Budget hotels on the brink as covid-19 dries up business2 min read . Updated: 21 May 2020, 12:06 AM IST
The industry has demanded that the govt earmark funds that can be used as working capital to pay salaries
Many small and medium hotels and restaurants have either started shutting down, or are on the brink of doing so amid the lockdown that has depleted their cash reserves as customers have disappeared, industry executives said.
With no financial relief coming from the government and a demand recovery expected to be several months away, establishments feel that it may not be worth paying the high fixed costs. The Southern Star Hotel in Mysuru shut down recently and several others are on the way, they said.
“In the last two months, we have not earned a single rupee. Over the last two years, we have been renovating and spent more than ₹10 crore. Our expense on labour, water, and electricity alone accounts for ₹50-60 lakh per month," said G.R. Ganesh, chief financial officer, HRB Group, which owns the 108-room hotel.
The group has two other hotels, one each in Bengaluru and Hassan, which are closed because of the lockdown. It is yet to take a decision on these two hotels, Ganesh said. “We don’t think there is any hope of the tourism industry improving in the next one to one-and-a-half years. Even if they allow hotel bookings, they may put a lot of conditions for disinfection for which a room may have to be left vacant for 48 hours. That could mean one-third of my rooms are gone. How can I maintain a hotel?"
Expenses are piling up not only because of lack of bookings, but also the dearth of business conventions and events with most companies moving to video conferencing to ensure social distancing, industry executives said.
The hotel industry has demanded that the government earmark funds that can be used as working capital to pay salaries until things improve.
Nearly 60% of the workforce are migrant labourers who fled to their native states, adding further stress.
About 50% of restaurants and hotels will be shut down in the near term in the current situation, said Gurbaxish Singh Kohli, vice president, Federation of Hotel and Restaurant Associations of India.
“I have received 12 notices from hotels and restaurants in one locality, which are shutting down in just a day. It will only snowball in coming months. As an association, we are asking them to wait it out, but even we are not sure if something will come from the government. The small ones will die faster because all of them have migrant labourers who have already left," he said.