Travel …..at its carthartic moment!

Life can be cruel sometimes and travel is probably going through its worst nightmare at this time. Travel is an intrinrinsic human need to increase interaction with other people build relationships, see as well as discover new places and that need is not likely to go away even though it may look that way with the challenge the world faces. Discovery, knowledge , adventure and interaction are very important to human race. History bears out the need and hopefully future will not be different. We however though need to manage the present. 
Actually managing the present means that as a business we have to survive. Travel encompasses different businesses within its fold ie flights or aviation, railways, road transportation,ground handling,tourism services, hotels, event, conferences and business services. The ground realities of each of these businesses is different and hence the survival strategies too should be different. One can look at these activities in four broad buckets ie Transportation, tourist services, hospitality and the MICE business. There are all closely interrelated and are best when they work together though the investment, carrying value of each of these services or activities may be different. The following are some guideline for survival during this challenging period:

Transportation- Transportation is a key ingredient for travel. Our ability to provide safe as well as secure passage to leisure as well as business destinations is the most important pillar for the travel sector. Presently all forms of travel whether by road,rail, flight, by ship either domestic or international is stalled due to the virtual fear of virus spread through air as well as human interaction. Restarting of these services depend on the threat assessment by Government, social distancing as well as hygiene protocols and fear psychosis in the travellers minds. It could take months or a year plus before such services will be back to normal or maybe a new normal. The biggest sufferers are the aviation companies or the railway owners or the cruise line companies. While the asset owning part will suffer depreciation, the services like maintainance,ticketing, crew services are all people dependant and the key cost will be related to salaries. Key actions here would include looking at maintainance contracts, employee rationalisation, leases,and interest subvention.  Many of the services specially flight bookings are already digital and therefore very difficult to get more leeway on costs. Government stimulus should be actively pursued if there is to be chance of reasonable survival. Good news is that the flights trains and road travel though very limited with precautions has commenced. 

Tourist Services- Tourist services would include tourist guides, special information services,ground transportation either through taxis or busses, food supply for travel either in trains flights or on highways. This along with other service requirements are largely people dominated and are one of the highest employment generators of informal and formal labour. Action here unfortunately unless there is Government help in form of subsidy, is to rationalise your strength to suit the work for the short period. Flight kitchen services can look to service Govt who could look to outsource meal services for their supervision or medical staff. Such contracts even though lesser paying can look to cover fixed costs.

Hospitality- Hospitality is an asset heavy business and unlike aviation its ownership at least in India largely rests with individual owners. Therefore inability for the asset to earn revenue is very difficult time and catastrophic in case there is a debt overhang not to mention the minimum electricity as well as maintainance activity which needs to be maintained. Good news is that it will begin to come to life along with the transportation modes are activated which is likely to happen. However it would require a new hygiene protocol and wait for the fear of travel to subside which could take some time. Action here is downsize, introduce new hygiene protocols, use kitchen facilities for outside deliveries, orient your focus to domestic business or leisure traveller. With constrained budgets the pricing as well as facilities may have to be rationalised too. With no government help in the offing in India at present, alternate use of property specially as quarantine centres or accommodation for medical staff or for other disaster relief should be considered at least in the short term.

MICE- Meetings, conferences,weddings (big business in india) are likely to be at a halt for some time. It’s probably the last part of travel that will normalise specially with strict rules of gathering of people. Besides the accommodation and transportation cost, the rest of the business is heavily people dependant. Action here is rationalise your people cost and other fixed costs. It’s likely to be a changed business when it opens up again and best to have a fresh look at that time. Smaller and more intimate gatherings may be the rule for sometime.

Travel in all its form may be critical at the moment but history indicates that it has bounced back always. It may take a while,it may come with new ways, it may come with changed economics but the world will not be without travel for long.  In the meanwhile ‘SURVIVE’.


Hospitality Industry Outlook – post lockdown…

(An article by guest writer Mr Rajan Puri, a colleague as well as MD of Sapphire Professional Services)

Covid19 is a historic event and is changing the future of business worldwide and businesses need to innovate to adapt to the new normal. For small and mid size organizations survival is key. We understand that this virus may be with us for some time until we have an effective vaccine however sanitization, hygiene, social distancing norms are likely to be there for the foreseeable future. While there is no absolute prediction on what happens next, businesses will need to redefine their revenue models to operate post the lockdown and come out stronger. As always in times of extreme adversity, while most businesses are cutting costs to stay afloat few are taking unprecedented decisions to generate creative solutions to address the change. Business and leisure travel alongwith hospitality will be under pressure for the next 6 to 12 months with graded opening up with hospitality being hit the hardest. Following are some views on some actions one may want to take in this down cycle;
 

1) Hotels: Identify the deeply impacted properties and repurpose them in the interim period of say 6 months to 12 months till we have more clarity on future. Some of the examples of repurposing could be attaching the properties with hospitals to provide stays and hospitality to medical staff (Covid 19 warriors) with the objective to cover the direct costs. Organizations should review their cancellation policies and make them more customers friendly and flexible. In these uncertain times, the customers will insist on refundable deposits as well as flexible dates. Hotels can offer alternatives to cancellations with additional benefits if they choose to reschedule e. g. use of F&B vouchers or other incremental benefits in value should they wish to continue. Further one can use this quarantine period to conduct extensive training for staff members. Invest in technology in areas like self-check-in and check-out, app driven room unlocking, thereby eliminating physical interaction. Such measures will initiate customer confidence and could lead to revenue.

 

2) F&B: Chefs could conduct webinars for sharing their popular food recipes to boost customer engagement and increase brand relevance. Restaurants can also look at delivering food packages to homes of their loyal customers. JW Marriott Mumbai and Taj Mahal Mumbai have already started delivering food packages to home. Proper social distancing norms need to be established before the restaurants reopen along with hygiene and now would be the time to establish the same to gain confidence

3) Domestic Tourism: We expect domestic tourism business to increase and there could be increase in demand of luxury and boutique properties, AirBNB’s & experiential holidays. We expect short distance road journeys to be preferred over long destinations and therefore the attention should be to direct marketing efforts to nearby areas both for business as well as leisure purposes

4) Events: Most large-scale events will be cancelled for the next 3-6 months and the popular notion is that MICE travel, exhibitions etc. will be suspended until quarter 2 2021. We expect destination wedding industry to shift more towards Indian destinations and may start picking up starting last quarter this year. The industry will have to comply with government norms in terms of gathering restrictions. However, the sentiment is that weddings and social events might become more expensive in terms of pricing of hotels and vendors given the social distancing SOP’s. We expect an increase in the number of intimate weddings with less people. One therefore should prepare a differentiated offering as well as marketing for such events of the future.

 

Here are some of my additional thoughts which could help us translate this future opportunity into a reality;

 

Strong Leadership: The leadership team has to come forward and keep team motivated on a regular basis by actively engaging them instead of focusing only on cost cutting. You should prepare a scenario of readiness in case the demand picks up. Motivated employees would play a key role.

 

Training: Focus on soft skills training to manage customer expectations and how to engage with those in the pipeline or even cancellations. There could be a possibility that some customers might be willing to examine options with incremental value instead of pure cancellations. While these are challenging times, certain consumers are using the time to plan events, weddings, short domestic holidays etc. which could be a good target audience. Focus on the opportunity even in these dire times. Create short videos and share them online / with your customers showing steps taken by you to deal with the Covid 19 environment e.g. sanitization of rooms post check out and common areas of property, temperature scanning of staff periodically, sanitization of customer bags at check in etc. 

 

Collaboration: We see a big thrust in Healthcare sector going forward. Grade your properties based on past performance and examine if you need to divest some of the weak performing locations. There could be a possibility of converting your properties into hospitals / clinics. We also expect consolidation happening in near future and look for options to collaborate to increase business.

 

 

Use COVID19 as an opportunity to reduce fixed costs and have open discussions with your vendors/ property owners to reduce the costs. Look at ways to convert fixed cost to variable or semi variable. The key is to be flexible in evaluating options and like I have stated earlier, survival is most important in these times. Only those businesses who innovate will come out stronger and emerge as front runners, so focus on alternate creative revenue streams with quick decision making.

 

Hospitality …..Life at a stand still

It’s summertime and the only talk that one hears at this time of the year  has to do with holidays and leisure breaks ! The preparations starts long before as there is a whole lot of research required to choose the places to visit, the hotels, airline or train tickets or a pleasant car drive, the clothes and the special experiences. In recent times the summer is not the only logical time but also extends to long weekends and other occasions when such trips are planned. The Internet, the newspapers and the special mailers from the travel companies or the hotels are over each other to entice you to come enjoy your summer and spend your money with them. This year however it is different! The world one fine morning decided to close down. When I say the world I mean virtually every country on the planet. People advised to stay at home, businesses, transportation and all nonessential supplies all cut off. No, it’s not the World War 111 but something more sinister where the enemy is invisible, armies  as well as weapons are useless and it will devour everything in its  march. It’s the COVID 19 virus and life is at a stand still……

One has not seen a catastrophe like this in lifetimes and there seems to be no conceivable preventive cure or protocol for this kind of an emergency. While the world with its resilience and science may be able to come out of it but it’s certain to leave an economic cost which may be crippling for countries, businesses and the people. Travel and all travel related businesses like aviation and hospitality have been dealt a very severe blow in the the short term which may ease over a period of time but the normal has forever changed. The traveller will come back but slowly and it could take months or years before he could travel without fear of infection. Along with the travel sector, hospitality plays a major role in earning the much needed foriegn exchange for India and is one the biggest employers in the country. Therefore what could be the new normal for the hospitality sector in India in the near term and what if any can the sector look forward to or drive to in the longer term future merits a discussion. Our reading of the situation is essentially in four areas ie what is the likely timing of reopening of the hospitality businesses, what are the short term issues that are likely to be faced by the businesses, what would the new normal look like and finally what are future areas that the businesses would concentrate on to fulfil the collective potential that India represents.

1. The likely timing for restarting hospitality businesses presently ranges from a few weeks to a few months. The virus is still active and not at its peak in India. The easing of restrictions will have to follow the onset and control of the disease as we still do not have a cure. The hospitality businesses cannot function until the aviation, train services or other travelling restrictions for road are lifted. It seems presently that a partial lifting of those restrictions with precautions may happen by June 2020. Only then the essential travel can resume which would mean a slow opening for the domestic hospitality too. The International travel may not resume except for necessary services or cargo till the end of the year. However the opening may not be business as usual as they could be additional hygiene or other restrictions which may be imposed. The near term, I’m afraid may spill over to the winter months which is the peak travel season for India. 

2. The near term issues for hospitality businesses are likely to be severe. They are looking for a revenue winter in the near term and reduced occupancies as well as revenue for the next year after that. This again is tentative since there is no cure as yet the virus may repeat in another six months along with the flu season and hence there may be shut downs again. Again three or four star properties may revive faster than the leisure or the expensive properties as the propensity to spend is likely to come down too. Therefor cost management and survival should be the the mantra in the short term. Pay cuts, rationalising staff costs, deferring renovation costs unless essential will have to be the norm for the coming period. The situation is grimmer if you put debt servicing into the equation and it would be wise to look for reschedulement. In India, except for a few large owners like ITC , Oberoi or the Taj group, majority of the hotels are owned by individuals,realtors or builders though managed by large brands. Their ability to sustain this crisis is going to be a challenge. In the current market conditions any transactional solutions also may be nonexistent.

3. The new normal is going to be very different from what we have seen before. To be fair though the market for hospitality has been slowing down due to the economic downturn and many properties with huge debts are already in the market with no buyers. This event is set to substantially increase the stress in the sector. All hotel businesses will have to look at their business plans again specially the average revenue per room which is going to show a decline along with the budgeted footfalls. Financing structures for Hotels have always been a source of worry due to high land cost and building cost, not to mention the low tenure of term loans.  Time to reimagine for lower growth and lower fixed outlays.

4. However, it does not mean travel and consequently hospitality will finish. Given a safe vaccine which everybody thinks is a good possibility and a little time to get over the fear, the sector will be back in favour. India’s basic attractiveness still remains and we will need many more rooms than what we have in the future. While we have the market attraction we continue to have the problems too. Our Infrastucture is bad. Land is expensive and we still require myriad permissions to operate.  Time to work together through the hospitality associations to lobby for a very large stimulus package for the sector as it is the hardest hit, to revise financing rates as well as structures and lobby government to build infrastructure. There is a good chance you will be successful as the Government could be listening.

Tough times will pass, need is to persevere!


Shimla- a walk down memory lane…

Hills have had a special fascination for me for a number of reasons. They were the preferred holiday destination and part of my growing years were in a school in the hills more specifically Bishop Cotton School in Shimla. Therefore hills in and around Shimla are like home. Coming after many years there was a strange anticipation as our plane docked at the new Chandigarh airport. It was a sudden flood of memories and the curiousity to see if things had changed in the many years that I had not come.

We took a cab from Chandigarh which along with its two twin cities Mohali and Panchkula still remains as one of the best planned cities in India. It’s wide roads, large roundabouts, plazas and big houses are a pleasure though they are more crowded now than before. With new highways we did not have to go through the main town and were near Pinjore, a township which houses the heritage palace and grounds from Mughal times, in good time.The place is now run by Punjab tourism and remains a great tourist spot. The first stop was for lunch ,a little further up,at Timber Trail, a beautiful resort on the highway with also a development on the hill across connected with a rope way. Lunch on the terrace with view of the valley and the mountains and bright sunshine was the ideal balm after part of the journey and preparation with what is ahead. The place has only gotten better with time.

As you take the turn from Shoghi ,the last stop before Shimla, you get the first glimpse of Shimla sitting majestically like a saddle straddling across two hills. Magnificent view which has not changed over the years. From being the summer capital of British to being the people’s capital of the state of Himachal Pradesh, it’s been a change! It’s happened gradually but the vestiges of the heritage remain strong. We did not stay in the city but a little away at Mashobra and then Naldera.

Clean air, blue skies, strong sun though reasonably cold is what we experienced the next morning. With towering pines, flat walking road and snow clad mountains as a backdrop it was heavenly to walk. Far away from habitation you have only you and the mountains for your thoughts. Brought back memories of another time when one would sit facing the Tara hill from school on a bench on many days alone looking out to the tiny specs of habitation on the opposite hill wondering how the people on the other side lived! While alone, there was always a calm and stillness and a realisation as to how tiny you are to the enormity of the whole existence. I am still fascinated!!

Shimla as a town has not changed much. The Mall Road, the ridge with Christ Church, the Gaiety theatre, Scandal Point are the life pulse of the town. Crowded, fashionable and forever buzzing. Shops may have changed some but some of the old names are still there like Gainda Mull, Dewan Chand & Sons though with one name which has closed – Baljees. Many fond memories of Baljees with its happening restaurant ‘ Fascination’. Many a afternoon spent listening to the latest English music at that place.Paul McCartney’s Band on the Run and George McRae come to mind. Davico’s the dinner and dance bar has also closed down though India Coffee House is going strong as ever. Finally the house on the corner of Scandal Point was always occupied by the Grindlays bank and then Standard Chartered Bank and now it is the ICICI bank. Times do change maybe sometimes for the better. What was good to see was the rush of tourists as well as locals on the weekend which has not changed.

Some images;

Some romances never die down or finish. Mine is the one with the hills and Shimla!

Travel, Tourism and Hospitality – why not on Government agenda?

India as a country is no doubt one of the most endowed in terms beautiful terrain, mountains, beaches, culture and of course centuries of history. Yet we are not one of the key tourism destinations of the world. We draw less foreign tourists than single cities like Singapore or for that matter Dubai.Our economy grows at and has for some years  grown at a enviable rate of growth and despite that our focus on this area has been sorely lacking. We do recognise its potential but sadly have not taken any adequate steps to bring this sector to its potential. Where are we lacking?  

Sapphire, a couple of years back did a survey along with BW Hospitality magazine to find out what ailed the Hospitality industry as well as the Travel Industry in general. Some of the key factors which emerged were:

1. Lack of connectivity and Infrastucture – poor roads and poor air connectivity are a hinderance 

2. Safety – safety of travel registered very high 

3. Lack of quality hotel accommodation

4. Inadequacy of information on the Indian experience both terms of places to see,eat and of course stay

None of these issues are insurmountable but the solutions do lie at the door of the government. Successive governments have recognised these but the action has been patchy if not negligible. With the kind of demographics that we are faced with and if they are to remain positive as well as value accretive we need jobs. Travel, Tourism and hospitality have the potential to create many more jobs than some of the other sectors like manufacturing where you look at the demand for for your goods. Here we have the destination and Government need to take steps to make the investment through infrastructure. These sectors have the potential to give you superior foriegn exchange earning, jobs and improved Infrastucture.  Then why the Government apathy?

 Part of the fault also lies in how the current industry is organised. The industry associations are different for travel and tourism and hospitality. They often work at cross purposes and do not work closely with administrative government ministries which create infrastructure and provide as well as regulate key services. Another key hinderance are the laws relating to building and running hotels. Permissions  are multifarious and take a huge amount of time. These are long gestation as well as expensive projects and hence facilities for credit as well as bank facilities need to be tailored accordingly. The industry associations need to be relentless in bringing forward these problems to the government of the day.

This is not the first time that these issues are being raised but surprisingly nobody is listening!

BW Sapphire Hospitality Insights

Pleased to present our new report in the hospitality space “HOSPITALITY INSIGHTS – From the desk of the CEO” in conjunction with BW Hotelier

Click here to download!