Covid brings hotel, resort business to a standstill

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With rapid economic growth – 6.5 percent on average – for the past one decade, hundreds of hotels and resorts were built in different parts of the country, especially in the tourism areas and big cities.

Entrepreneurs built the hotels and resorts with 60-70 percent bank borrowing and the remaining part was their equity.

The Covid-19 pandemic has brought the sector to a standstill. For many of these hotels, layoffs have become the ground reality. In this sector, thousands of people have already been sent on leave without pay.

Owners are on a double-edged sword – they do not have business but the interest on their bank loans is accumulating for non-payment.

Dhaka Regency Hotel and Resort, a star establishment with 220 guest rooms and suites, has a Tk90 crore bank loan. It has to pay a monthly installment of around Tk1.5 crore. The payment was not tough for the hotel because its monthly revenue was nearly Tk8 crore, but it has now come down to only Tk15 lakh.

“We have no income and we could not pay the installments for the last two months,” Shahid Hamid, executive director of the Dhaka Regency, told The Business Standard.

He said they are trying to find alternative opportunities to face the challenges.

“Around 220 health professionals involved with coronavirus treatment are staying in my hotel from May. Of the 250 employees of the hotel, 80 are serving the doctors. The rest are on leave without pay.”

He claimed many hotels have laid off their staff partially.

The hoteliers said their business has mainly three sides – room business, banquet hall and restaurant business. The room and banquet business is almost at the zero level in most hotels after the outbreak of novel coronavirus.

Now, Dhaka based posh hotels are seeking alternative opportunities such as a special offer for guests, keeping health professionals and food delivery service, to make up for some losses.

But these initiatives are not enough to allow hoteliers and resort owners to repay their massive loans. Most of the hotels could not continue paying the loan installments for the last three months.

Hotel Inter Continental is run by the state-owned company Bangladesh Services Limited (BSL), and Agrani Bank has a big investment in the company.

According to its financial statement,the company has a loan of around Tk767.79 crore till March 31.

Senior Secretary to the civil aviation and tourism ministry Md Mohibul Haque, who also serves as chairman of BSL, said, “We have reopened the hotel but it has no guests.”

“We will seek an interest waiver and an increase in the grace period of loan payment after September,” he added.   

Unique Hotel and Resorts Limited has three hotels – Dhaka Westin, The Sheraton Banani and Hansa.

According to its financial statement, as of March 31 this year, the company has a bank loan of Tk311 crore.

Shakawath Hossain, chief executive officer of Unique Hotel and Resorts, expressed his inability to speak on the  subject of loan repayment.

Industry insiders said the boom in chain hotels is part of the country’s economic growth in the last decade.

Over the years, many investors have come forward to develop international luxury chain hotels to serve the growing number of foreigners coming here.

According to the hotel and restaurant cell at the civil aviation and tourism ministry, now the country has 17 five star hotels while a minimum of 12 hotels are in the pipeline to open within a few years.

There are also four 4 star and 17 three-star hotels, it added.

Besides, around 200 resorts have been built across the country in the last decade, especially in the surrounding areas of the capital like Gazipur, Narayanganj and Narsingdi, according to the Bangladesh Parjatan Corporation.

Khabir Uddin Ahmed, president of the Tourism Resort Industries Association of Bangladesh (Triab), and owner of Arunima Resort Golf Club in Narail, said, “The resorts do not have guests because of the coronavirus outbreak. Now, we have started agricultural production in our resort such as vegetables and fish farming to face the Covid-9 challenges. My target is to deliver the products in the market and start agri-tourism.”

“I have a moderate-sized loan. If I succeed in attracting domestic tourists, the current situation will change,”he added.   

Hoteliers’ sufferings in Cox’s Bazar

Cox’s Bazar, popularly known as the tourism city of the country, has around 450 hotels and resorts. Among them, some 16 hotels are of star category.

The luxury hotels that have started up in the last 12 years include Ocean Paradise, Royal Tulip Sea Pearl Beach Resort and Spa, Seagull, Sayeman Beach, JolTarongo, Long Beach, the Cox Today and Sea Palace.

Abdul Kader Mishu, director of the five star Ocean Paradise Hotel and Resort, said, “We have started our hotel with bank loans and we have to pay installments every month. Though the banks did not create pressure amid the coronaviruspandemic to pay the loan, the tension of compound interest is growing.”

“We kept around 100 staff among 300 in the hotel maintaining health safety. We paid the staff in the last two month but we are facing hardship this month,” he added.

The situation is almost the same in most hotels of Cox’s Bazar. As hoteliers cannot bear the employment cost, they applied to the prime minister last week through the district administration to manage loans at low-interest.  

“We have demanded loans at low interest,” said Abul Kashem, general secretary of the Cox’s Bazar Hotel Motel Guest House Owners Association.

“All the hotels have to send at least 50 percent of their staff on leave. They are giving full pay to their employees who are attending work, and partially to the rest,” he added.  

Mohammad Shams-Ul Islam, managing director of Agrani Bank, said, “The tourism and hospitality sector is in the worst situation among all sectors amid the pandemic. We have investment in the sector, and the money has come from public deposits.”

“If hotels do not get guests, then how will they repay the loans? Still, we did not receive any directive from the government about the loans, except the installment grace period till September this year. We will review the whole scenario then,” he added. 

Hoteliers demand:

“Now the occupancy rate is around 2-3 percent in most hotels, which is the lowest in history. The combined loss of the hotels would be around Tk4,000 crore till July this year,” said Hakim Ali, president of the Bangladesh International Hotel Association. 

He said they applied for interest waivers from March to December this year, and will be starting the current installment from March next year.

Besides, the association demanded utility bill waiver and cash assistance for employees.

“We sent a letter to Prime Minister Sheikh Hasina in May this year with four demands. It will be impossible for the sector to stay afloat without government support,” said Hakim Ali.