Build a stronger risk management system

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Improved road and air connectivity is laying the foundation for more travel and related hotel demand, although some markets may need to readjust their demand patterns once connectivity creates wider travel options

Excellent prospects

Disruptors Starring – Covid19

Supporting distribution regulations; limitations; ourselves; lenders; trend assumptions

As we stand on the cusp of potentially changing circumstances, pragmatism is essential.

The positivity on the outlook is demonstrated by the pace of the resumption of activities (in some sections at least) when operations are authorized. Revenues for a set of nearly 300 selected hotels were more than 2.5 times between July and September 2021 compared to the same corresponding quarter for 2020. In fact, revenues for the July to September 2021 quarter (end of summer and normally the slowest time of the year) was higher than the January to March 2021 quarter revenue for these hotels.

Domestic demand was a revelation, as was its propensity for rates. It’s important that we build on this for the long term and not dilute our focus on this segment once inbound travel and business travel pick up again. Another positive is that a handful of states have recognized hotels as an industry. Finally, we are seeing strong interest in development efforts, which bodes well for the supply pipeline, especially as new markets and smaller towns get better resorts and hotels. Improved road and air connectivity is laying the foundation for more travel and related hotel demand, although some markets may need to readjust their demand patterns once connectivity creates wider travel options.

Business and large-format hotels continue to suffer, especially as inbound business travel and business travel are minimal. Gains in the leisure sector were prodigious, breaking records for several hotels. Demand related to weddings remains strong and the industry should actively work to create demand for delayed celebrations of weddings that have taken place on a limited basis during the pandemic.

But we need a strong sense of balance and caution when planning for the year ahead – which is why I say we ourselves could be major disruptors. We need to guard against (a) the accumulation of fat that often happens insidiously as better times return – some fat is necessary, but make sure it’s only good fats; (b) faulty assumptions about future demand attributes arising from pandemic experiences – boutiques have gained recognition, but cannot and will not replace brands; working side by side, they can nurture a new set of demands that will require careful assumptions about dynamics; (c) failing to recognize that the occupancy and ADR bonuses that have been earned by several resorts and hotels, during the pandemic, will permanently dissipate as normalcy returns – this will be a major challenge for owners , asset managers and operators with expectations and deliverables to be balanced and fair, and not a measure or excuse for capacity or laxity; (d) the tendency to focus entirely on the flavor of the day, rather than creating a wider range of demand base – Goa and Jaipur are excellent examples where an excessive focus on charters (and in that of specific markets ) and an excessive focus on the demand for marriages has worked to the detriment of the markets at different times.

More importantly, we must be prepared for the reality of the consequences of a people-driven industry. Restrictions will be imposed when health or safety issues arise; there is no escaping it, and self-pity will not help, even in situations where the restrictions seem excessive. We have the right to ask for help and to protest excessive limitations – and to do both with full force and vigor. But I see a need for greater balance on our part, simply because the frequent SOS and doom messages and outbursts of doom have had no results and the majority of the industry is still surviving on a one way or another. I in no way minimize or dishonor the losses and closures that have occurred due to closures and restrictions; Regret for these business situations and job losses runs deep in all of us. Yet, at the global industry level, we need more atmanirbharta. Let’s use the lack of political support as a catalyst to develop our own resilience and response mechanism. In the medium to long term, this will provide greater leverage, as well as support from our direct and indirect employees and perhaps even our demand base. Let’s build a stronger risk management system that adds to the core of our business and guides us to take timely corrective action.

Good times will soon be ahead of us; the dates are not yet clear, and this is beyond our control. However, it is up to us to be positive, strong and pragmatic; all of this to a greater degree and advantage than the enormous courage and strength they have shown since March 2020.

AUTHOR BIO Vijay Thacker is Partner and CEO, Crowe Advisory India; MD, Horwath HTL India

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