By Nitin Mittal – Founder & CEO, SOLV
Covid19 outbreak led shut-downs are having disastrous impact on economies around the world, including India. Small and medium businesses are the worst hit segment and among them the most impacted are the ones in travel, tourism and entertainment. With more than 1.3 bn people confined to their home in India, the HORECA sement which relies on the very premise of discretionary spends, business travels and people ‘socializing’ is strugging to survive.
With occupancies crashing to below 5% in comparison to 95% last year, hospitality industry is the worst hit.
Hotels, restaurants and cafes are capex heavy businesses, with high fixed costs like rents that comprise of almost 60% of the cost. Hospitality industry often witnesses 70% to 100% occupancy by the end of the February in India, however, this year, with the outbreak accelerating, the occupancy has gone down to a minimum. This is leading to hotels towards a shutdown or to operate in a very limited cash-crunched manner.
Dominoes Effect of Impact on HORECA Segment on other sectors
High-value food commodities (HVCs), such as milk, fruits and vegetables, and meat, fish and eggs, account for 56% of the total value of output from agriculture and allied sectors. Prices of agricultural and high value commodities have fallen by more than 20% since bulk demand from HORECA has plumetted and export scenario is uncertain.
With rumors around consumption of poultry and other livestock and hotels & restraunts cancelling orders, their breeding has hit a major roadblock too.
Firefighting the Trend
Hotel chains like Oyo are partnering with embassies to accomodate foreign traveller stuck in India, to ensure occupancy. Restaurants are reworking their menus, operating on delivery & takeaway models only, operating with limited set of chefs since most restaurant staff comprises of migrant workers especially in Mumbai, Delhi & Bangalore.
Expectations from the Government
- The industry is looking for support to survive, in the form of pushing back of instalment repayment, support in paying salaries to the staff and waivers in government levies such as tax, ESIC, bank guarantees, security deposits, etc.
- Rental renogiations basis state level mandates are sought
- Doubling of working capital limits on interest free and collateral free terms will also be helpful in preventing businesses from going bankrupt.
- FAITH has sought a support fund for 12 months on the lines of MNREGA to support basic salaries with direct transfers to affected tourism employees.
- There’s also a demand of setting up of a national tourism task force under PM’s leadership to fast track all tourism investment proposals and to withhold the tax collected at source (TCS) on travel provision proposed in Finance Bill 2020 as TCS on travel will displace business from India to overseas markets.
- CII’s recommendations include release of SEIS and EPCG schemes on an urgent basis based on last year’s submissions of foreign exchange earnings of companies at an enhanced rate of 10%
- Doubling the overdraft facility for the industry and provision of short term interest free or low interest loans for rebuilding businesses.
COVID-19: The Aftermath
The HORECA segment will have to create solutions to revive itself in a world that has become inward-looking and is following social distancing.
- Health checks: To tackle the fear in the minds of employees and guests, the industry will have to conduct their health check-ups. Ramping up the health screening of guests and employees is necessary and must be diligently followed.
- Better sanitization: In order to minimize any risk, the industry will have to offer better air quality, better sanitization solutions, food-grade chemical sourcing to sanitize deliveries & takeaways etc. Also, hotels need to issue personal protective gear and eadequate sanitization.
- Sustainability and Self-sufficiency: Not only should the focus shift to food with higher shelf life to reduce shortages due to lack of supply chain capability; but also, there’s a need to create higher self-sufficiency by owning farms for constant supply of fresh vegetables and fruits or connect to ecosystem players that aggregate farm level stock and data
- Healthcare specialist: Onboarding a healthcare specialist or partnering with a medical practitioner to offer quality healthcare solutions to guests should be looked at.
- Space out workstations: Create workstations on either side of processing lines so that food workers are not facing one another
In the times of COVID-19, people will be sceptical of the quality of fresh-food products/ handling of cooked food. Therefore, ensuring food safety and communicating it to the customer would be of paramount importance.
Originally published here .