“Contingency planning should become a necessary business practice”
Anindya Dutta, MD & Co-Founder of Stanza Living, opines that dedicated time, effort and resource investment to risk planning and management on an ongoing basis, are necessary for sustained business health in a Covid-19 kind of situation.
TPCI: How did the Covid-19 pandemic impact your business in the initial days till the lockdown was announced?
Anindya Dutta: Considering much-needed, precautionary measures like the shutdown of academic institutions, corporates adopting work-from-home format and shutting down office premises, existing residents temporarily relocating to hometowns; the immediate impact was on the running occupancy at our accommodations. The reduction in occupancy has resulted in reduced monthly revenues, while we continue to incur ongoing running costs including landlord rentals, fixed operations, people costs, etc. We have needed to review business processes in view of the reduced revenues being generated vis-à-vis the costs incurred.
Also, increased hesitancy in real estate decision-making is being observed. With the uncertainty around the impact of Covid-19 and the period it would last, landlords/partners are seen to be more trepid and cautious; thus impacting the potential pace of growth of the sector.
TPCI: Was the lockdown totally unexpected, or were you anticipating such a situation given global cues? If so, how were you preparing for the same?
Anindya Dutta: There were some clear indicators of a potential lockdown situation, considering the global direction of the pandemic. We have also been closely observing government and WHO advisories on precautionary measures. So, we expected some disruptions in the business operations. As a result, we had actioned some pre-emptive measures to ensure our operations don’t get significantly impacted and we continue standing by our residents and staff.
• Strengthened supply network: We are already running our operations for residents who continue to reside with us, ensuring that they have a safe, sanitized space, where delivery of service experience continues, and our on-ground teams are there to support for any help or contingency. On the F&B front, rations are fully stocked for more than 21 days and hot meals will be provided to residents as usual. We will continue strengthening our supply network.
• Smoother work from home arrangements: Instituted for all corporate employees, in the run-up to the nationwide lockdown, all procurement of supporting equipment, enterprise tools and licenses (laptop, internet facilities, remote-working software) has been done in advance
• Safety and sanitization measures had been adopted across the board for our residents, ground staff and partners across 10+ cities.
TPCI: What operations have been most critically impacted as a result of the lockdown?
Anindya Dutta: For operators like us, who have a strong aggregation network to fulfil diverse consumer living needs (food, housekeeping, laundry, internet, etc), there were some initial hiccups with supply chain disruptions that have now been smoothed over. However, with much-reduced occupancy levels at our residences, meeting existing rental obligations like fixed minimum guarantee agreements with our service-partners, will come under pressure. If the unpredictability continues, operators and service partners will need to collaborate effectively to mitigate business impact on both.
TPCI: How do you expect them to impact your business in the coming days and the financial year?
Anindya Dutta: Businesses have been going through a tough time with the Covid-19 pandemic spreading and the co-living space has been no different. We see the following potential impact on businesses:
• Potential revenue-loss risk: As the consumer-demand remains highly volatile without a clear outline on the period that this unpredictability could potentially last, there is a risk of potential revenue loss – as the key costs being incurred by the company (landlord rentals, security, human resource, etc) remain relatively high on account of high running costs which are fixed. Add to this, the consumer expectation on relief on rentals, due to unprecedented non-occupancy periods, and the strain on operators is expected to increase.
• Impact on overhead business expenditure: In the context of steady fixed costs vis-à-vis reduced revenues being generated in the shared accommodation business – the prospect of operators not being able to sustain their employee payroll costs is real.
• Also, increased hesitancy in real estate decision-making is being observed. With the uncertainty around the impact of Covid-19 and the period it would last, landlords/partners are seen to being more trepid and cautious. Thus, it is impacting the potential pace of growth of the sector.
However, having said that, our pre-emptive contingency measures, agile teams and focus on finding solutions adaptable to the changing external environment in consultation with our partners, will help us hold the fort and mitigate deep business impact. We are geared to get on track with our plans with renewed vigour, post stabilization of external situations.
TPCI: What critical steps have you taken to address/minimise the business disruption during this period (lockdown)?
Anindya Dutta: We have taken proactive measures for the safety and health of our residents, employees, staff and partners across 10+cities.
• Robust business operations contingency plan: Our preparedness in the fight against Covid-19 includes a detailed contingency plan of operations that outlines the action plan in the case any of our residences needs to be quarantined.
• Stanza Living Employee Contingency Fund: With the voluntary contribution of part of the salary from employees and personal monetary support from the co-founders, a dedicated Contingency Fund has been set-up for all our employees to cover their medical expenses in case of an unfortunate confirmation of a Covid-19 case and raised over INR 1 lakh.
• Enhanced Sick Leave Benefit: We have relaxed the annual sick leave quota for all employees. Sick leaves, being marked till April 6, 2020, are not deducted from the employee’s annual leave balance. The policy will be extended, based on the situation assessment in the next two weeks.
• Work From Home: Instituted for all corporate employees, along with the procurement of all supporting equipment (laptop, internet facilities) in advance.
• Awareness and prevention: We have issued advisories in tandem with WHO guidelines, instituted health and sanitation measures across offices.
• Stanza’s #CoronaWarriors: In this tough time, we have ensured that we stand by our residents. All those who are currently staying back at our residences, are being taken care of by our ground-operations team (following health and safety protocols including wearing masks, gloves, etc.) to continue maintaining our quality, hassle-free experience.
• Extensive sanitation measures: Residences have been sanitized, hand sanitizers installed across the residences, cleanliness measures of all high-touchpoints/common spaces have been increased, along with increased frequency of regular housekeeping.
• Awareness measures: Students have been issued healthcare advisories and advised to adopt preventive measures like social distancing, personal hygiene. Parents have been updated on all measures as well.
TPCI: Where would you like more support from the government/local authorities?
Anindya Dutta: While prudent assessment of financial expenditures is already underway, government support on tiding over challenges will positively impact the industry as well as the people working in the sector as this generates very high employment given the highly management-intensive nature of the operations.
Certain solutions/measures that could help minimise the impact:
• GST concessions: rollover or lower rates.
• Rental concessions for a specified period from landlords, till operations stabilize.
• A national policy on the invoking and implementation of “force-majeure” clauses for all rental payments.
• Three-month extension for income tax payment.
• Payroll credit policy, especially for junior employees and office staff.
• Cash support for certain worker groups.
TPCI: What contingency steps are you contemplating in case the lockdown lasts longer? What will be the key challenges and tactical difficulties you see in coming back to business-as-usual once the crisis passes over?
Anindya Dutta: The biggest impact of the pandemic comes from the uncertainty of regularisation of operations and timelines.
• Deferred timelines in the education sector: Mandated closure of educational institutions/ deferring of exams/delayed admissions will lead to a short-term disruption in consumer demand for student housing.
• Corporates adopting work-from-home format, deferring new employee joining: This will especially impact the movement of young migrant working professionals, and thereby impact the demand for their accommodation needs.
TPCI: Covid-19 is rightly considered a black swan event of epic proportions, which no one could have predicted till a few weeks ago. What key lessons can the industry learn from this crisis to prepare for such events in the future?
Anindya Dutta: I think companies must ensure contingency planning becomes a necessary business practice so that such scenarios don’t catch them completely off-guard. It is critical to make dedicated time, effort and resource investment to risk planning and management on an ongoing basis, for sustained business health. Similarly, as companies continue to grow, greater emphasis should be placed on cash flow management and not just P&L management. For operator businesses in particular, with dependencies on a partner ecosystem, it is even more important that internal and external stakeholders are well-rehearsed, agile and adaptable to driving collaborative results.
Stanza Living is a professionally managed shared accommodation operator that caters to the living needs of young migrants (18-25 year olds) including students pursuing higher education and working professionals. The company operates a network of 250+ residences across 10+ cities in India including Delhi, NCR (Noida and Greater Noida), Hyderabad, Pune, Indore, Dehradun, Vadodara, Chennai, Coimbatore. As India’s largest shared living company, we have 55,000 beds under management, providing a full-stack, tech-enabled living experience for consumers.