Last month, Viji Jagadeesh had only eight guests at Mitraa Inn, not even enough to cover the Internet bill. CNA Insider looks at how hostels like hers could face a wipe-out, in a series on micro SMEs beaten down or changed drastically by the coronavirus pandemic.
SINGAPORE: During the severe acute respiratory syndrome (SARS) outbreak in 2003, Viji Jagadeesh lost her job when the accounting firm she was working in struggled with poor business.
After being jobless for more than a year, she started a small outfit with 12 beds, offering short-term rental to budget travellers.
Three years later, Viji opened hostel Mitraa Inn with 60 beds, riding the low-cost aviation boom which saw a spike in budget travellers in Singapore.
Her business flourished and, over the years, became one of the largest hostels here, with 144 beds in two shophouses in Serangoon Road.
Mitraa Inn is located in Little India. (Photo: Christy Yip)
Mitraa Inn has been particularly hard hit by COVID-19, however, that it is forced to shut down this month. “The past six months have been truly a walk through fire for me,” said its 55-year-old owner.
She sensed trouble as early as December, when a group of 44 students from India suddenly cancelled their booking for April. But it did not prepare her for what was to come.
“We were thinking, it’s no problem … the travellers will come back,” she recounted. “Then people started cancelling bookings even for September, during the F1 period.”
She struggled to fill beds, with occupancy fluctuating between 30 and 40 per cent when the break-even point was 65 per cent.
Viji tells CNA Insider her story. (Photo: Christy Yip)
Sometimes there were as few as five to six people a day, which was “almost as good as zero occupancy”.
“I was in denial that it (the closure) was happening. It was mental agony,” said Viji. “But we have no choice (but to close down) before we incur further losses.”
It has been a difficult situation not only for her. In an industry that relies on travellers, hostels in Singapore could face a wipe-out.
‘WHEN THE BORDERS CLOSED, WE PANICKED’
Before the borders were closed to short-term visitors in March, Wink Capsule Hostel — with 150 beds in two locations — was running at 80 per cent occupancy, said co-owner Allan Lee. It has been a struggle to survive ever since.
“We’re a backpacker hostel. When there are no tourists, we have no business,” he said.
In April, a group of 40 hostel owners — with a combined total of 3,000 to 4,000 beds — banded together and formed the Singapore Backpacker’s Hostel Alliance to discuss and keep one another updated on the government’s various COVID-19 measures.
“We all could feel that we were entering a pandemic, and we were all affected by the drop in tourists,” said Adler Poh, the group’s spokesman and the managing director of Adler Hostel Singapore. “When the borders closed, we panicked.”
Adler Poh, 32. (Photo: Christy Yip)
Mitraa Inn was offered a lifeline, said Viji, when it started housing returning foreign domestic workers who were issued with 14-day Stay-Home Notices.
“We thought this would be sustainable. We had girls from Myanmar and Philippines. Then the maid arrivals stopped in April as countries closed their borders. Our occupancy dropped again,” she said.
Around that period, thousands of Malaysian work pass holders also had to be housed temporarily in Singapore after Malaysia implemented its movement control order on March 18, and many hostels benefited from this.
By the time Mitraa Inn was ready for this group in April, however, most of them had already found accommodation in other hostels, said Viji.
(Photo: Wayne Liu)
CURRENT OCCUPANCY CAP NOT VIABLE
But even with these Malaysian workers, hostels like Wink Capsule Hostel had to drop their daily rates from the usual S$35 to cater for this group.
“These workers aren’t looking at tourist prices. The market rate is about S$20 today,” said Lee. Had he not lowered his rates, he added, these workers would have rented HDB rooms instead, possibly at a lower monthly price.
Then there is competition from some hotels that have even cut their room rates to S$40, which works out at S$20 per person, said Poh.
“That leaves us with very little room for manoeuvre,” he said. “With each bed going for S$20 and a monthly revenue of about S$10,000 … how am I going to pay my staff? We’re burning money every day.”
A staff member of Adler Hostel Singapore at work. (Photo: Christy Yip)
Another problem is that occupancy must be capped at 50 per cent to comply with mandatory safe management measures, which he said is not commercially viable for hostel operators.
Bunk beds or capsules, for example, must be allocated in an alternating fashion, while single beds or mattresses must also be spaced at least a metre apart.
David Peh, manager of Pine Hostel on Tyrwhitt Road in Jalan Besar, said that because of the 50 per cent rule, the hostel has had to turn away guests like Malaysian workers.
“We’re struggling to break even,” he said. “We’re waiting for the government to do something (to revise the rule).”
The hostel has survived so far because the landlord had given it rental waivers, he added. “The next few months will be the real test (without the waivers).”
If the 50 per cent rule is still strictly adhered to and landlords do not budge on negotiating rents going forward, Poh believes “many of the hostels will close down”.
The Adler Hostel Singapore lobby. It has seen busier days, pre-COVID. (Photo: Christy Yip)
“We’re in such a difficult situation now … We haven’t been viable for a long time,” he said. “(Many of us) try to balance our costs, but we’re reaching the end of the Jobs Support Scheme (JSS).”
The overall shortfall for Wink Capsule Hostel, said Lee, is now “a few thousand dollars every month”. He added: “We’re trying to hang on till the end of the year. If (we) can’t, we’ll close down.”
JEWELLERY PAWNED, FLAT DOWNGRED
For Mitraa Inn, Viji said she started closing floors over the last few months to save on electricity and manpower costs. “In July, we had only eight guests. We couldn’t even pay the Internet (bill),” she said.
She had to pawn some of her jewellery and downgrade from a Towner Road flat to one in Bukit Panjang so that the company would have enough money to refund those who had cancelled their bookings, she shared.
The hostel occupies four floors. Old photographs adorning the walls are among the few things that remain. (Photo: Christy Yip)
While her landlord had passed on the rental waivers to her in the last couple of months, Viji figured she could not hope to sustain her business with a monthly rental of S$45,000 and Singapore’s borders remaining closed.
“The hostel business isn’t just about the rental; the utilities are hefty, and there are also maintenance and pest control bills,” she added. “There are also the salaries of employees, even with the JSS.”
She has not laid off any of her 16 employees, she said, as the landlord has expressed interest in taking over the business and may hire them.
But her husband, who quit his IT job to help her run Mitraa Inn, has to look for a job next.
One of Mitraa Inn’s rooms, stripped and to be returned to the building’s landlord. (Photo: Christy Yip)
The pandemic has also claimed her three other businesses located within the hostel: A flower shop, a supermarket and a travel agency that also relied on tourists for income.
Spending 15 years in a business where she has had to be on call 24/7 has been “very tiring” for Viji. Her children, a son aged 23 and a daughter aged 15, have urged her to take a six-month sabbatical.
However, coming full circle and jobless again, she is already thinking of what to do next: Either sell properties or open a maid agency, as she has a real estate salesperson licence and an employment agency licence too.
She may even have the energy to open another hostel, “maybe in one or two years’ time”. “But one with a smaller capacity, maybe 50 to 60 beds,” she added. “We shall see.”
This is one of several CNA Insider stories on micro SMEs in different sectors that have closed or changed drastically amid COVID-19. Know of any others? Let us know at DigiFeatures@mediacorp.com.sg
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https://www.gov.sg/article/4-ways-the-resilience-budget-is-helping-singapores-businesses-stay-afloat