How the second wave has impacted an already fragile restaurant industry

The Federation of Hotel & Restaurant Associations of India (FHRAI) expects 50% of restaurants across segments of the industry to remain closed after restrictions ease.
Restaurants in India
Restaurants in India

This story is a part of the TNM COVID-19 reporting project. To support this project, make a payment here.

For the restaurant industry across India, the last 18 months have been an unending roller coaster ride. After eateries were forced to suddenly close during the early months of lockdown, many saw a glimmer of recovery towards the end of the year when patrons started to dine out in droves once again. But come April, those hopes quickly faded as the second wave forced the country indoors. And some industry experts say the prognosis may be alarming: a lack of business over the last two months, along with the predictions of a third wave, could permanently shutter a significant percentage of food & beverage establishments across the country. 

Though there is no official number of restaurant closures as yet since the lockdown is still underway, according to Pradeep Shetty, the joint honorary secretary of the Federation of Hotel & Restaurant Associations of India (FHRAI), they expect 50% of restaurants across segments of the industry to remain closed after restrictions ease. Earlier, the association had stated that 30% would remain closed after last year's lockdown. The National Restaurants Association of India has estimated that between 30% to 32% of restaurants will shut down permanently. 

According to PC Rao, president of the Bangalore Hotel Association, out of the roughly 24,500 hotels in the city, 6,000 have closed down. While larger hotels have struggled due to a lack of events and meetings, smaller eateries with a handful of employees have also found it difficult to stay afloat, particularly if they are not connected to e-commerce platforms and food apps, he said.  

Recovery under duress

After September last year, when restrictions were lifted and diners were allowed to eat out in limited numbers, it was a slow but steady climb to a semblance of recovery. As TNM reported earlier this year, many restaurants in Bengaluru saw close to 70% of pre-COVID revenue in December, and even higher in some cases as the city moved into 2021 with a low number of coronavirus cases. Higher recovery tended to favour open-air restaurants and those in commercial areas, while localities like Whitefield and Sarjapur, with its high demographic of transient IT workers, saw smaller gains. 

But even for those who appeared successful, the task of reopening a restaurant after several months of closure was not only an uphill challenge but a huge financial burden, according to Misha Pamnany, the proprietor of Salt and Pepper F&B Consultants. Crucially, that involves having a significant working capital to get the establishment up and running again, from reaching out to vendors to rehiring the workforce, many of whom had left cities due to the lockdown.

There was still significant potential for the industry to mend itself soon enough. However, the second wave pushed the country into crisis, as thousands contracted and succumbed to the virus. The restrictions on dining across the country were swift. “People were still losing [last year] with the hope that good days were about to come,” Shetty said. “With this disruption [of the second wave], it's a snakes and ladders board game where you’re back to square one.”

This story is a part of the TNM COVID-19 reporting project. To support this project, make a payment here.

Impact of second wave

As lockdowns continue, many restaurants are back to a delivery-only model though Anurag Katriar, president of the National Restaurants Association of India, noted that within the gamut of F&B businesses, very few can sustain in this way. Fine dining restaurants, catering companies, nightclubs, bars, pubs and restaurants require an in-person dining experience to manage expenses. An additional problem will be a lack of private equity being pumped into the system due to the uncertainties currently being piled on to an already-risky venture. “The proportion of fixed operating expense in our business is fairly high. Which means you need more cash to fund losses than you would in say, some other line of business,” he said. “So resource crunch has emerged as the single biggest reason for maximum closures.” 

And while the period after the first wave allowed businesses to recover some of their losses (though according to Shetty, recovery was closer to 30% of pre-COVID numbers nationally, but was higher in bigger cities) according to Katriar, that may not be enough. A potential third wave will likely also shorten any recovery period after the second wave. 

“You can perhaps survive and not fund losses but you will never be able to keep some resources aside for a rainy day,” he said. 

One of the biggest indicators of restaurant closures has been posts in Facebook groups like ‘Secret Sauce Behind a Successful Restaurant,’ where newer restaurant spaces and equipment have been put up for sale after only six months to two years in business. “It takes a lot to get up twice and fix the situation,” Pamnany said. 

Signs for optimism

Last week, the Reserve Bank of India announced a liquidity window of Rs 15,000 crore for the hospitality and tourism sector, as well as aviation ancillary services, providing desperately-needed support to hospitality businesses impacted by the pandemic. The window is open till March 31, 2022 with tenors of up to three years at the repo rate. While the move was welcome, associations saw it may not be enough in the long run and urged the RBI to consider extending the tenure.

“Infusing liquidity will provide the much-needed liquidity support to cash-strapped hospitality businesses without which the industry couldn't have survived. However, we request the RBI to extend the tenure for at least 5 years. A duration of 3 years is just not sufficient to recover from the financial turbulence that the industry is going through,” Gurbaxish Singh Kohli, vice-president of the Federation of Hotel & Restaurant Associations of India (FHRAI) said in a statement. 

Some states have also started to include restaurant workers within the frontline category to prioritise vaccinations against COVID-19, something that many in the F&B industry had been actively requesting. 

And not all see the situation as completely untenable. According to Pravesh Pandey, director of operations at Byg Brewski, which has locations in Hennur and Sarjapur, signs that the industry bounced back quickly following last year’s lockdown is important in considering the coming year. While some categories of restaurants,such as those without open-air spaces and ones that rely on large-sized events, “strong brands with better emotional connection with their customers, good food.. Health centric meals [and] organised players who are funded well” will succeed.  

“I am positive that we should be seeing a bounce back time of 1.5 to 2 months when things will be 80% back to normal,” he said. 

TNM COVID-19 Reporting Project is funded by our readers. We would like to thank the following people for making this story possible: Ashwin A, Vani Saraswathi, Yatish Shetty, Abhishek B, Rohit Raghavan, Robin BE, Sandeep, Ganesh, Sudharsan, Abhash Kumar, K Bhaskar, Ganesh Chakravarthi, Krithika Muthuraman, Nishant Radhakrishnan, Abhirami Girija Sriram and many others.
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