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Hospitality

Published on: March 8, 2021, 8:04 a.m.
How IHG plans for the new normal
  • The new Holiday Inn Chandigarh Zirakpur is the group's second hotel in the city

By Suman Tarafdar

The big question heading into a post pandemic world – which all hope comes sooner rather than in 2022 – for the hospitality sector is the rate of revival for the sector. Brutally impacted by lockdowns globally, the sector has taken a considerable beating in India too. Amidst this, leading global hospitality chain IHG, whose presence in India includes InterContinental Hotels and Resorts and Crowne Plaza, besides the various Holiday Inn sub brands, has announced the introduction of another of the group’s brands – Staybridge Suites, its upscale extended stay brand, with the first hotel slated to open in 2023 in Bengaluru.

Emerging from the lows of the lockdown remains a priority for IHG. “The Covid-19 crisis has impacted the everyday lives of billions of people globally, severely damaging economies and posing the biggest challenge our travel industry has ever faced,” admits Sudeep Jain, managing director, South West Asia, IHG. “However, since the easing of restrictions in India last year and especially with people resuming domestic leisure travel, occupancy across our portfolio has improved and we have crossed 50 per cent averaging occupancy threshold.”

Challenges galore

The body blow to the hospitality sector is a serious one and the process of recovery overall is expected to be a long-drawn-out one. In its report, rating agency ICRA expects the domestic hospitality industry to witness a decline of over 65 per cent in 2020-21 with massive operating and net losses wiping out the cumulative profits of the four past years. However, it predicts that there might be a recovery in demand in the latter part of financial year 2021-22, dependent on the vaccine rollout.

HVS Anarock estimates revenue loss in 2020 of Rs89,813 crore for the Indian hospitality sector, with occupancy down by 31.6 per cent and RevPAR (revenue per available room) down a huge 57.8 per cent. ICRA predicts a RevPAR decline of 70-75 per cent.

Jain admits to considerable headwinds facing the sector. “Last year, we witnessed the lowest occupancy and revenue in history,” he points out. Segments such as business travel and events including weddings have been adversely impacted. “The overall contribution from our catering and events segment had reduced by 11 per cent last year,” Jain points out.

“The travel landscape has changed dramatically and we’ve had to move to ensure our shape, plans and resources fit this trading environment and the needs of our owners – and importantly, allow us to respond with agility and pace as markets come back to life. At the peak of the crisis, we had to significantly reduce discretionary costs, marketing spends and capital expenditure and relook at resourcing, as we prioritised only what is needed to drive a recovery.”

Another significant challenge is the unlikely return of inbound travel. “Understandably, limited international business still remains a challenge for the hospitality sector, as we continue to have restrictions on international air travel,” remarks Jain.

Road to revival

What keeps the industry optimistic is the fact that people’s appetite to travel has not changed, says Jain. “We know this, as the business started to pick up as soon as Covid-19-related restrictions were eased in India. We have been recording a gradual increase in occupancy across our portfolio. The sentiment is further improving with developments related to the vaccine and we expect this to reflect in our business performance as well.

The shape of recovery remains varied globally, but we’ve continued to outperform the industry in key markets thanks to the strength of our teams, business model and segments in which we compete.”

Business recovery in India, as in any other market, will depend on an effective distribution of vaccines, agrees Jain. According to him, since the beginning of the crisis, “we have moved at pace to evolve our offering in order to respond to market needs better. We are working closely with new revenue centres such as food delivery portals across our hotels and have managed to gain market share in that space. We have also developed customised packages, which helps us partner with preferred vendors to lease our outdoor venues/lawns, and generating incremental revenues”.

The absence of inbound travel has put a renewed focus on domestic business. “In terms of business segments, our focus will be to continue leveraging the domestic travel potential – across both leisure and corporate segments,” affirms Jain. “We will also continue to tap into opportunities for hosting intimate weddings and other social events.”

“The speed of our response to protect hotel owners by reducing operating costs, meeting heightened consumer expectations around flexibility and cleanliness and ensuring that we protect the health of our business has been key to our strong progress versus industry peers to date,” stresses Jain. “Our partners have appreciated our response and have reciprocated with faith and confidence in our business and our ability to effectively manage the situation as best as possible.”

The group is banking on a slew of new initiatives. “Our tailor-made intimate wedding packages powered by IHG’s assurance of cleanliness and safety have become extremely popular with guests for their weddings and social event requirements. Also, the global IHG Meet with Confidence initiative, which allows bookers to confidently book future group and meeting space with zero cancellation fees or attrition fees at participating hotels, has helped us build confidence and trust amongst MICE planners.”

The number of new hotel signings and openings has fallen significantly. “Last year, we signed five new hotels in India and opened three new properties across SWA,” says Jain. “Understandably, this is not at par with our usual signing and opening numbers in a year. We are optimistic for the year ahead and are in active discussions to sign and open more hotels in the mid to long term.

Depending on the stage of the project, there could be some delays in construction. That said, projects that are currently in the initial cycle or towards the end are expected to continue as planned.” IHG recently announced the opening of Holiday Inn Chandigarh Zirakpur.

Jain says the group is “encouraged to see that occupancy is steadily improving in many of our markets. And, with leading brands, a resilient business model, strong cost controls and access to a healthy level of liquidity, we look towards recovery with confidence, while recognising that it will take time and that the situation will differ from market to market”. Recovery, however, could depend as much on external factors, ranging from revival of the economy to how effective the vaccine rollout is or even how confident Indians feel in crowded spaces such as weddings or conferences.

Suited to Staybridge

 All-suite hotels are a rarity in India, but this will change as IHG has announced the entry of another of the group’s brands, Staybridge Suites, with the signing of the first hotel for the brand. Signed as a management agreement in partnership with NR Greenwood Construction Pvt Ltd, the hotel is expected to be operational in the first quarter of 2023 in Thanisandra, a tech hub in Bengaluru. The hotel is slated to offer a residential-style of hotel experience with 170 suites with kitchenettes.

It will be designed for multi-night business and leisure travellers for days or even months at a time. The hotel will also feature two meeting rooms, a 300 m2 dining room, and will provide facilities such as a business centre and a gym, with the overall guest experience being enhanced through IHG’s signature hospitality.

What’s changed

The pandemic has brought a significant shift in operations

Cleaning protocols: The emphasis on cleanliness, sanitation, hygiene and well-being of guests is the dominating area of focus. IHG has partnered with industry leading experts Cleveland Clinic, Ecolab and Diversey, to launch the global IHG Clean promise, ensuring a safe experience for guests.

Technology: IHG is deploying new technologies that will enhance guest experiences whilst making them feel safer.

F&B: To keep up to speed with the shift in demands, it has introduced F&B delivery service across its portfolio.

Training: The group continues to provide relevant training and business tools to its staff to keep them abreast of evolving cleanliness and safety guidelines, new technologies being deployed at the hotel and new guest experiences.

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