Govt will do something for the hospitality sector, hopes IHCL MD

New Delhi/Mumbai: Although there was nothing for the tourism and hospitality segment in the government’s Rs 20 lakh crore package to tackle the crisis caused by the coronavirus, Puneet Chhatwal, MD of the Tata Group’s Indian Hotels Company (IHCL) is optimistic that some relief is in store for the sector that’s considered an important pillar of growth. “I think the government will do something. But when it will come, I don’t know,” Chhatwal told ET. “The government and the leaders have time and again outlined tourism as an important pillar of growth – that has been the message from the government for several years.”
Chhatwal, who is also president of the Hotel Association of India, said it is time for the hospitality sector to be allowed to open just like airlines. “We are open for business but we are only operating for quarantining services or offering accommodation for medical staff. It varies from state to state and there is no uniformity. Some states are open, some are closed,” he said. A key demand of Indian hoteliers is a 12-month moratorium on all statutory obligations.

“We had asked for a suspension of leases, licences and excise fee as it was the government that shut us (hotels) down. Lockdown has happened and it was necessary. Nobody is disputing that. But why should the hotels be paying excise fee for the period of the lockdown? Why should we be paying property tax? To be expected to pay taxes as if it is business as usual when your hotels are not allowed to operate is unfair.” IHCL, which said in April that it was raising long-term funds through external commercial borrowings and non-convertible debentures, plans to take on additional credit facilities.

“This is prudent fiscal management. We have to be prepared for the worst. Credit facilities have been arranged. Assuming that business stays at the existing level – 10%, 15%, 20% – then we will be a requirement for extra cash. Hopefully market conditions will improve and there will be no need for this additional cash." Chhatwal said IHCL will also have to rationalise its manpower costs.

“How can you operate at 70% occupancy level staffing when your short term occupancy will only be 30-40%. There will be a redeployment of skills. But you have to do it in a humane way, in the right way. It will not be a one size fits all approach.” For hotels, the unofficial lockdown started with the suspension of all tourist visas to India on March 11, Chhatwal said. “Except for accommodating stranded travellers, hotels had to be shut. No business school ever taught you what happens when your revenue becomes zero and you still have all the costs,” he said. He said what has helped the hotel chain is the hosting of medical staff and those quarantined in Mumbai and other big cities.

“We never had this market segment before. They pay less, but there’s some activity, there’s some revenue. With the airlines starting, you start getting some crew business,” said Chhatwal. He said from IHCL’s point of view reaching pre-Covid business levels could take anywhere from 12-18 months with its domestic business taking the lead. For business to kickstart again, it will take time till September to October. “We are slowly climbing back and hope we have better occupancies in the coming months if things start opening up.”