The world is still coming to terms with the COVID-19 outbreak and there is no doubt that the pandemic will change the world as we know it. With the globalized world going into partial or complete shutdown, the overall impact on human life, economic growth and businesses is immeasurable, both in the short term and long term due to the uncertainty as things evolve.
While most Economists and Analysts currently expect the global economy to rebound, by some measure in the latter part of 2020, the exact timeline cannot be determined till the virus is contained across the globe.
Nearer home, the Indian hotels sector has been hit hard, grappling with significantly low demand, with very few future bookings. Essentially, all transient demand has completely vanished – the remaining is largely on account of either a few long stay guests, or hotels having been prescribed by the Government for the international travelers returning to India.
Nothing could have ever prepared us for the COVID-19-shock and although, the current crisis is unlike any other we have ever faced, not all is lost. The Indian hotels sector can recover from this crisis as well, by adjusting strategies in the near term and preparing for the future.
In this report, we have tried to quantify the impact of COVID-19 on the Indian hospitality sector, while discussing some of the immediate steps that are needed to help the sector get back on its feet.
We would like to emphasize that our analysis is based on data available to us as on 23rd March 2020. However, as the situation and implications are evolving rapidly, some of the insights in the report may quickly be outdated.
It is imperative that all the industry participants collaborate and work harmoniously in the current crisis by sharing best practices, keep the workforce motivated and seek to put the industry back into recovery mode, because this too shall pass soon.
COVID-19 – Unprecedented Impact on the Global Economy
To say that the economic impact of the outbreak has been devastating, is putting it mildly. Most Economists believe that the full impact will only emerge once the outbreak is completely contained.
Economists world-over expect the global economy to shrink in the first quarter of 2020, a first since the 2008 financial crisis. With the number of cases rising sharply on a daily basis, even if the pandemic is contained soon, the ripple-effects will be felt across the world well into the year, pushing all major economies into a possible recession.
COVID-19 will significantly impact the GDP growth forecast in 2020
Source: IMF, RaboResearch, MacrobondS
Impact on Global Travel & Tourism Sector – a Few Alarming Estimates
- IATA estimates that global airlines need an emergency fund of up to US$ 200 billion as they fight for survival
- According to the World Travel and Tourism Council, the COVID-19 pandemic could slash 50 million jobs worldwide in the travel and tourism industry, reflecting a 12-14% reduction in jobs
- International travel could be adversely impacted by up to 25% this year, equivalent to a loss of three months of travel
- The industry could take up to 10 months to recover after the outbreak is over.
COVID-19 & Impact on the Indian Hotels Sector
The Indian hospitality industry is undoubtedly one of the biggest casualties of the COVID-19 outbreak as demand has declined to an all-time low. Global travel advisories, suspension of Visas, imposition of Section-144 (prohibition against mass gatherings), India like most other countries is on a lock down, the ramifications of which are unprecedented.
Inbound Foreign Tourism Comes to a Grinding Halt and Limited Scope for Quick Revival
- Foreign Tourist Arrivals (FTAs) into India (particularly leisure travelers) started softening in February, as the spread continued its unabated movement to other countries.
- Following suit, the Indian Government suspended travel visas (with a few exceptions) till 15th April 2020, which in all likelihood will be extended. Even if it is not, the paranoia surrounding the events will continue to have a major impact on travel.
- Demand from FTAs is not expected to pick up any time soon. In our opinion, travel bans across the globe will fully roll down only by the end of the year, even though such a process will commence much sooner.
- Furthermore, majority of the future travel bookings for winter i.e. October-March – the strong season for our industry – are done in the summer months, have largely evaporated.
With new confirmed cases being reported daily, the penetration of the COVID-19 virus in India has caused mass hysteria, the reverberations of which are expected to continue well into the second quarter of the calendar year 2020. The current situation is extremely grim, as domestic flights have been ordered to shut shop from 25th March 2020 and all other demand segments such as MICE, business, social and sporting events have been cancelled or deferred indefinitely for the foreseeable future.
