May 23, 2020 TnH Global

STARING AT AN UNPRECEDENTED EXISTENTIAL CRISIS

With neither support nor assurance from the Government, traumatized India’s travel & tourism industry stares at an unprecedented existential crisis.

By Prem Kumar

It has been around two months since India has been under a nation-wide lockdown; however, a few restrictions have eased in the fourth phase of lockdown currently in force since 18th May. Although the corona pandemic continues to be on the rampage, spreading rapidly in almost every part of the country, the Governments felt it is imperative to start the process of reopening the economy gradually so many economic activities have been allowed to resume. The Railways is gradually starting operations, airlines are also all set to restart their domestic operations from 25th May under a new set of guidelines announced by the Ministry of Civil Aviation.

However, not much has changed for India’s travel and hospitality industry. International flights remained suspended. Hotels and restaurants are still not allowed to reopen. Tourist attractions are still out of reach. Thanks to the nature of the pandemic and the subsequent lockdown in the country and worldwide both leisure and business travel came to standstill.

At present, the travel and tourism sector is facing two kinds of challenges both related the pandemic: supply-side crisis and demand-side crisis. Even before the lockdown was imposed by many countries including India, demand for travel services sharply fell, thus creating a demand crisis for this sector. Possibility of getting infected during travel made people cancel and postpone their travel plans. People started avoiding places like tourist spots, restaurants, pubs etc. Therefore, travel became the immediate victim of the pandemic. Then came the lockdown grounding airlines and disrupting whole supply chain of travel & tourism sector on the one hand, and forcing people to stay indoors on the other. These twin challenges brought the industry to its knee, on the brink of collapse. As travel & tourism is not considered an essential service and the pandemic showing no sign of retreating, this sector travel has become the first and worst-hit sectors of the economy and would probably be the last one to recover.

Thanks to decades of political apathy, this sector has always been struggling to survive and grow. But the COVID-19 pandemic is proving to a death knell for many in the industry. With no source of revenues or liquidity, most players in the sector are unable to meet their operating costs like paying their employees and rents, and with no support from the government and no sign of recovery in near future, they are facing an unprecedented existential crisis. As the pandemic continues to rage on, no one is sure of when the tourism industry will be on track of recovery.

There is no cash inflow expected for many quarters over FY 20-21 as the key segments of the Indian tourism economy will be down. The international inbound tourists inbound and VFR – (visiting friends and relatives) and the outbound travel will remain mostly non-performing due to international flight restrictions and tragic impact in most key markets tourism markets of India.

Domestic travel and corporate travel within the country may slightly ease up post lockdown but will be highly restricted due to fear of travel among elders & children, the new social distancing norms, corporate travel freeze and the closure of the holiday season which will be impacting all leisure, adventure, heritage, spiritual, cruise and niche tourism segments.

Height of Apathy

Many governments in the world have come out with financial reliefs for this sector so that businesses operating in this sector can overcome this crisis and millions of jobs are saved. But for the Government of India and state governments in the countries, tourism comes at the end of their priority lists or does not come at all. India’s finance minister Nirmala Sitharaman, who recently unveiled 20 lakh crores economic revival package for the country, did not utter a single word of support or assurance for the country’s travel & tourism industry, leaving the industry shocked and shattered. In response to a question by a journalist about any relief for the tourism, hospitality and aviation sectors, the Finance Minister curtly responded by saying: ‘Theek hai’ (Okay).

Reacting to the package announcement, Subhash Goyal, Honorary Secretary of FAITH said that the entire tourism industry is totally disappointed that out of the 20 lakh crores bail-out package, not a single rupee has actually come for a bail-out of the travel tourism & hospitality industry. Expressing his disappointment over the package, Pronab Sarkar, President, Indian Associations of Tour Operators (IATO) said “We are completely disappointed by government’s lack of empathy for the suffering of the tourism sector. This sector, directly and indirectly, employs about 4 crores people yet not a single word of solace for the sector in the entire five press conferences held by Hon’ble Finance Minister.” Sarkar said that the tourism industry was the first to be affected, even before the lockdown came into force when the international flights and visa got cancelled starting with China, followed by Italy, Iran and Korea and then followed by all the countries. Lack of any mitigating announcement by the Finance Minister in the series of announcements made only goes to show that the government consider the entire sector not worthy of any attention.

The Indian Travel & Tourism industry was expecting a set of survival measures from the ₹ 20 lakhs crore economic revival package. FAITH had sought a dedicated interest and collateral-free long term fund for paying salaries and operating costs and for a minimum of 12 months of complete waiver of fixed central and state statutory and banking liabilities without any penal or compounding interest which has not been addressed.

FAITH, an umbrella federation of 10 associations in the Country’s travel and hospitality sector had been constantly engaging with all factions of the Government over the past 10 weeks including the PMO, ministries of Finance, commerce, aviation, and tourism, RBI, Niti Aayog and the Empowered Group 6. According to FAITH, the industry, believed to contribute directly and indirectly about 10% in the country’s GDP, has already seen over one-quarter of accumulated losses since February.

The industry had sought financial support in the forms of the refund of advance payments made to the airlines for air tickets, the refund of advance payments made for luxury trains and wildlife safaris, exemption from GST, enhancement of SEIS to 10%, reduction in VISA fee and several other measures.

Expressing his dismay on being ignored by the Government, Gurbaxish Singh Kohli, Vice President, Federation of Hotel & Restaurant Associations of India (FHRAI) and President, Hotel & Restaurant Association of Western India (HRAWI) said, “We are in a state of shock because of the insensitivity shown by the Government! As always, the hospitality industry has been completely ignored. It’s almost as if our existence or imminent doom does not matter at all.”

In her interview to the Economic Times, in response to a question that there was no direct support for the stressed industries such aviation and hospitality, the Finance Minister said that the package has been designed in such a way that every sector benefits. “Somewhere, every sector, even though I have not named each one, will be touched by the banks being able to extend, without additional collateral. It is designed with everybody in mind and therefore every sector will benefit from what we are doing.”

Her junior in the Finance Ministry Anurag Thakur told PTI that the Modi government is sensitive to the need of the people and businesses and that his ministry is taking inputs from the various sectors. “Tourism is a very important sector for us. Hospitality is an important sector for us. Civil aviation is an important sector for us. In a country like India where they contribute to the GDP, provides millions of job. We are very open about these sectors and others if they have been left out,” the Minister of State for Finance said. But Thakur added that many will also fall into other categories which have been benefitted. Some will benefit from the series of announcements made for the MSME sector. Small hotels which fall into this category can take advantage of the announcements made in the Atmanirbhar Bharat Abhiyan package. He added that the government will continue to take action to deal with the current economic crisis.

India’s travel and Hospitality, still seen as an underdeveloped sector, faces an unprecedented existential crisis, and in the absence of any support from the government, many segments of the industry may not be able to sustain their businesses for long to benefit for any recovery in future. With no visibility of cash inflows, the Indian tourism industry is now looking at large scale bankruptcies, business closures which will lead to job losses across cities, towns and hinterlands of India. This has the potential to set the Indian tourism, travel and hospitality industry by many years back, and that would be a setback for the whole economy.