MITIGATING THE COST OF CLOSURE

India is under a nationwide lockdown for 21-days at least. What no natural calamities, dreaded wars, socio-economic and geopolitical crises could do in centuries of civilization, COVID-19 has done in just a couple of weeks.

- Achin Khanna

The mammoth Indian railways are shut. Every last flight has landed, every interstate bus service sealed. Intracity metros and even the unstoppable Mumbai locals have been brought to a grinding halt. Schools, colleges, offices, malls, cinema halls, factories, farms — there are padlocks on every last door. Time seems to have come to a complete standstill.

Reality does indeed prove to be stranger than fiction. As we all move towards adjusting to this new normal, businesses grapple with the challenge of attempting to answer the near-impossible question — how long will this last, and will our enterprise survive long enough to see light at the other end of the tunnel?

Even as we penned an article about COV- ID-19 and its impact on the Indian hotel industry just a week ago, it seems as though we may have written it in another lifetime.This article digs deeper into just how grue-somethe cost of closure may be for India’sorganised hotel sector. Much like most other businesses, hotels have certain variable costs that they can mitigate and manoeuvre in tough times.

Paying fixed liabilities

There are, however, some fixed liabilities that they must bear, even when their ability to generate revenue slides down to naught. Presently, the government’s directive allows hotels to remain functional through the lockdown period. That offers no solace to hotel owners and operators. The very idea of operating these expensive undertakings makes scant sense when the citizens of our nation are prohibited (understandably and for good reason) from stepping outside their homes. That does not, however, wish away the following fixed costs that hotels must pay for:

• Debt outstanding – principal and interest payments

• Salaries and wages

• Provident Fund – employer contribution