The lockdown, in Pakistan, has been lifted. Whether for better or worse, even though we are predicting it will be for the worse, other than a barely audible suggestion to follow SOPs by the government, the signal has been to go back to normal. The reaction?
As of now, the elite of Lahore, Karachi and Islamabad are filling cafes and restaurants, and since you can’t eat with masks, it is a buffet for the coronavirus. With the words “lockdown lifted” there has also been a marked decrease in compliance with SOPs, even as a threatening resurgence of cases just a few days after Eid began to make their mark.
But along with eateries once again allowing dine-in, people from all over the country have also been heading off on vacations. The tourism sector, although ‘opened’ earlier by the government, has finally seen the swing it desperately needed with hotels desperate for customers able to bring in some much needed money. However, at what cost is the tourism industry being saved?
The move to save this industry has preceded the current lifting of the lockdown. Even when Pakistan’s coronavirus cases were peaking in June and July, even as the World Health Organization (WHO) and other health experts were strongly urging a stricter lockdown than the one in place, Prime Minister Imran Khan was preparing to open the tourism industry.
The Pakistan Tehreek i Insaaf (PTI), since before they came into power, have been promising that they would transform Pakistan into the hottest tourist attraction in all of Asia. And according to initial claims, one trillion rupees were going to be added to Pakistan’s economy by 2025 through tourism alone.
There isn’t a doubt that tourism was on the rise. The northern province of Khyber Pakhtunkhwa (KP) has seen the volume of tourism rise by nearly ten times from Rs 86.23 million in 2012 to Rs 791 million in 2018/19. Numbers provided by the Pakistan Tourism and Development Corporation (PTDC) showed that foreign tourists were also frequenting Pakistan more than before. In 2016, 9,161 foreign tourists visited Pakistan, while in 2018, the number of tourists had increased to 17,823 and in 2019 these figures were 24,487.
Not only this, but corona arrived at a horrible time for the tourism industry, especially the majority of the industry in the north. The time of the year from May to August is precisely when tour companies, hotels, inns, restaurants, and car rental companies all make the most money, as people on summer break and needing to get away from the heat head north to the mountains. In fact, most people in the sector work overtime during these months and make little during the rest of the year.
Had the pandemic hit Pakistan in the winter, the industry may have been willing to wait it out for a few months. But because of the timing, they pressured the government to lift the ban on tourism. However, the result has not been good. What those in the business of tourism have discovered is that just because the government has allowed them to operate, does not mean people will come in the numbers they require. And with operating costs higher, most businesses are being bled dry.
Since then, as the virus spreads and changes, the government has been opening and closing tourism at different points. But what has been the damage done, and what do all the stakeholders have to say? Profit, takes a look.
The end for hotels?
Naturally, the first people that were going to be affected by the closure of tourism were hotel owners. Large, luxury hotels began to teeter, with Pearl Continental and Serena even offering much cheaper prices for “pampered quarantine” to guests. And while five-star hotels have enough else going on to survive, the hotels at threat of extinction were smaller, local operations, particularly in the northern areas.
“Small hotels have already started closing down en masse. The big ones can’t survive for too long either, we’re going to go bankrupt,” says Byram D. Avari, Chairman of the Avari Group. “Not only are the rooms of all the big hotels closed, but their restaurants are also closed. We established a hotel containing 210 rooms in the Gulberg (Lahore) four months ago. It is currently completely empty.”
Even with tourism opening on government order, Avari is far from satisfied. It simply means he has to open his hotels and hope customers arrive, even though they are unlikely to. People are already afraid of coronavirus, and above that flights are patchy and mostly closed. Few people traveled via road as it was.
How have hotels dealt with this problem? As usual, the working classes have suffered, with mass unemployment following the closing down of hotels, and contributing to the growing unemployment in the country.
“In the past, even when the whole country was in financial crisis, we did not fire anyone. In this situation, we have had to close five hotels, one of which is a five-star and one four-star hotel in Multan, as well as one hotel in Islamabad, one in Lahore and one in Faisalabad,” says Avari. “We have sent 3,000 employees to their homes because hotels are closed and there is no business.”
According to Avari, every employee has been paid regularly over the past four months, but with a salary budget of Rs 90 million and nothing coming in, they cannot keep this going for much longer.
The tourism sector being in the doldrums is also naturally bad for the government. With no business, the tax that hotels will pay to the government will also be very low. “All sections of our hotels including food and beverages, swimming pools, health clubs and massage parlors are currently closed. How to pay taxes when there is no income? To improve the situation, the industry has to get some relief, and for that the airlines need to open.”
Zoraiz Lashari, owner of Luxus Grand Hotels, was also disturbed by the closure of the tourism industry and believed that the closure of the tourism industry has caused a lot of damage and is still happening. “The hotel industry is a labor intensive type of industry. As many as 250 people were working in our hotel in Lahore and even if we reduced their salaries, it would be a huge amount which cannot be borne in these circumstances.”
“The tourism industry hosts two types of people, domestic tourists and foreigners. In Pakistan, people go to the Northern Areas for tourism, but everything is closed here as well,” he says. “But it isn’t just about hotels. Hotel rooms account for only 20% of the total traveling cost. Car rentals, tour operators, restaurants and petrol pumps all make significant money from tourism and almost every business is involved.”
Another problem was how far hotel owners and others in the industry had planned. According to Lashari, everyone had expected tourism to open up after Eid-ul-Fitr nearly three months ago, mostly because the government had said so. And this was the time when the tourism market is at its hottest. Now, it was expected that it would happen after Eid-ul-Adha, but things are still unclear.
“Events will keep coming in the country and tourism business is seasonal while this season was spent without opening business. Accommodation is less available than demand in the Northern areas, which is why even small hotels do good business during the season. If the government announces the opening of this industry now, its impact will come at least twenty days later and people will make up their minds to go out and travel. The government should take this decision on a commercial basis as the closure of this sector has led to huge unemployment which cannot be estimated while the industry has also lost billions of rupees.”
However, what none of these hotel owners seem to appreciate is that there really is a still prevailing national health emergency that we are very much still fighting against. While Pakistan’s covid cases are on a decline, it is a pattern seen all over the world, where even phased reopenings end up in a resurgent and stronger second wave. Pakistan has not even phased its reopening, and has been lucky to avoid more deaths. This is no time for complacency.
What do these hotel owners expect the government to do? It is more of the same whining about wanting concessions and for the government to bend over backwards to save them during a time they did not prepare for and are incapable of countering with innovation. It is much of the same stuff that any other industry might ask for, freeing up of rents, bills, and handouts as well as reopening.
Lashari, for example, claims that his hotels have incurred a loss of RS 120 million in the last three months. “We did not lay off any staff for the first three months of lockdown, but in the fourth month since, we have reduced the number of our employees to 45. We will call back the rest when the government does something that helps us get there,” he complained. “The biggest problem is the electricity bill because when the AC or chiller is starting, we have to start it for everyone, whether the room is one or two hundred.”
Munir Gilani, a member of All Pakistan Hotels, Guest Houses and Tourism Association, told Profit that the hotel and tourism industry has the second largest share in the country’s economy and foreign exchange reserves. “There are about 12,000 hotels in Pakistan which directly and indirectly employ 2.5 million families. Our industry contributes billions of rupees in revenue to the exchequer. The hotel and tourism sector has suffered a loss of more than RS 45 billion this year,” he said.
“The government is trying to open this sector but the damage done so far cannot be compensated. Many hotels and guesthouses have closed their businesses due to non-payment of rent, while many people have invested in this sector whose investment is at risk of being wasted.”
The other end of the equation
Perhaps less lucrative than the hotel business and more badly affected have been tour operators. What they do have going for them are low operating costs, but what they don’t have going for them is a complete dearth of customers.
It is hard to estimate how much money this part of the equation is worth. The problem is that so many of these tour operators work on such a small scale that they are not registered with the SECP and do not file taxes. In fact, a lot of tour operators are area locals that do this work during the high season and make most of their money this way, doing odd jobs the rest of the year. However, it is a significant source of employment. A tour operations company not only directly employs five to ten people, but also gives business to small hotels.
According to a survey conducted by Profit, these companies charge between RS 20,000 to RS 100,000 from a tourist and in return give them packages for tourist sights. These unregistered companies are mostly run by students or tourists and gather their customers through Facebook and Twitter.
A member of the association of operators, transporters and hotels (OTH), Haris Bhatti, informed Profit that his company was not registered but paid regular taxes. “Due to the corona virus and the closure of tourist destinations, our income has dropped significantly this year. We had earned RS 3 million in the last summer season, out of which people were paid salaries and other expenses were incurred but this time our business is completely closed,” he said.
“Tourists want to visit the northern areas, but these areas have been closed by the government. About 3,000 tour operators, large and small, are currently out of work. All of us tour operators are working in the form of an association and we have also staged a protest against the closure of the business. Some tourists come to us because of personal relationships while most come through websites and social media.”
Similarly, a travel agency owner, Usama Shah, informed Profit that due to the Covid-19, travel and tourism work has been stopped all over the world and in Pakistan, leaving businesses like his high and dry. “Our situation is such that we can no longer reopen our offices. We had contacts with tourists in foreign countries whom we used to provide travel services to come to Pakistan in different seasons every year but this year it is facing severe decline due to lack of Hajj and Umrah,” he says.
“Travel agents have taken airline membership and paid for it in advance. The advantage of this is that we get tickets at a price lower than the on-screen price of the airline, and if we sell even ten tickets a day, we get a good profit. Due to the closure of the airlines, our money is also stuck. Until the tourism industry reopens, our situation will not be normal.”
On the other hand the Minister of Transport in Azad Jammu and Kashmir Nasir Hussain Dar told Profit that the Covid-19 has badly affected Kashmir’s tourism industry. “A large number of citizens in the northern parts of Pakistan, especially in Azad Kashmir and Gilgit-Baltistan, depend on the tourism industry for their livelihood,” he says. “Despite the threat of Covid-19, most people did not agree to close their businesses because of the income generated by the influx of tourists in the summer.”
He explained that over the years, AJ&K and Gilgit-Baltistan have emerged as tourist destinations of domestic and to a limited extent foreign tourists. More than 1.4 million tourists flocked to Neelum Valley and Rawalakot in 2018 due to the scenic beauty and adequate security. In 2019, tourist arrivals increased to 1.5 million. It was expected that about 2 million tourists would visit Azad Kashmir in 2020.
Dar was of the view that most of these tourists come from Sindh and Punjab, where temperatures reach 45 degrees Celsius in June and July. “In recent years, especially in areas like Neelum Valley and Poonch, people have built large-scale infrastructure by borrowing from banks or relatives in view of the possible increase in the number of tourists. The AJ&K government renovated and opened several guest houses in Tatta Pani, Kotli, Poonch and Muzaffarabad districts, once also known as ‘Daak Banglaws’, for tourists.”
Intikhab Alam, managing director of Pakistan Tourism Development Company, told Profit that the corona virus has undoubtedly caused severe damage to the tourism industry. “The tourism sector accounts for 2% of Pakistan’s GDP and our target was to increase it to 5% this year, but that did not happen due to the coronavirus,” he laments. “Our goal is still to increase the inclusion of tourism in the GDP from nine to ten percent in the coming years.”
According to him, domestic tourism will be revived as soon as the situation of Covid-19 improves. “In our country, people cannot stay away from tourism for long and they cannot be stopped for long. Yes, foreign tourism can take time to improve. However, in order to run foreign tourism in a better way and to impress tourists, the quality of food and the system of hygiene must be greatly improved. In this regard, we are also in touch with the restaurant and hotel industry and have formulated SOPs for them.”
