The word ‘unprecedented’ has been used so often to describe the impact of the coronavirus pandemic that its sharp urgency seems to have been dulled. For the tourism industry — which is built on the ability to help people be out and about — it is a cataclysmic event, and for the next many quarters we are going to be locked in a battle for survival. How to revive and thrive are questions that can be dealt with later. Covid-19 has cast a pall on all segments of the travel and hospitality industry.
Countries around the world have sealed international borders, international and domestic flights have been suspended, which has been compounded further by countrywide lockdown with intercity and interstate travel completely forbidden – it’s a situation that has no parallel at this scale. Italy has already announced that it is closed for tourism until the end of this year. The year 2020 could be a complete washout for the travel and tourism industry in India too if we don’t take immediate steps – not just to contain the impact of virus on lives but also its devastating impact on businesses that support millions of livelihoods.
And if this is considered short-term pain, a bigger challenge stares the industry in its face. All cash inflows of the travel and hospitality industry have completely frozen and the situation looks unlikely to improve anytime soon. The tourism and hospitality industry will continue to feel the heat as the restrictions imposed on travel will ease only gradually and apprehension to travel will persist for many more months.
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Life support for tourism industry
Battered by the pandemic, the Confederation of Indian Industry (CII) estimates that the tourism industry is staring at an overall loss of Rs 5 lakh crore and job cuts impacting up to five crore people. Globally, aviation sector has been one of the hardest hit and the situation is dire in India with many looking at job cuts and even closure. The organised sector in the tourism industry — which consists of branded hotels, tour operators, travel agencies — may be the worst hit with an estimated loss of Rs 1.5 lakh crore. Other than the organised sector, the tourism industry is a source of employment for homestays, small and budget hotel operators, tour guides and others for whom this is going to be an existential crisis that they can’t survive without support for more than a few months.
For an industry that contributes nearly 10 per cent to India’s GDP – immediate intervention is needed from the Narendra Modi government for ‘survival’ measures to prevent mass bankruptcy and layoffs by the crores. The immediate need of the industry, including the aviation sector, is liquidity for the short and midterm in order to meet the fixed costs during the lockdown period as well as for rebuilding businesses almost from scratch. At this point, any support on loans with easy terms would be of immense help. Loans could be extended after assessing the track record of the companies and their potential paying capacity but with a long term view rather than taking a conventional super conservative collateral-based lending approach.
It’s not going to be an easy call for the banks within the defined norms of lending and NPA, so the Reserve Bank of India (RBI) will have to help make changes to ensure that the liquidity easing being done actually reaches the corporates who direly need it and help save millions of jobs.
Also read: International travellers can shrink from 1.4 billion to under 1 billion due to Covid-19
Liquidity is key
On-ground assessment of the situation points towards the fact that the industry would need more liquidity support and, therefore, the current moratorium period of three months needs to be extended. The RBI is well capitalised and will have to play a lead role in setting the tone from the top, mandating a widespread distribution beyond AAA corporates. Our financial sector was already passing through difficult times with certain NBFCs and banks not being in the best of health and that would be weighing on the entire sector leading to risk-averse approach to lending. They would need help and confidence from the RBI in order to change the mindset.
Apart from this, the Modi government also needs to consider deferment of statutory liabilities including GST and advance tax payment timelines and removal of fees for upcoming licences, permits renewal and excise exemption for the travel and hospitality industry. The government should bring Aviation Turbine Fuel under the GST ambit to offer long-term relief to airlines apart from offering rebates on landing, parking and housing charges. Last year, Prime Minister Narendra Modi had given a clarion call from the ramparts of Red Fort urging Indians to explore 15 cities within India by 2022 to promote domestic tourism — a money-spinner for our economy. A 100 per cent tax rebate for the next three fiscals should be given to people booking domestic tourism packages through Indian travel businesses.
Travel and hospitality is a sector that creates massive direct and indirect employment, drives consumption, earns foreign exchange and invigorates the domestic economy across a range of other sectors including transportation, food, beverage, lifestyle, culture, recreation, sports and more. Covid-19 has brought the momentum of the travel industry to a halt but with timely intervention and requisite support from the government, it’s a sector that can help lead recovery for the economy while continuing to support millions of jobs.
The author is the Founder and Group Executive Chairman of MakeMyTrip. Views are personal.