Impact of COVID-19 on the hotel industry

Impact of COVID-19 on the hospitality industry

COVID-19 outbreak has impacted nearly every industry and everyone living and working across the globe. It’s no secret the hospitality industry is among those who have been hit the hardest with a real economic impact. The highly infectious coronavirus continues to thwart the sector and raises serious questions about the present and future survival of the sector. This article introduces three questions: first, the impact on the hotel and tourism industry, second, the impact on jobs in hospitality, and coping strategies of the hotel industry.

( Figure1: COVID-19 devastating hotel industry, source: https://www.ahla.com/clone-covid-19s-impact-hotel-industry )

Impact on travel and hospitality industry

The COVID-19 pandemic has disrupted the travel and hospitality industry and shaken businesses across the world. Many hotels had to temporarily shut down to prevent the further spread of the virus, resulting in occupancy rates dipping into the single digits across the country. 

( Figure2: China drops Occ by 89% wither 2 weeks, Source: https://www.meadin.com/info/212343.html )

On January 14, 2020, the hotel occupancy rate in the Chinese mainland market was still at a high level of 70%, and after just two weeks, it fell to single digits-only 8%.

Accounting for the unprecedented travel restrictions, the United Nations World Tourism Organization expects that international tourists will be down by 20% to 30% in 2020, when compared to the last year.

( Figure 3: The number of nights spend at tourist accommodation in the first 3-4 months of 2018-2020, source: https://ec.europa.eu/eurostat/web/tourism/data/database )

Disruptions to production, initially in Asia, have now spread to supply chains across the world. All businesses, regardless of size, are facing serious challenges, especially those in the aviation, tourism and hospitality industries, with a real threat of significant declines in revenue, insolvencies and job losses in specific sectors. Sustaining business operations will be particularly difficult for small and medium enterprises.

In China: Compared to 2019 figures, occupancy is down by as much as 68%. As China was the first market to deal with the covid-19, it is also the first to show signs of stabilization. As per data, 87% percent of the country’s hotels are now open and occupancy is beginning to rise.

( Figure4: The impact of COVID-19 on Asia’s hospitality industry，source：https://www.meadin.com/info/212343.html )

Other countries: Hotels across the U.S. are experiencing unprecedented booking cancellations due to the pandemic, which could eliminate up to four million posts (this accounts for 50% of all hotel jobs in America). The average occupancy in Italy is down by 96% ; the United Kingdom is down by 67%.

( Figure5: U.S. Hotel occupancy

Source: https://str.com/press-release/str-us-hotel-results-week-ending-13-june )

Impact on jobs in hospitality

• The World Travel & Tourism Council has recently warned the COVID-19 pandemic could lead to a cut 50 million jobs worldwide in the travel and tourism industry. As per an Oxford economics study, Asia is expected to be the worst affected and data suggests the industry could take many months to recover.
• An important factor for the continuous operation of traditional hotels is to maintain the stability of the professional talent team. Hotel employees generally have high academic qualifications, broad knowledge, high career initiative and mobility, and a certain sense of entrepreneurship. Affected by the epidemic, hotels have no business for a long time or business is unstable, which will affect their income and career development, and to a certain extent will cause brain drain, and the lost talents may often be the backbone of the hotel, which is for hotel companies It will have a greater impact.

( Figure6: COVID-19 devastating hotel industry, source: https://www.ahla.com/clone-covid-19s-impact-hotel-industry )

Coping strategies of the hotel industry

( Figure7: University of Cape Coast, source: https://www.hospitalitynet.org/opinion/4098657.html )

• Increase income.

1. Actively use various national policy subsidies or financial support.

2. Looking for partners to carry out business mergers and reorganizations or sell parts.

Example: JinJiang International Holdings Co., Ltd

• Establish a crisis response team
• Urgent deployment of scarce supplies
• Raising 3.5 billion special funds for hotel epidemic prevention
• Extend the half-year validity period of Jinjiang membership
• All hotel coupons (including free room vouchers) will be extended for 3 months

• Reduce expenditure.

1. Reduce rigid expenditures.

2. Reduce default losses in accordance with the law.

Example: Marriott Hotels & Resorts

• Free refund and change
• Exemption of management fees and franchise fees for February and March
• Exempt the furniture, fixtures and equipment (FF&E) savings that must be paid every month from February to July
• Extension of membership validity for one year
• Negotiate with suppliers to maintain discounts
• Provide masks and other protective equipment for hotels
• Exempt hotel brand standard audit (BSA) responsibility
• Encourage owners to understand the policy liability and insurance claims related to the epidemic

• Strategy for hotel

Hotel level

• Purchase disinfection and protective equipment, improve disinfection procedures
• Close the shop, or provide housing for medical staff, isolate suspected cases

Consumer level

• Launched “Safe Isolation Room”
• Provide continuous stay discounts, free cancellation, full disinfection, online consultation and other epidemic protection services

Staff level

• Encourage employees to take vacations (paid or voluntary unpaid)
• Strengthen employee protection. Distribute protective equipment such as masks, and measure body temperature twice a day.

• Carry out intelligent transformation

During the epidemic, hotel groups such as BTG Home Inns, Huazhu, and Dongcheng also carried out intelligent transformation of their hotels. 2020 is the first year that “contactless service” in the hotel industry has become a core selling point, and it is also a year when 5G technology is widely used in commercial practice. The empowerment of technologies such as big data, artificial intelligence, and the Internet of Things in the hotel industry can greatly reduce labor costs in addition to contactless services to ensure customer safety. This will be an important development trend of the hotel industry.

At no point in history has such an incident occurred, where businesses in almost 200 countries have been paralyzed due to a common factor. Only time will truly tell the full impact of COVID-19 on the global business scenario. The landscape of hospitality could possibly change forever, and in order to stay relevant, we must find creative ways to secure our industry. Therefore, the impact of the new crown epidemic on us is temporary, but the changes provided to the hotel industry are long-term. We must seize the challenges and opportunities this new crown epidemic brings us.

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Reference

https://www.google.com.hk/amp/s/hospitalityinsights.ehl.edu/covid-19-impact-hospitality-workforce%3fhs_amp=true

https://www2.deloitte.com/nl/nl/pages/consumer/articles/impact-of-covid-19-on-the-hospitality-industry.html

https://www.meadin.com/info/212343.html

https://hospitalitytech.com/economic-impact-covid-19-hotel-industry

https://www.sohu.com/a/375849301_459927

http://www.zichanjie.com/article/466218.html

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