The Hotel Association of India (HAI), highlighting the plight of the hospitality sector amid the COVID-19 pandemic, has said that in the absence of support from the government and the RBI, the Indian hotel industry will collapse. The industry body has reiterated its demands including extension of the moratorium on interest and repayment of principal for the entire financial year 2021 till March 31, and the interest due is added back to the total principal outstanding and the loan term extended by 12 months.

"This will solve the current cash crunch as there is expected to be almost no demand for FY21," an HAI statement said.

Further, for the 'revival phase’, interest rate should be 200 basis points higher than repo rate.

Citing a recent study by McKinsey, the HAI said airlines and hotels will be the worst impacted sector in India, with around 75% output decline in Q1 FY21 compared to Q4 FY20.

The revenue loss to the hotel industry is expected to be to the tune of Rs 90,000 crore in the year 2020, it added. 

"The COVID-19 pandemic has led to demand destruction in excess of 90 per cent for the tourism and hospitality sector which employs nearly 4.5 crore people, provides livelihood to around 16 crore people, and contributes 9 per cent to India's GDP," it said.

While the RBI has announced an immediate term to avert the crisis by allowing moratorium on loan repayment, HAI said that on behalf of the Indian hospitality sector, it has been recommending more relief measures for the “survival and revival" of the sector.

It added that the hotel industry is now solely focused on survival and has been requesting the RBI to extend more proactive support.

The current debt levels in the organised part of the industry stands at Rs 45,000 crore.

"Unfortunately, an immediate term solution will only defer the crisis as what is needed is a longer-term solution spanning the next 24-36 months which solves for both stakeholders: the borrower (unable to pay the interest and principal for the foreseeable future) and the lender (loans becoming NPAs)," the statement said.