The temporary closure of 400 room Hyatt Regency Mumbai due to a shortage of funds may have raised many eyebrows and has highlited the tremendous impact of Covid-19 on the Indian hospitality sector.
Asian Hotels (West) failed to repay the principal and interest of 4.32 crore Indian Rupees taken from Yes Bank. The company has a total debt of 262.54 crore INR. After the hotel announced that it is temporarily closing its operations, its shares fell by more than 13% amid uncertainty over its future.
Following the failure of the company to pay Yes Bank’s due installment on April 28, 2021, Yes Bank has held all funds including the daily hotel collections in escrow account. The hotel is prevented from making any sort of payments from this account including taxes, salaries, vendor payments, and any other payments for the hotel’s essential services.
Almost every hospitality company in India is in some kind of debt. As tourism is halted from many months now, the hotels revenue has taken a major beating. The profitability of most of these hotels depends heavily on inbound tourism. Since the advent of the pandemic, many of the hotels have seen a sharp decline in revenues – as much as 80% decline. This is raising serious concerns among the industry insiders.
Big hotels are operating at barely 5% occupancy across all the major cities of India. With the revenues almost non-existent for almost a year and half, expenses like electricity, water, taxes, salaries, property maintenance costs, etc have further emptied the existing cash reserves of many hotels.
According to the Hotels Association of India (HAI), hotels across various categories are operating at zero revenue from quite some time now. The association’s preliminary data shows that more than 40 percent of hotels have shut down and about 70 percent, mostly small ones, may face closure in the immediate future.
The alarmingly dire state of the hospitality and tourism industry has put in danger around 90 million jobs that the industry supports. A huge portion of these jobs were lost in the first wave itself.