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Hospitality Industry Sinks: Woes of Restaurants, Hotels Amid COVID



The hospitality industry in India is expected to contract at an alarming rate of 65 per cent in 2021.

In the wake of the second wave of COVID, restaurant and hotel workers have come out to protest against regulations that ordered their outlets to be shut during the lockdown.

The movement, #MissionRoziRoti started last month, when the majority of hospitality businesses had been closed for more than a year and owners feared insolvency and job losses.

The hospitality industry in India is expected to contract at an alarming rate of 65 per cent in the financial year 2021.

For hotels, the occupancy level hit 18 per cent while RevPar (revenue per available room) declined by almost 80 per cent. The National Restaurant Association of India (NRAI), estimates that almost 40 per cent of restaurants in the country have closed down since 2020.

Even after such a rough year, the hospitality industry was one of the few sectors to have actively fought the pandemic on the ground.

After the lockdown announcement in March 2020, the hotel industry provided the health ministry with 50,000 rooms, while more than 400 restaurants across the country collaborated to distribute food packets to first responders and migrant workers.

Like many chefs in the country, Rishabh Singh, a young restaurateur and chef-owner at Shakahari’s in Ahmedabad, tied up with Just 100 Foundation to provide packaged meals for migrant workers. Not only did he do his best to keep everyone in his restaurant employed, but also used his kitchen as the ultimate resource to fight the pandemic.

The selfless nature of many such small chefs and restaurateurs to give back to the community has largely gone unnoticed. But chefs like Singh inspire us to explore a dimension of hospitality that is driven by intention and purpose.

The opening of restaurants and hotels in other countries indicates a direct relationship between vaccinations and demand recovery within the industry. However, with less than 4 per cent of the total population fully vaccinated, the road seems very uncertain for the industry. It has demystified a common industry belief: people will never stop eating out.

Post reopening, restaurants complied with every safety regulation issued by the health ministry, making dining out as safe and comfortable as possible.

Regular temperature checks, maintaining social distancing, proper sanitisation of stations, etc became a part of the standard operating procedures.

Just when it seemed like the restaurant industry was limping back on its feet, the second wave-induced restrictions critically challenged the survival of restaurants.

And while they struggle, there are two reasons for their decimation after the imposition of the restrictions: Food aggregators and the ignorance of the government.

Why Food Delivery Aggregators Are Not the Solution for Lockdowns

In the absence of outdoor dining, food aggregators became the only form of survival for restaurants – leaving them in no position to set regulations for delivery. While the restaurants ran into heavy losses, Zomato, in its mid-COVID report announced that the pandemic had positively impacted their business.

In April 2020, they came out with a press release, highlighting their safety measures – contactless delivery, face masks, temperature checks, disabling cash on delivery, etc. convincing the public that delivery was the safest option, even if that meant their biggest stakeholders, restaurants, bleeding.

The food-delivery space, which became a duopoly between Zomato and Swiggy, has gone from strength to strength, after the former acquired UberEats in 2020.

The food-delivery system had penetrated the Indian market long before the pandemic and the infrastructure was set for it to thrive. Though it provides a different dimension of service for restaurants, it is, by no means, a saviour of the industry.

Riyaaz Amlani, MD & CEO of Impresario Handmade Restaurants, said in an interview that online delivery platforms were charging close to 40 per cent commission for delivery and promotion.

Even before the pandemic, small restaurants were fighting a tough battle against Zomato and Swiggy. Issues such as high discounts and commissions, delayed payments, unreasonable penalties along with data masking were raised by NRAI in a report in 2019.

In a The Indian Express report, restaurateur Thomas Fenn explains the plight of a restaurant owner amid the pandemic while differentiating between dining and delivery models; and the problem with calling food-delivery aggregators the messiahs of the food business.

Similar concerns have been raised by restaurants across the globe.

Restaurant owners have not only been critical of food-delivery platforms but have also accused them of ‘stealing’ their customers.

Most affected are local and small restaurants that don’t have the resources to sustain losses for a long period.

They have often depended on local communities for their business and with the market getting more competitive, they find it difficult to differentiate themselves without an online presence.

The Inadequacy of Government Relief

Rather than intervening and working out a solution for this crisis, the government has only added to their woes.

The restaurant industry was extremely hopeful of a budget that would ease their financial situation with relief packages, relaxation of certain taxations, direct cash benefits, and handing out interest-free loans. However, the government turned a blind eye to almost all demands, leaving the restaurant industry to fend for itself.

The Modi government did announce a stimulus of ‘Rs 20 lakh crore’ to revive the economy but the hospitality industry received no direct help.

Under the MSME package, the finance ministry issued collateral loans worth 3 lakh crore to help restaurants with working capital. However, according to a survey, 44 per cent of MSMEs were not happy with the package and wanted more direct cash support from the government.

Piyush Goyal, Minister of Commerce & Industry and Railways, in a webinar, told the Federation of Hotel and Restaurant Association of India (FHRAI) to not expect the government to help out the premium hospitality sector. He also added that the government had not formulated any policy or relief package for their revival.

What Goyal fails to understand is that service professionals who work at five-star hotels do not qualify for the luxury segment.

The majority of chefs and service professionals, who work behind closed doors, are now unemployed or have been shifted to contractual settings. This segment has found it extremely difficult to survive and is in dire need of direct cash benefits.

The Road Ahead

The government must have provided all hotels and restaurant workers with unemployment benefits along with partial compensation for those covered under the Employee State Insurance Act.

This model has been followed in many countries. The Biden-led government in the USA recently provided direct help of USD 28.6 billion to small restaurants. Continued unemployment benefits with stimulus packages have not only ensured the basic survival of small businesses but also helped them to bounce back once the lockdown was lifted.

Dynamic leadership within the National Restaurant Association (NRA) successfully lobbied congress to include restaurants in the USD 1.9-trillion stimulus package for the revival of the economy.

Lawmakers have said that without the influence of the NRA, which questioned accountability within the government, restaurants would never be a part of this package.

Though it is unfair to expect the same from the National Restaurant Association of India (NRAI), political activism within the industry is a cause of concern.

While it spoke passionately against the problems associated with food delivery, it must hold central & state governments accountable for the ill-treatment of restaurants across the country.

As an association dedicated to working for the welfare of restaurants, it must speak for every small business, which is out of business and employees who have lost their jobs.

Today, the restaurant industry craves for what it pours out in abundance every night –care.

Restaurants have implemented all possible service models to survive in this pandemic, yet they find it hard to profitably deliver their promise of hospitality. Without direct support from the government, many of our favourite restaurants will shut down.

And as things stand today, it is evident that the government has no plans for the hospitality industry in its vision of Atmanirbhar Bharat.

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