- FHRAI has mentioned that nearly 25% of businesses will permanently shut down before the end of the current financial year
- “The hospitality industry is denied a benefit offered by the Government simply because it doesn’t fit the pre-defined conditions for loan restructuring”, G S Virk, MD, Park Plaza, Chandigarh
THoD Newsdesk, New Delhi: The hospitality sector in India is now gradually waking up after a sabbatical of eight long months, induced by the coronavirus pandemic. Although many hotels and restaurants opened up their shutters, welcoming patrons again, quite a few could not afford to do so and may not be able to at all. Eateries and other hospitality businesses are facing a hard time due to uncertain business conditions and restrictions on Foreign Tourist Arrivals (FTAs), shortage of labour, low domestic footfall and no access to working capital.
The apex body of hotels and restaurants in the country, Federation of Hotel and Restaurant Associations of India (FHRAI), has mentioned that nearly 25% of businesses will permanently shut down before the end of the current financial year.
Gurbaxish Singh Kohli, Vice President, FHRAI, was quoted saying, “The pandemic enforced lockdown has broken the back of the hospitality industry. Reopening for business has brought us minor relief today but even this could be short lived. It’s festival time and things may look optimistic now but the threat of Covid-19 still looms large over us all. As we speak, the UK is under complete lockdown once again. So, to assume that things have gone back to normal wouldn’t be prudent at this time. The hospitality industry anticipates poor business for at least another year and until then, to keep it afloat, it needs working capital. Today, sustaining is extremely crucial because if the industry is allowed to wind up, rebuilding it will prove to be an even bigger challenge.”
This industry is a labour and capital intensive sector, with high gestation periods, which will further make it a challenge to start from scratch, especially during such times of financial loss. The FHRAI has specified that banks fail to realize the underlying difference between hospitality businesses and businesses from other sectors.
G S Virk, MD, Park Plaza, Chandigarh, stated “The hospitality industry is denied a benefit offered by the Government simply because it doesn’t fit the pre-defined conditions for loan restructuring. The biggest hurdle that the industry faces under such terms is the RBI directive which expects an account to be regularized as of March 2020 without which the establishment cannot avail loan restructuring. The hospitality sector’s predicament here is that March is the off-season for business and during this period most accounts are almost never in the SMA-0 class. Most hospitality players are able to regularise the book of accounts only during or after the holiday season. This has become a barrier for Hospitality players to even qualify for loan restructuring. The nature of our business is unique and unfortunately, because of this, we are deprived of a benefit specifically offered to rescue us.”