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Covid-19: Its Impact on Aviation and Hospitality Sector

Created on 28 Apr 2020

Wraps up in 4 Min

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Updated on 14 Jan 2023

Aviation and Hospitality Bleed Under Covid-19
As the world comes to a standstill fighting the COVID 19 pandemic, the Aviation and the Hospitality are reeling under the huge losses they have been incurring from the start of this virus spread. To contain the spread of the virus governments across the world have announced travel restrictions and lockdowns restricting the movement of people both domestically as well as internationally. Their operations have come to a complete halt with no sign of when normalcy will return. While the hospitality sector is projected to report over Rs 30,000 crore of loss of revenue during 2020, India's aviation sector will report losses over Rs 8,200 crore for just a quarter as international and domestic flights to stay grounded.

Restrictions on travel have a direct bearing on the hospitality sector. According to estimates hotel chains in India are staring at a loss of $4.2 billion to $4.7 billion in revenues due to the coronavirus outbreak. The loss to the organized market, which is about 5 percent of the total lodging sector in India, is estimated to range between $1.3 billion and $1.55 billion. This amounts to an erosion of 27-32 percent of the overall revenues as compared to the previous financial year. The hospitality sector is also likely to be impacted by large-scale cancellations and drop in room rates.

Establishments like bed & breakfast, pubs & clubs, cafés, restaurants, bistros, and beach bars, being small family businesses are very likely to live the crisis far worse than other big players in the private sector as they are intrinsically vulnerable to change. The impact by the changes in the supply chain, the lesser demand, might prompt some of them to partially or even fully shut down until the recovery can take place

A bird’s eye view on the impact that has created this tailspin.

  • The losses for the airlines as well as airports are primarily due to curtailed flight schedules, slide in new bookings, large-scale cancellations, and rescheduling of flights.

  • With international and domestic travel closed, demand for turbine fuel has substantially declined. In spite of the fall in the crude oil prices the benefit has not been reaped by the industry and set off these losses. However, once operations resume the airlines will get some respite from the low crude prices.

  • Outbound travel and inbound travel to India will be at an all-time low.

  • Layoffs in the industry have been high. Salary cuts and leave without pay have been announced by several airlines.

  • Deferring or scaling back of Capex spends on increasing the fleet size.

  • Large scale cancellations - The industry estimates that the hotel, aviation, and travel sector together may incur a loss of about ₹85 billion due to travel restrictions imposed on foreign tourists.

  • Small cafes, hotels, and motels have shut shop unable to sustain the high overheads.

  • The Restaurants Association has projected that even 10-20 per cent of job loss among its 7.3 million employees in restaurants across the country would mean up to 15 lakh unemployed. Something that would surely have severe social consequences

Creating Opportunities

It is a moment of pride to see the hospitality sector rise to the occasion in working together, showing their true hospitality commitments in helping out our society where they can. Many hotels have made their venue available for hospital beds and to house Medical staff. Foodservice teams and chefs worldwide are mobilized to arrange free meals to the medical staff while putting themselves at risk to battle the crisis.

As the relationship between each brand and consumer starts by building trust, regaining customer confidence will be the first step in overcoming the crisis. Strict sanitary and hygiene measures will have to be implemented, with new practices put in place to monitor and control the environment in which the business takes place.

The current situation also brings in new business models and opportunities, in defining, for instance, new delivery concepts, human capital sharing platforms, initiatives in promoting the “staycation or holiday concept” and the use of this time to work on activities that were earlier pushed aside like asset counts, security plans, defining standard operating procedures, social media plans, etc. 

But in all of this, there will also be an opportunity for the aviation sector to relook at the way we do our business, the way our costs are structured, the contracts that we have in different parts of the world. India is going to be one of the markets that will probably as a consequence of the lockdown and as a consequence of how Indians are behaving in this crisis is going to be one of those countries which recover relatively faster than other countries around the world and in this, aviation...

Due to the heavy worldwide impacts of COVID-19, humanity shall walk into a new era of a post-crisis world which will require the players of the industry to adapt their approach towards the new traveler. This will allow for new concepts to be developed aiming to benefit the society in need of emotional retreats and focusing on psychological well being.

The Government has to step in to shore up money which can be used to bear the emergency expenses arising due to coronavirus, and rollout a fiscal package to help badly hit sectors tide over these tough times. Stay positive, stay focused, and stay alert on your financial situation.

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Vivek Tiwari

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Vivek Tiwari is a Software Engineer and a Data Scientist who hopelessly fell for Economics. His plans to move to Management might now save mankind from his IITJEE selection story.

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