economic packages such as providing a loan moratorium, relaxation in tax and corporate compliances, etc. to ease the burden of cumbersome paperwork and processes at a time when business operations have been adversely affected. The packages and relaxations ushered in a glimmer of hope during the industry-wide gloom, however, recovery at the grassroots level may take longer than anticipated, leaving numerous industry players in the lurch.

In RBI’s endeavor to provide interim relief, it announced a loan moratorium on interest and principal repayment for three months extendable to six months for the hospitality sector thus providing immediate but short-term relief to survive the pandemic. The Hotel Association of India requested the government and RBI to extend the moratorium on interest and repayment of principal for the entirety of the Fiscal Year 2021 till 31st March.

It is an industry-wide belief that such an extension would ease short-term financial trenches, however, a pressing issue is whether the industry can take flight while balancing the costs incurred for safety measures and economic survival in the long term.

However, with the conclusion of the moratorium period, the Finance Ministry introduced a one-time debt restructuring package for ailing businesses sitting on large debt piles. This measure is another short-term infusion shot by the government aimed at keeping businesses afloat, however in a capital- and labor-intensive industry such as hospitality with high fixed costs and payrolls, this may provide a breather for many players.

In principle, this measure appears equitable; however, in practice, hotel and restaurant owners have experienced procedural roadblocks in availing of the one-time restructuring facility due to reservations and non-cooperation by banks. Therefore, intervention by the government and RBI is pertinent to ensure fair and equitable implementation of the scheme and penalize institutions that ride against the spirit of the scheme.

Thus, it goes without saying that the slew of measures announced by the RBI and government to alleviate liquidity woes of financial institutions, may have a lesser impact in the short term, but a one-time credit rebuilding framework, if implemented properly, may become an attractive option for businesses who intend to stay competitive and progressive in these difficult times.

In particular, financial support from the government is imperative for MSME entities such as bed & breakfast, hostels, pubs, cafés, restaurants, bistros, and beach bars to name a few, which are vulnerable and worst hit by the change in general. Therefore, infusing adequate liquidity and relaxations into smaller businesses may help mitigate the impact of change caused due to supply chain disruptions and reduced consumer confidence and demand.

The ineffectiveness of government measures is likely to adversely impact the industry at large. Although the hospitality industry has demonstrated resilience through heavy discounts, constant innovation, cost reduction, and adoption of technology to survive the pandemic – physically and financially, many MSME players may not see light at the end of the COVID-19 tunnel.

While larger players struggle to make profits, emerging concepts such as homestays in remote locations, Work-from-Hotel, emotional and psychological retreats, cloud kitchens, etc. offered by the industry players may help them re-establish a consumer base and stay relevant even today. It goes without saying that a resumption of economic activity is essential, but its success hinges upon the right implementation of government measures and relaxations along with liberal governance on the finances of the hospitality sector while maintaining a strong vigil on the virus. 

 


Tags: hospitality industry, tourism and hospitality industry, hospitality business, hotel hospitality, hospitality sector, hospitality service, the hospitality industry

hospitality sector

Cashing in on Markets’ Celebratory Mood – IPOs in the Hospitality Sector

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IPOs in the Hospitality Sector

The COVID-19 pandemic has been the most compelling force for start-ups and venture capital in 2020, discounting the slow movement of global business and the devastating losses incurred on the pretext of the pandemic. Despite existing challenges, the steady stream of Initial Public Offerings (IPOs) by Indian companies witnessed in 2020 is likely to continue in 2021, with a handful of unicorns planning to go public.

Technology and AI-based companies have been quick to come up with IPOs and the hospitality industry – which is beginning to clock sales – has also hopped onto the IPO bandwagon. Joining the likes of Jubilant FoodWorks, Westlife Development, Speciality Restaurants, and Burger King India; Barbeque-Nation Hospitality is yet another stock from the Hospitality sector to list on the stock exchanges this calendar year and the first in the new financial year 2021-22.

Backed by renowned investor Rakesh Jhunjhunwala’s Alchemy Capital, the IPO raised Rs 453 crores. Despite coming amid an ongoing wave of COVID-19 Pandemic, the IPO stood subscribed 5.98 times on its last day on March 26, 2021, consequently receiving bids for 2.99 crore equity shares against the offered size of 49.99 lakh equity shares.

In the past too, the IPOs of Burger King India Ltd and Mrs. Bectors Food Specialties Ltd were heavily subscribed across investor categories, especially retail. These IPOs went on to deliver stellar gains on stock debut to investors.

Regardless of how well received the IPOs from the Hospitality sectors are, one common question continues to haunt the investors from all categories: the predictability and reliability of returns from the Hospitality Sector and its impact on the economy at large.

It is no secret that the major source of revenue for the Food Based Hospitality Sector comprises dining – in-house and take away combined or standalone, as the case be. Establishments like Barbeque Nation heavily rely on in-house dining for their revenue, as compared to Burger King and McDonald’s whose major source of revenue is generated by takeaways (delivery, drive-through, and on the go).

Given the ongoing pandemic and restrictions imposed on its account, the entire dine-in industry has seen a major slump. On the contrary, the takeaway industry has seen a sharp rise in sales and revenue. Here comes the burning question of returns from a stock that heavily banks on dine-in experience for its revenue.

In view of the shifting consumer preferences, investors are likely to bet on the long-term potential of India’s food and restaurant business amid progress on COVID vaccines and rapid urbanization. Therefore, despite the fast-drying revenues seen in the hospitality industry’s balance sheet coupled with a heightened risk of further slower growth on account of the second wave, investors are bullish on the long-term potential of certain hospitality chains.

In this category, demand for the ongoing Barbeque Nation Hospitality IPO remains high and such high demand serves to redeem the industries which are on the verge of sinking.

With a meticulous balance required to be struck between benefits and risks associated with hospitality IPOs, companies have clearly elected to go public despite high financing costs in anticipation of long-term benefits.

Interestingly, the freshly raised capital does provide for a better liquidity cushion than before, however the same is at the cost of public monies. The hospitality industry is likely to follow suit to address issues such as cash shortages, large short-term liabilities, and increased major operating expenses, in light of low footfalls and sinking revenues.

While the intent and purpose for the capital are said to fund expansion and pre-payment of borrowings, the ability to remain afloat during the present times cannot be overlooked. Nevertheless, the subscription and demand for the IPO make it clear that the investors are overlooking the risks to the company’s revenue and profit. This unchecked and risky approach does quadruple the prospect of a market disaster for investors, a disaster to which the market is no longer a stranger.

 


Tags: celebratory mood, venture capital, hospitality sector, venture capital in 2020, ai based companies, tourism and hospitality industry, hotel hospitality, hospitality industry, hospitality business

hospitality sector

Transformation in The Hospitality Sector

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The Hospitality Sector and Transformation

The magnitude of devastation attributed to events like 9/11 and the ‘Great recession of 2008’ seem bleak in comparison to the havoc wreaked by the COVID19 pandemic. The pandemic-induced lockdown has disrupted supply chains, closedown of businesses, and mass unemployment.

But the government’s decision to reopen the country in a phased manner brings a breath of fresh air and hope for a gradual but steady ascent. However, the ascent is contingent upon the hospitality industry’s adaptability to the virus-induced irreversible transformational effect at large.

With canceled flights, empty hotel rooms, and deserted restaurants, this pandemic has taken a toll on the hospitality industry. The industry’s dependence on the airline, tourism, and travel industry makes recovery agonizingly difficult during these unprecedented times.

However, as the industry strives to get back up on its feet, stringent rules applicable to hotels in the MMR region, including Mumbai, Pune, and Nashik must be followed. Therefore, the hospitality industry is in metamorphosis as they gear up for the post-COVID era.

At the outset, the entire guest experience from check-in until check-out is likely to be redefined to cater to the current requirements of social distancing and hygiene. Zero-maintenance buildings, contactless interactions, and technology-based sanitization will emerge as the “new normal” for hotels and restaurants at large.

Specifically, hotels outside containment zones will be allowed to operate at 33% capacity subject to adherence to social distancing and hygiene guidelines. The rationale behind this is not only to avoid overcrowding but also to convert the remaining 67% capacity into a quarantine facility, as and when required by the government.

Reduced operational capacity and increasing costs of running a hotel or restaurant will compel the industry to look for unconventional avenues to keep business afloat during a depressionary phase.

Moreover, several other guidelines ensuring hygiene and social distancing such as mandatory thermal screening, protective glass at reception tables, sanitizers for all hotel staff and guests, contactless digital payments, etc. will change the entire guest servicing experience.

This goes without saying that only asymptomatic guests will be allowed entry into hotels. As an additional measure, hotels are required to keep each room empty for a minimum of 24 hours post guest check-out and sanitize the room. Many of the facilities, like bars, buffets, spas, and swimming pools, will have to stay shut for now and even though restaurants can open, they will only serve hotel guests for now.

The State-mandated guidelines will propel the hospitality industry to provide a safe, contact-less experience from the pick up at the airport to the check-in, entire stay, and until check-out.

State-mandated guidelines although necessary for the health and safety of individuals, it is likely to have catastrophic consequences for alternate accommodation such as Bed & Breakfast, Guest Houses, and unbranded budget hotels which constitute 95% of the hotel industry. On the other hand, implementation of these guidelines is easier for chain and luxury hotels with deep pockets, however high maintenance costs coupled with fewer customers may pose a challenge.

In light of this, the low-priced sector in the country can ride on India’s large domestic tourism to kick start the industry. Also, the alternate accommodation industry offers potential entrepreneurial opportunities to small-scale business owners. Seeking out entrepreneurial opportunities is especially important as revival projections do not look promising to date.

Corporate travel will perhaps revive the chain of hotels through the lockdown has shown that corporate travel can be limited with the emergence of the work-from-home concept. As per FHRAI, hotels are seeing about 15-20 percent occupancy at present. For restaurants, a limited number of working hours coupled with restrictions on the sale of alcohol makes business unviable, thereby hurling several small restaurants, bars, and hotels towards an empty treasury.

Moreso, inbound traffic is bound to be slow due to travel restrictions and recessionary conditions limiting disposable income. Clearly, the prolonged impact of the COVID-19 crisis, even after the lockdown has been relaxed, is likely to have a long-term impact on the sector on account of burdensome guidelines and recessionary conditions limiting the disposable incomes of customers.

Driving up sales requires a culmination of strategies including – continuous and effective marketing strategies that communicate with loyal guests through digital and social media during and post the lockdown. In doing so, hotels and restaurants can showcase their contributions and safety measures in wake of the pandemic for their customers. Secondly, it is imperative for hotels and restaurants to maintain adequate liquidity for working capital.

This can be achieved through a combination of renegotiation and extension of payment cycles with vendors, adopting RBI’s 3-month moratorium period for existing interest and principal payments to banks, and enforcing rigid cost-control measures while supporting the salaries of its staff members. Consequently, a higher budget will be allocated to technology; minimum human interaction is maintained while providing a safe, hygienic, and comfortable stay.

The Finance Ministry’s economic package disappointed the hospitality industry, which came to a screeching halt on account of the COVID-19 outbreak. Unfortunately, the survival of this industry is interlaced with the situation of the aviation, hospitality, and tourism sectors, thereby making the survival and recovery of hoteliers challenging across leisure, heritage, adventure, and niche verticals.

The industry is starved for relaxation from the government, but more importantly for customers to feel at ease to visit hotels and restaurants once again. It goes without saying that a resumption of economic activity is essential, but the vigil on the virus must remain and in doing so Indians are likely to witness decades of unprecedented transformation in near future.

 


Tags: hotel market, hospitality sector, tourism and hospitality industry, transformation in the hospitality sector, effective hospitality management, hospitality industry, lodging industry, hospitality business, hospitality marketing

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