Inhospitable: Gauging the COVID-19 impact

on hospitality industry

A report submitted By MBA IB PT 2019 – 22 (Group 4)

Inhospitable: Gauging the COVID-19 impact on hospitality

industry
 Inhospitable: Gauging the COVID-19 impact on hospitality industry

Contents

1 Objective........................................................................................3

2 Synopsis........................................................................................3

3 Division of work:...........................................................................4

4 Support from government – India and Abroad...........................5

4.1 Pre-COVID19 initiatives by government of India.............................5
4.2 Post-COVID19 initiatives by government of India...........................6
4.3 Suggestions for measures that can be taken by the government:...7
4.4 Initiatives related to hospitality by governments internationally.......8

5 Local Hotel Industry changes – the new Normal........................9

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 Inhospitable: Gauging the COVID-19 impact on hospitality industry

1 Objective
The idea behind to select this case study is to know the following factors.

1. Local and Global impact of the pandemic caused by Corona Virus strain Covid-19.
2. How the industry plans to cope with this situation and their expectations from the
government for revival.
3. Path to recovery after mitigation of the pandemic.
4. Marketing strategy with retrenched human resources for the hospitality industry.

2 Synopsis
The spread of COVID-19 pandemic has had an impact of monumental proportions on not
just the health and well-being of citizens globally, but also on global economy. Among the
key industries impacted, the hospitality businesses worldwide have taken a massive hit as
travel bans, countrywide lockdowns, and social distancing become the norm vital to contain
the proliferation of this disease. Looking at the trends and the speed with which the spread
is happening, the outlook looks grim in the short term. Moreover, the shock waves of this
historical development will have long-term implications and ramifications that will change the
business ecosystem and solicit a very significant change in the marketing and business
strategy.

Our analysis will follow a 3-pronged approach: Analysis of the impact, Actions to mitigate
the impact – short term and long term, and rebuilding strategy for the hospitality industry.

Analysis of the impact: How this calamity has impacted the hospitality industry, in terms of
lost business, sunk costs, impact on the employment prospects, and impact on image of
hospitality destinations like hotels, resorts, etc. as safe, disease free havens.

Actions to mitigate the impact – short term: Marketing and rebranding strategy, active
reputation management, support from government through subsidies, policies, spending,
etc., local industry support.

Rebuilding strategy – Long Term: Revitalized marketing campaigns, New promotions,

rejuvenating communication channels, contingencies to ensure business continuity, building
sustainable business models.

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 Inhospitable: Gauging the COVID-19 impact on hospitality industry

Division of work:
Analysis of the impact (Lost business, employment in hospitality): Sukeshi Mishra

Analysis of the impact (Impact on image of hospitality destinations, financial impact, any
other impact): Parul Singh

Actions to mitigate the impact – short term: Marketing and rebranding strategy, active
reputation management: Ashley Gagneja

Actions to mitigate the impact – short term: Support from government through subsidies,
policies, spending, etc., local industry support. Aman Varshney

Rebuilding strategy – Long Term: Harsh Kalra

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 Inhospitable: Gauging the COVID-19 impact on hospitality industry

4 Actions to mitigate the impact - Marketing

and rebranding strategy, active reputation management
Hospitality industry across the globe was the first casualty of this pandemic and the
rest followed. After this, things have been topsy-turvy, and everything looks grim for
the sector. But there are certain measures that the industry is planning to take which
may mitigate the problem. Waiting for the government of the nation, is not what they
have in mind.
There are few short-term plans of action mentioned below. 

4.1 Adjusting pricing strategy 

Across the globe, many of the hoteliers are already facing difficulty to cope with this
downfall because of the travel restrictions. One of the traditional methods would be to
reduce the prices and garner as many occupancies possible. As most of the people
who are stuck will be low on cash and in need of shelter, which can be a perfect
opportunity for these establishments to make some dime in this situation. Not only this
can be helpful to get enough amount for operating costs but also repair or build the
reputation of the hotel or a chain as a whole. Observing the other hotels for pricing and
region by region could be beneficial. 
But one should note this may boost the volume in the short period but can have an
adverse effect in the long term as whenever the demand shoots up again, there is going
to be resistance in the market. Taking the example of 2003 where in the SARS
outbreak, most of the hotels were seen having a sudden in price of the rooms and had
to be taken back when the demand even in the normal market conditions fell drastically.
So keeping this in mind, the hoteliers the pricing should be done gradually to avoid any
problems from the customers. 

4.2 Utilization of Hotel Rooms 

As most of the hotel rooms are vacant and are of no need to anyone, many
governments are planning to utilize these rooms for doctors and volunteers which are
working day and night to curb the pandemic. This provides the hoteliers to use this
opportunity for rebranding their image and give them a better chance to present
themselves to come as a saviour in the time of need. While others are in the talking
phase, Marriott is first of the few who has already taken this opportunity. 

4.3 Cost Management 

When most of the businesses are facing the problem of falling demand, the businesses
can go for controlling their operational costs which can be helpful to maintain the
remaining cash flow. However, hoteliers should be mindful to plan out any cost

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reduction actions to ensure short-term activities do not hurt business opportunities and
brand value in the long run.
Accurate demand forecasting provided by an automated revenue management system
can greatly enhance a hotel’s labour scheduling, helping reduce instances of
overstaffing in the face of low demand and help to reduce costs. Once demand
forecasting data is made available, staffing managers can determine which areas are
most affected by the number of guests staying in the hotel. The number of occupants a
hotel carries can directly influence housekeeping needs, the number of staff needed on
the front desk to check guests in and out, the number of servers required in restaurants
and valets to park cars, or cutting down on food purchasing according to the predicted
number of covers or bookings.

4.4 Creating special packages 

Packaging allows the hoteliers a chance to provide additional benefits to their
customers, which add value to staying at their hotel amid the lockdown. If a hotel offers
additional services like priory checked meals and sanitisation, package them together
with accommodation for a really great deal that encourages guests to use services they
may not have previously thought about.

4.5 Preparing for rebound

While the spread of COVID-19 is having a direct impact on many hoteliers’ forward-
reservations, this can be an opportunity one can grab. Hoteliers should use this
situation as a chance to re-evaluate their business. This period can be utilised to train
their people and review their plans for investing in long-term success. Additionally,
when travel bans are released, tourist arrivals will rebound, and hoteliers will have
opportunities to attract new guests from new markets and build a wider customer pool
for long-term success.

4.6 Manage cancellations

Hotels must be dealing in large amount of cancellations at the moment, which can be
turned into an opportunity. The hotels can offer guests the opportunity to convert their
booking to a voucher, so they're-book when they feel comfortable or able to travel
again. Vouchers could also be used for local restaurants, spa or golf course. People will
be looking forward to these things when they are able to enjoy, so vouchers are a great
way to drive spend while consumers are cautious right now.

4.7 Shifting of marketing approach

This is often the first thing the businesses tend to do after they are running to losses.
Hoteliers can shift to advertising through means of print and digital or through any other
modes of communication, but that is not end to it. They can shift the focus of their
strategy.

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According to a survey, social media platforms and chat apps are up significantly in

usage. People are also watching more videos, engaging in video chats like Zoom
whose usage has increased by 4 times and hosting live YouTube events. This is an
opportunity for hospitality businesses to leverage their marketing and brand awareness
skills to keep in touch with their regular guests while they are stuck at home. Here are
some examples:
 Sharing of videos of restaurant staff cooking to provide for local communities - This is a
great way to show compassion and share that they are providing this service. Trying
platforms like Instagram or Facebook to show the initiative they have to people’s
screens. 
 If they are still open for business and welcoming guests, share information on how they
are keeping their property clean and safe. They can do this with video, photos, or
checklists. Transparency with this will reassure their guests.
 CN Traveller has listed a number of different ways businesses in the travel industry are
helping local communities, even news like this can also be shared. 
As lockdowns and quarantine continue, people are dreaming of travel and getting back
to doing what they love. This can be used as an opportunity to stay front of mind during
this. This is the time to encourage people to keep doing as much of what they love in
these challenging times. Spreading a word of positivity and inspiration is something
people are holding dear right now.

5 Support from government – India and

Abroad

5.1 Pre-COVID19 initiatives by government of India

The hotel industry in India is highly dependent on the tourism sector for business, and
hence, government initiatives, by enhancing tourism, play a crucial role in aiding the
expansion of the industry. The Ministry of Tourism, along with the Ministry of Civil
Aviation and The Ministry of Railways, promotes tourism in the country.

Schemes like SWADESH DARSHAN (Integrated Development of Tourist Circuits

around Specific Themes), PRASHAD (National Mission on Pilgrimage Rejuvenation
and Spiritual, Heritage Augmentation Drive) and the promotion of E-Visa has been
taken up by the Ministry of Tourism to increase the tourist inflow in the country.

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Incredible India, Vision 2040, UDAN – Ude Desh ka Aam Nagrik and NABH Nirman
(transaction structure for greenfield airports) are a few initiatives taken by the Ministry of
Civil Aviation to boost air connectivity, which would increase hotel guests in even the
remote corners of the country.
As domestic travelers constitute the largest guest share of the hotel industry, the
Ministry of Railways is improving rail infrastructure throughout the country to ease
traveling for domestic trips.

5.2 Post-COVID19 initiatives by government of India

As economies come to a grinding halt the world over, employers scramble to cut costs
and stay afloat. A large cost for most service providers today is salaries and employee
benefits while for many organisations major costs include taxes, debt repayments and
license fees. For people below the poverty line, the cost of goods itself is a challenge.
For many others, it is the availability of food and essential commodities that proves to
be challenging. As stock markets slide and GDPs plummet, people in the hospitality
industry alike look to their governments to bail them out.

The Government of India has been applauded by several world leaders for taking
stringent measures to contain the spread of the COVID-19 outbreak in the country at an
early stage. They had also announced the first relief package of INR1.7 lakh crore
between April and June 2020, mainly targeted at economically weaker sections of
society include the following actions related directly or indirectly to the hospitality
industry:

 5 crore construction workers are being handed-out cash amounting to a total of

INR3,071 crore.

 79 lakh individuals and 3.8 lakh establishments stand to benefit from the announcement
pertaining to government taking on payments of 12% EPF as employer and employee
shares each where monthly wages amount to less than INR15,000.

 Advance PF withdrawals of up to 75% have been allowed by the government during

this period and 2.1 lakh members have already availed this benefit.

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 While the Government of India works on a Financial Relief Package for the revival of
industries and services in the country, there is already talk of what it will include. Some
believe that the package will not be released all at once, rather, ‘booster doses’ will be
made available for various sectors in a phased manner. A major concern for the
government at the moment is that cash crunch faced particularly by medium and small-
hotels will translate into insolvency issues. Some proposals that may find their way into
the second relief package include:

 Cheaper lending and softer loan servicing may also be worked out.

 Payroll support for employees of SMEs will take the burden off the organisations while
offering some respite to the employees currently facing retrenchment or even loss of
jobs.

 Reduction in GST rates to lower slabs for the service sector including airlines, hotels
and restaurants that cannot recover losses incurred during the lockdown period. This
will lead to a reduction in overall prices of services thereby creating demand and
allowing the service providers to find their feet again.

 Eleven committees set up by the Prime Minister’s Office to submit proposals for
repairing the economy post the lockdown include not only the aforementioned points
but also make suggestions regarding ease of doing business, cash flow support for
organisations, and working capital loans to companies at low interest rates that are
guaranteed by the government in case of failure to repay on the company’s parts.

5.3 Suggestions for measures that can be taken by the

government:
 Monetary support to casual/contracted staff in the hotel, aviation and cruise line
industries as people face severe pay-cuts and lay-offs

 Working capital loans at reduced interest rates in order to continue paying employee
salaries

 Offering a moratorium or a deferment of debt payments to hotel owners over a six to

nine-month period

 Deferment of renewal of licenses that do not pose immediate health, hygiene or safety
related operating risk to establishments by six months as well as the possibility of
smooth renewal at no incremental cost in this fiscal year

 Deferment in filing and submission of GST on the monthly portal for a longer period of
time post June 2020

 Introduction of Leave Travel Allowance (LTA) post the lockdown period to create
domestic demand that will help jump-start the Indian aviation and hotel industries

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5.4 Initiatives related to hospitality by governments internationally

Internationally, many governments have extended benefits to the hospitality and

tourism sectors, as below:

 Singapore – for the current year, the Government of Singapore has

announced 100% property tax rebates for hotels, serviced apartments,
food and beverage outlets, etc. It has also promised to pay salaries up to
75% based on sector

 Malaysia – the Malaysian government has gone a step further and

offered deferment of tax debts for 6 months, exemption of hotels from
Service Tax, investment of US$6 million to promote tourism in the country
and discount vouchers for airlines and hotels

 Indonesia – along similar lines, Indonesia has also exempt hotels and
restaurants in 10 tourist destinations from paying taxes for a period of 6
months. Additionally, it has also announced financial incentives for airlines,
travel agencies and tourism marketing amounting to US$13 million

 United Kingdom – other than offering salary benefits up to 80% for all
hospitality employees, the UK government is also offering sickness benefits
to self-employed people. It has waived off all VAT payments until the end of
the year and are also offering grants of between £10,000 and £25,000 to
small hospitality businesses

 Italy – one of the worst-hit countries in the ongoing pandemic, Italy has
frozen lay-offs for 2 months and also extended unemployment insurance for
its workers.

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6 Local Hotel Industry changes – the new

Normal
 SETTING THE STANDARD

The hospitality industry is partnering with cleaning companies like Diversey, Reckitt-
Benckiser (makers of Lizol and Dettol) and Ecolab. Additionally, hotel chains like IHG
and Hilton are consulting with medical practitioners from Cleveland Clinic and Mayo
Clinic. Hyatt is bringing in experts from the Georgetown University Medical Center and
Johns Hopkins department of medicine. Accor, The LaLit hotels and The Oberoi group
have the Bureau Veritas stamp of approval. The company, headquartered in Paris, is a
leading certifier of cleanliness and hygiene standards. And ITC Hotels will have the
National Accreditation Board for Hospitals & Healthcare Providers stamp of approval for
its “clinically-clean" sanitation and hygiene practices.

The sum of all this—every object that you could touch in a hotel is under scrutiny and is
either being removed (think paper menus and extra pillows), replaced (taps you had to
turn will now work by sensors) or retrofitted (sneeze guard shields at reception).

 LEARNING FROM THE BEST

Voluminous codes of operation are being developed, from deep-cleaning processes to

leaving rooms vacant for up to 48 hours between occupants. Sanitizer dispensers will
become as ubiquitous as floral displays, as will posters reminding you to wash your
hands. Thermometers, masks, gloves and sanitation wipes will be essentials in any
amenity kit (the government’s draft protocol asks for daily temperature scans of all staff
and guests). The new norms will be implemented not only in guest areas but in staff
areas as well—locker rooms, dining and rest areas and administrative offices.

While it’s true that the measures being undertaken are required, keeping in mind health
and safety, it does make one wonder if it might rob hospitality a little of that very
inherent quality—of being hospitable.

 TECHNOLOGY TO THE RESCUE

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To bridge the social distancing gap, it’s indeed technology, digital and otherwise, that
the hospitality industry is turning to. Central air conditioning, seen with suspicion by
many in the context of airborne infections, is being adjusted as prescribed by the
country’s apex body on such subjects, the Indian Society of Heating, Refrigerating and
Air Conditioning Engineers. The more visible QR code is being deployed in rooms and
public spaces. One can scan one to access food and drink menus, the hotel’s directory
of services and even cleanliness protocols.

While restaurant seating plans are being redrawn to account for social distancing
norms, industry wisdom predicts that in the initial days most guests will prefer dining in-
room, to avoid crowds. That they will order in from a hotel’s restaurant(s), even if the
menus have fewer options than usual.

 FOR THE SHOW MUST GO ON

Industry leaders are convinced that bars and nightclubs will be the last pieces of the
hospitality pie to be pulled out of the lockdown deep freeze. This poses a significant
challenge for big hoteliers.

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