Indian & global hoteliers press RESET button to get business back on track

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Ashish Kulshrestha | The Clear Picture

The COVID-induced lockdowns have triggered domestic and global hoteliers to reevaluate their operations and fiscal spend to drive revenue growth and provide cushion to their battered business. Coined as RESET, hoteliers such as the Tata Group-owned Indian Hotels Company Limited, Oberoi Group’s EI Hotels Limited and international hotel chain Accor are undertaking steps to boost (R)evenue growth, ensuring guest (E)xperiences, (S)pend optimisation, (E)ffective asset management and (T)hrift financial prudence to drive improvements in business.

According to IHCL’s fourth quarter investor’s presentation, it witnessed a benefit of Rs 264 crore, Rs 420 crore, Rs 70 crore and Rs 135 crore respectively under its RESET program and helped in business recovery, improved RevPar (revenue per available room). Similarly, Accor’s RESET initiative is expected to provide over €70 million (Earnings before income, taxes, depreciation and amortization) EBITDA gain expected in 2021 and a recurring EBITDA benefit of €200 million in 2022.

“RESET helps us in the business recovery quarter on quarter basis. We all know what happened in April and May of last year (2020) when there was almost a complete lockdown. The industry came on its knees, there was a 7% revenue versus the April of the previous year. And the total for the quarter was at 15%. And the RevPAR came down to 513. So RESET helped us to drive this (growth), drive this faster with a lot of agility and in a prudent fashion,” said Puneet Chhatwal, Managing Director and Chief Executive Officer, Indian Hotels Company Limited in the company’s earning’s call.

Global property Consultant JLL said in a report that the India-wide hotel performance registered a decline in RevPAR (Revenue per Available Room) by approximately 55 per cent over the previous year.

Chhatwal feels the situation would have been much worse on both EBITDA and profit level if not for the implementation of RESET initiatives.

A Boston Consulting Group’s April 2020 note says that the crisis has rendered meaningless the typical reference points—including historical booking patterns and trends—that drive price optimization. This drastic change has essentially turned companies’ revenue management (RM) systems into blank slates.

In addition, markets will probably be fundamentally reshaped in the aftermath of the pandemic. For an extended period, travel demand will be lower than pre crisis levels, and travel patterns are likely to be very different.

Hence, it will be essential for companies to move fast and remain flexible in understanding and adapting to these new conditions and gain significant market share and secure their positions. BCG says that amidst the high levels of uncertainty and volatility, travel and tourism companies need to manage pricing and customer relationships in the short term, while re-tuning their RM systems to optimize revenues for the economic recovery.