India’s tourism sector is in dire straits, and urgent relief from the government is needed to help tour operators survive the ongoing pandemic, urged Indian Association of Tour Operators (IATO).
IATO president Pronab Sarkar said that the sector, which contributes almost nine per cent to the country’s GDP, is tottering on the brink of collapse, putting millions of jobs at risk, reported Times of India.
Waves of layoffs and furloughs have plagued the tourism industry, while remaining workers are getting less than 30 per cent salary, IATO said in a statement issued on Monday.
As such, IATO has appealed to the government for various relief measures, including a one-time financial grant of the gross salaries amount paid to the staff of tour operators on the basis of the balance sheet of fiscal year 2018-19 which has been submitted to the government authorities.
The industry body has also requested for the government to raise duty drawback under the Service Export India Scheme from seven to 10 per cent. “Such a measure would go a long way in alleviating the liquidity problem as the sector currently has zero billing and this would help tour operators to survive,” it said.
IATO has also sought amendment in rules with regards to granting of loans to MSMEs, as it claims that at present, only companies which have established relationships with banks are being offered loans.
“We understand the government finances are stretched, and therefore, the measures we have sought do not involve huge outgo from the government but if these relief (measures) can be given now, these can go a long way in providing succour to the stressed sector, failing which many tour operators would shut down,” Sarkar said.
On Monday, India surpassed Brazil to become the country with the second-highest number of Covid cases, recording more than 4.2 million confirmed infections. The high case tally, coupled with limited international flights, is keeping away inbound travellers, according to a GlobalData report.
The same report also stated that up until recently, even domestic tourism was not an option for most Indians as various states had restricted inter-state travel. While all restrictions on inter-state or inter-district movement have since been lifted, it will likely take a long time for tourist volumes to reach pre-Covid levels, it added.
Weighing in on IATO’s plea for government intervention, Animesh Kumar, director of travel and tourism consulting at GlobalData, said: “IATO comprises of 1,600 member businesses covering all segments of tourism industry and many of these businesses are smaller ones. The crisis poses existential risks to smaller players as they lack deep pockets to see them through the difficult times. A helping hand is indeed required for the survival of tourism industry in India.
“However, giving any type of direct financial aid may not be prudent. The Indian economy is not in a healthy state and it will put an additional burden. More importantly, the current cash flow crunch in the tourism industry is an issue created due to the crisis but it is not the root cause. The situation has arisen due to the pandemic and because people have almost stopped travelling. Instead of giving financial grant, it is more important for the government and the industry stakeholders to take steps to bring in inbound tourists.
Kumar cited examples of how travel-dependent economies across the globe have come up with innovative solutions like the SG Clean and Qatar Clean initiatives to boost consumer confidence, as well as implemented travel bubbles, pilot projects and incentive schemes to stir up travel demand.
He concluded: “Understanding and leveraging best practices from other countries/destinations is crucial for all stakeholders in India to come up with the right strategies for the survival and revival of the tourism industry. The government, on its part, must extend support to ease the immediate cash flow challenges through measures like interest-free loans, provident fund relief and GST exemption.”
As Phuket’s hotel industry inches closer to breaking point, industry leaders are urging the government to throw a lifeline to the beleaguered sector in hopes of tiding it through the high season.
The call comes as Thailand’s controversial Phuket Model international travel reopening scheme runs into a roadblock due to a new virus case. Meanwhile, hotels in Thailand’s leading resort island struggle to sustain operating viability based on domestic tourism.
According to the Airports of Thailand, passenger arrivals at the aviation gateway have plunged 65 per cent year-on-year from January through July of this year.
What remains clear is that the 86,000 rooms in Phuket’s registered accommodation establishments cannot realistically break-even or even be cash-flow positive with only domestic demand. This realistically could set the scene for 50,000 job losses in the hotel sector this year if there’s no support forthcoming or international visitors are not allowed in.
One of the green shoots is the Alternative Local State Quarantine (ALSQ) programme, with over 60 island properties applying. While this programme is meant to emulate the ASQ programme in Bangkok, given there are no direct flights to Phuket, the government needs wider support of a return of international travellers at a local level and implement inter-ministerial coordination before it could materialise. But this may take months.
Anthony Lark, president of the Phuket Hotels Association that represents 78 hotels in Phuket, said: “The math simply doesn’t work with single-digit occupancies being reported. No amount of induced local demand can prevent the dramatic continued loss of jobs and rapidly eroding financial crisis for owners and operators. We strongly advocate a safe, pragmatic, and strategic reopening for foreign travellers.”
With tourism being the lead economic indicator in Phuket, data newly released by hospitality consulting group C9 Hotelworks reveals the Covid-19 impact on the hotel development pipeline with 69 per cent of hotels now being delayed or put on hold.
Looking at the economic consequences, at the end of 2019, there were 1,758 licensed accommodation establishments on the island and today incoming projects stand at 58 hotels, representing a 19 per cent rise in supply with 16,476 additional rooms planned.
C9 Hotelworks managing director Bill Barnett said: “Thailand’s failure to relaunch overseas tourism creates a dangerously perilous scenario for Phuket’s hospitality industry. The domino financial impact is not only on hotels and the expanded tourism sector, but it suffocates the development pipeline. This will negatively trigger the erosion of jobs in construction, real estate, retail and ultimately be manifested in consumer credit defaults. The situation is bad, and likely to get worse, as operating hotels (which) remain incur losses day in and day out.”
In terms of updating the Phuket hotel situation on the ground, there continues to be much controversy and a lack of national and local consensus over the proposed Safe and Sealed sandbox long-stay programme. While a stark warning was issued last week by the Bank of Thailand (BoT) over the potential disruption to the heavily tourism-dependent country, the fate of Phuket’s coming high season remains very challenged.
Citing a way forward, C9’s Bill Barnett said: “Any reopening plan must not only be well planned but has to win the hearts and minds of the Thai people to see any chance of success. While the island may hold the keys to the Kingdom in leading a restoration of tourism, the more critical issue is how hotels can fight for their lives in the current state of limbo.”
Speaking about Phuket’s current situation, Anthony Lark added: “Firstly, greater proactive dialogue between the public and private sector has to be undertaken. We can’t simply say we are now in unknown territory forever. Steps must be taken and a single voice formed.
“Secondly, the BoT has to look at interim measures to assist hotels with short-term operating bridge loans to weather the storm and retain jobs. Tourism is a human endeavour, and without protecting and nurturing our Thai workforce, there will be no recovery.”