Revenues could fall up to 90% in April: Sarovar Hotels MD

Forum Gandhi Mumbai | Updated on April 06, 2020

Ajay Bakaya , Managing Director, Sarovar Hotels

The Indian hospitality industry is undoubtedly among the biggest casualties of Covid-19, as demand has declined to an all-time low. Sarovar Hotels and Resorts, which has 86 hotels and resorts, is not immune to it. Ajay K Bakaya, Managing Director, shared his master plan to help the company mitigate the losses. Excerpts:

Can you quantify the impact of the pandemic on your year-on-year ARRs (average room rate), occupancies, revenue and MICE (meetings, incentives, conferences and exhibitions)?

We started feeling an impact from mid-February with group and MICE cancellations due to the outbreak of coronavirus in the Far Eastern countries, followed by other geographies. Gradually, we were hit because of domestic market restrictions. By March, we saw a fall in revenue by 50 per cent and, for April, it would be lower by 85-90 per cent.

Historically, during any financial crisis, travel is the vertical that gets impacted first and recovers the last. FY21 Q1 will have the largest impact of up to 30-35 per cent revenue loss despite the lifting of the lockdown due to hesitation towards travel.

What are the cost-cutting measures that the company is planning to take to mitigate the losses?

Individual hotels have been able to bring down their daily expenses by 60-70 per cent, especially by downsizing air conditioning operations and the number of floors that are operational per hotel. Cities that had multiple hotels (of a group) were asked to limit the operations to only one hotel. Besides this, there is a deferment of rentals and annual maintenance contract renewals.

How has this impacted the investment plans of the company?

Anticipate a delay in the ground breaking of Sarovar 162 Bay Hotel at Sri Padur, outside Chennai. Any capital for operating a hotel, including major renovations, will inevitably be postponed.

How is the company planning to utilise its marketing budget?

The industry will have to re-assure its guests that the hotels have taken necessary measures to ensure they are sanitised. Our marketing initiatives will revolve around endorsing the actions, too. Adequate use of social media channels and PR activities will be needed to be made at city-specific levels to regain customer confidence.

With a larger dent on the economy, our major bread and butter — corporates — will become conservative in terms of spending and will look for special packages and deals, which again need to be marketed aggressively.

From an industry perspective, what is the short-term and long-term impact of the pandemic?

In the short term, several corporates will have a cash crunch, which will lead them to cut costs. This will impact the MICE business for hotels. There will also be a considerable delay in most of the property improvement plans due to the monetary crunch.

In the long term, companies will invest in larger business continuity plans with specific focus on disaster recovery centres so that even if there is an unprecedented disruption, the industry is ready bear the brunt.

Is there anything positive that may come out of the pandemic?

More and more people in industry will not on travel — there will be a move towards meeting online. It’s not positive for the hospitality industry , but it’s a positive for human kind and society at large. Online mentoring and coaching will continue in large scale.

Read also: Covid-19: Hospitality, F&B players reworking operational plans to stay afloat


Published on April 06, 2020

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