COVID-18 Watch: Hotels, airlines look for new revenue streams, hold on to cash to tide over liquidity crunch

Other steps like drastic cost control and a sharp reduction in future supply addition are also in the offing.

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The hotel and airline segments of the tourism industry, which are typically high fixed-cost sectors and have forgone revenue for almost a full quarter due to the impact of COVID-19 and the subsequent lockdown, are now accessing future revenues to tide over the short-term working capital deficit. While all airlines, which had to cancel flights on account of the lockdown, issued credit shells to passengers to make future bookings, some hotels are offering discounts for future bookings.

Even as the airlines industry was completely shut for two months, with the exception of sporadic cargo flights, the hotel industry, too, has been operating at 10-15 per cent occupancy, with losses for these segments mounting on account of incurring fixed-costs. According to experts, a typical 200-room premium hotel needs to operate at an occupancy of 38-40 per cent to record a cash breakeven. Furthermore, unlike goods, which can be consumed later, a deferred service, like that in the hospitality industry, cannot be consumed later.

To generate cash for keeping themselves afloat, companies in these segments have not only finding new revenue streams but also holding on to the cash they have. A 4-star hotel in Shimla, for instance, is offering a flat 45 per cent discount through gift vouchers which would be valid for bookings till one year. Such a measure would provide some funds for the hotels to wade through cash crunch as they continue to keep their staff engaged to maintain the premises.