Impact Of
Demonetization On The Hospitality Industry..!
by Mr. Mandeep
Lamba, Managing Director - Hotels, JLL India
Over the short and
medium terms, the demonetization drive will have varied effects on the many
sections of the hospitality industry in the country, but in the long term will
positively impact the growth of the hospitality sector.
Often, the strong
season for the hospitality sector in the country extends from October to March,
which to a large extent defines the success for the industry in any given year.
The lack of available currency will force some hospitality customers to either
postpone / cancel their travel and accommodation or to use hospitality products
that easily allow the use of the other modes of payments.
The demonetization
drive will benefit the organized hospitality sector in India the most. Combined
with the general uptake in the sector, the movement of customers to the
organized sector due to ease of alternate modes of payment will positively
impact the market. However, given the larger base of hotel rooms in the country
is in the unorganized sector, we anticipate the general performance of the
industry to witness some stress in the short term.
The hospitality and
the tourism markets are renowned for their ability to create a large number of
direct and indirect jobs in the country. With the inability of customers /
tourists to easily spend on frills due to lack of available currency, the
unorganized industry will suffer the most in its ability to create new jobs.
The impact of demonetization will also be felt by the suppliers of consumable
goods, who often work on cash transactions with their wholesale
counterparts.
The unorganized
inventory of hotels in the industry will be most impacted by this move. In
addition, the leisure sector hotels and restaurants segment will see a higher
impact on account of the discretionary nature of spending in this sector, and
the substantially larger base of cash transactions that occur in its when
compared to mainstream business hotels.
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Mandeep Lamba,
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Also, the restaurants
business - both in hotels and standalone - will see a short-term slowdown in
growth on account of the reduced availability of cash and the generally high
usage of cash spending in restaurants.
The organized banqueting
business will witness growth, as customers move from the almost cash-only
unorganized sector of standalone party venues and farm houses to hotels for
want of non-cash means of payment. The weddings business will also return to
Indian hotels from their Overseas counterparts, as unofficial channels for
offshore transfers of cash have dried up, forcing the cancellation of many
Indian weddings from foreign locales back to hotel venues in
India.
The tourism and
hospitality sectors are intrinsically tied to the economic conditions of any
country. The boost provided by the demonetization move to the macro economy of
the country will effectively trickle down to the industry.
With banks being flush
with liquidity, we anticipate a major reduction in interest costs, which augurs
well for the growth of the industry.
As more liquidity enters the organized
sector along with some further softening of land rates and gradual movement
towards cleaner real estate transactions, we anticipate investments into the
sector to increase from the organized players who have, in the past, shied away
due complexities associated with underlying real estate.
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