Chennai: The second wave of COVID-19 has forced a tsunami of permanent restaurant and hotel closures in Tamil Nadu, sinking under the burden of mortgage payments, declining attendance, increasing restrictions and the anticipation of a third wave. The hospitality industry has made a clear appeal to the state government to receive vital support to overcome this existential crisis.
Rajkumar had weathered several literal storms during his 30+ years in the restaurant business. Through Cyclones Ockhi and Vardah, other business setbacks and crises, his restaurant survived. He joined the hospitality industry as a class X student in Madurantakam town in Tamil Nadu, before moving to Chennai in 2003 and opening the Aryabhavan Hotel at Perungalathur Bus Station. In 2020, he also owned another grocery store, Ganapathy Mess.
When COVID-19 hit, it had an unprecedented impact, with the restaurateur having to close both restaurants. With a bank loan of Rs 10 lakh hovering over him, he sold his jewelry, put his car on sale and used up all his savings. âWe had just started to recover from the first wave when the second hit us. I do not know of any other source of income. The hotel business had been my way of life. I have never felt so helpless, âhe said.
The majority of software professionals, construction workers, call taxi drivers from Perungalathur, a major public transport and IT hub, have left for their home countries or have closed their doors. Regular customers of restaurants like Rajkumar’s, their unemployment or absence has had a domino effect on hotels.
Mr. Venkadasubbu, president of the Tamil Nadu Hotels and Restaurants Association, predicts a bleak future for the industry. About 2,000 hotels have closed permanently, many more are on the verge of closing and at least 50,000 workers have lost their jobs, he says.
The biggest grievance from hoteliers is that the state government has allowed textile and jewelry showrooms to reopen, but hotels have yet to receive the go-ahead for dining. âWe can’t run restaurants with just parcel services, which only account for 10-15% of our business income. From this, online delivery partners like Swiggy and Zomato take 20% of that income. There is no gain, only expenses on our side. If other industries open up, so must restaurant services. A blanket ban on this hardest hit industry will make matters worse, âhe said.
The hospitality industry came to a screeching halt with the announcement of the lockdown last year, but with the silver lining that the economy will open up soon. A year later, many restaurateurs have exhausted all their options for getting out.
More stops to come
KL Kumar, president of the Madurai District Hotels Association, said that around 1,000 small and medium-sized hotels are currently on sale in Madurai, Theni, Dindigul, Tirunelveli and Ramanathapuram.
âWe kept trying to reinvent during the pandemic by introducing new dishes like ‘face mask’ parottas to raise awareness of safety protocols. But all we’ve seen are more warrants and curfews being imposed on us over time. We are ready to reopen with all standards in place to ensure safety, hygiene, social distancing, sanitation and controlled entry, âsaid Kumar, who also owns the Temple City restaurant chain in Madurai.
Mr Santhosh, real estate agent for the MS group of companies in Hosur, pointed out that most of the hotels sold are at the ends of the budget spectrum: small hotels and five-star restaurants. They were weighed down respectively by the lack of financial support and the enormous maintenance costs. Restaurants on the outskirts of town and highways have also had to close as the number of customers has declined due to transportation restrictions. Food stores in shopping malls have closed due to the high rents they pay, he added.
Even well-established restaurant chains like Adyar Ananda Bhavan have had to close five of their outlets. âThe big chains suffered losses in crore. The hospitality industry has been under threat for over 18 months and will only get back on track when the purchasing power of the public is restored, with no glimmer of hope in sight anytime soon, âsaid KT Srinivasa Raja, Managing Director of the Adyar Ananda Bhavan.
Laid-off workers eagerly await recall
Mr Ravi, chairman of the Chennai Hotels Association and chairman of the Namma Veedu Vasantha Bhavan hotel group, had temporarily closed two of its branches. âWith the catering businesses shut down, an entire dairy and agricultural supply chain slipped into limbo, resulting in huge amounts of food waste. About 10 lakh people are directly or indirectly employed by the hospitality industry, which includes hotel workers, farmers, people involved in poultry and fishing, milk vendors, among others. Every other day I get calls from anxious workers in Bihar waiting to come back. If I don’t call them back to work soon, they’ll turn to construction work or some other source of income. We are going to lose a highly skilled and skilled workforce, âhe said.
Vellore-based P. Boominathan, who ran four restaurants, has closed all except his first business, Kanna Saiva Unavagam. This point of sale also carries out only 10% of its usual activity, via delivery services.
When he opened the fourth business, Sai Sabari Restaurant on the Chennai-Bengaluru Highway in 2018, he roped Nepalese workers and hotel management graduates from Rajasthan to cook North Indian cuisine. The restaurateur has fought tooth and nail to keep his workforce by providing them with accommodation and minimal payment during the pandemic, although there hasn’t been a lot of work.
âMost workers are either stuck in their hometowns or hang out at their workplaces doing odd jobs and waiting to be rehired. I have to pay the bank for a loan I took out and I don’t know how long I will be able to do it. My restaurants have been closed for almost 16 months, except between November and January, âhe said.
Falling industry calls for help
Even though COVID-19 standards were relaxed, many establishments had to be closed because operational costs, payment of salaries, bank interest and other expenses could not be covered.
Earlier this month, the Reserve Bank of India asked banks to lend to contact-intensive sectors such as hotels, restaurants, among others, opening a liquidity window of Rs 15,000 crore for lenders. Borrowers with loans of up to Rs 50 crore were eligible for loan restructuring, in which they could delay payments without being classified as in default.
âAlthough the government has announced a loan restructuring, the burden of financial calamity continues to loom. India can learn from countries like the UK, which included the hospitality industry as part of their economic stimulus package, âsaid Ravi.
On June 19, the Chennai Hotels Association contacted the state government to request that EB fees be paid in installments instead of late payment penalties, store rent waiver, GST penalties, business license fees. , sanitation and water costs, property tax, among other tariffs.
Sundar Singaram, director (operations) of the South India Hotels and Restaurants Association, said hotels in the South Zone were on the decline even before COVID-19 hit them, with an occupancy rate of 50%.
âThe average price of rooms in a five-star hotel had fallen to 4,500 rupees per night in Chennai. About 65% of the expense at these hotels must be incurred regardless of occupancy rate, as their infrastructure is capital intensive, resulting in high maintenance costs by default. Industries and businesses provide a solid foundation for occupancy and unless this accelerates hotels cannot have great pricing powers, âhe said.
For the next few years, the hospitality industry will face a difficult period, he adds. âThe business experienced some respite in October-February, with wedding ceremonies being held with strict restrictions. Yet the usual share of press meetings, awards ceremonies and other such corporate events has disappeared. Hotels have been turned into COVID-19 neighborhoods and the industry has offered its infrastructure and support staff for half the price. Many large hotels were auctioned off by banks after the second wave, although there were no takers. Unless the government steps in to get the industry back on its feet, there will be an increase in delinquencies on loans, permanent closings and no place for tourists and others upon their return from the pandemic, âSingaram said.
Even though COVID-19 left a trail of destruction, global fast food chains had the financial power to stay afloat because they were well capitalized. According to Ashutosh Bihani, CEO of Dindigul Thalapakkatti, brands like KFC were operating at 95% of their capacity before COVID-19, mainly due to deciding factors like brand, cuisine, and delivery requirement quotient. The profile of a large part of their clients – the young and the working – has also not suffered as large a loss as the other sections.
Dindigul Thalapakatti, which has an older clientele, was operating at 60% of its pre-COVID-19 numbers. âEven though indoor dining has been closed, online orders have jumped during the pandemic. The sector will recover slowly with the ebb of the second wave, the easing of restrictions and the resurgence of demands, âAshutosh hopes.
Nalini Ravichandran is a freelance journalist who has worked with the New Indian Express and Mail today.