Impact of COVID-19 on Hospitality Industry

 

Introduction

The hospitality industry is in a state of constant change and a hotelier must adapt to the emerging trends and situations to keep their business afoot at all times. The priority as said by does not lie in increasing the number of guests but improving their experiences while at the hotel. Customer satisfaction is very important as this is what keeps guests coming back. This is because the guests are continuously voting and sharing their experiences online, which only attracts more guests for the future. The changing consumer behavior is that the consumers today are more interested in building long term relationships than on a quick sell solution. The key consideration here also lies in the fact that not all guests are the same and satisfying customer needs of all must be carried on (Schaap, 2017). However, this being said certain situations natural or otherwise impact the guest experience and also the profitability of businesses.

The impact of disasters is always a blow to all industries, especially the hospitality sector, and the hotel industry is impacted by natural disasters and pandemic situations. In light of the current situation, the COVID-19 will change the way we look at the world! With globalized shutdown and travel bans, tourism is suffering greatly and even in the coming year, the immigration departments of all countries are thinking about imposing restrictions on leisure travel. Economic growth, business progress, and the impact of human life have become extremely volatile and unpredictable. According to experts, the situation will be handled more efficiently when the contamination of the virus is in control (Fernandes, 2020).

The Impact

Many hotels and resorts across the world have been juggling their business with low demand, fewer future bookings. The transient demand has completely reduced, due to the restrictions imposed by the governments. Although few long stay guests have been allowed by the government in certain cases, the impact of those travelers is too low to hold on to the profitability of hotel institutions. Having said this, many economists (ETMarkets.com, 2020) believe that the world will experience an economic slowdown in the first quarter of 2020. Unless, a cure is invented the global economy will suffer a recession much likely to the one faced in 2008.

According to an IMF report (STR Data Solutions, 2020), tourism and the hotel industry is likely to lay down 50 million jobs due to the economic impact. International travel would be reduced by at least 25%, which is almost the loss of three months of the economy for the hospitality industry. Data also indicates that the branded hotel segments and bigger chains are likely to face decline by 16-20% in the year 2020. The ADR is also bound to decline by 6-7%, and the RevPAR will go down by almost 36%. The mean decline can be around 2.8% globally (Ozili & Arun, 2020).  The suspension of visas and the global imposition of lockdown have relatively made the industry demand an all-time low. Moreover, the cancellation of events like conferences, conventions, sports events like the Olympics, and others has hit the hotel sector by major booking cancellations. The impact is not only revenues but also on the entire supply chain of the industry. At the current moment, the phrase “social distancing” has become a part of everyday life and phrases like “Stay at home, Stay Alive” are being promoted. Naturally travel has taken a fresh perspective on the minds of the consumers. Here it is important to mention that the institutions must reassess their abilities and figure which parts of their operating system can cope with disasters and which departments need work. Quoting UCLA Professor, “successful coping with external or internal pressures requires selective change” (Diamond, 2019). 

Researcher Combs (2020) mentions that there are two scenarios, which the industry is facing at the moment. Firstly, the possibility that a customer might be tested positive for Covid-19 through his or her travels and secondly, a massive drop in the profits. In the event of business disruption and lower profitability, economists advise all hotel owners to make preparations to combat the impact of COVID. One of the major steps recommended by many is to focus on the insurance provider and check the terms of insurance for business disruptions. With the pandemic being a part of our lives, the hotels must also make all future guests aware of the global implications. They should also prioritize their expenses and focus on reserving finances as far as possible. Experts pointed out that the Indian Airlines industry would require a savings of USD 200 billion to combat the impact of Covid-19 (BW Online Bureau, 2020). Most importantly, planning with stakeholders is essential to plan for the future ahead without targeting the pocket of the travellers. Certain operational features must be in line with the guidelines by the Health Department and the Health Protection Agencies.

Experts like Legrand (2020) is also of the opinion that stress management has become of utmost importance. Employees must also be motivated to work at such times of crisis and taken care of with finances and resources as far as possible. The ultimate goal right now as said by Dolton (2020) is to improve sustainability and handle cultural and natural resources efficiently. The COVID-19 situation however, has stressed more than ever on future-proofing the businesses and creating resilience in the industry.  The government must work together with the public and private sectors as well as with their customers to create strong sustainability that fights with viruses like COVID. Researcher Simons (2020) here states that referring to Maslow’s Hierarchy of Needs, the concept of ‘primary needs’ has been redefined under the current situation. He is of the opinion that rather than suppressing the situation, preventing steps must be taken along with normal life resuming. He states that Earth is a closed system of the economy where resources are limited and hence as long as hoteliers focus on the linear model of the economy, mindless actions will be taken. The goal should be on creating a sustainable approach with the virus as a part of normal life!

On a brighter Side!

Many hotels in the UK and around the world have also considered Hotel Cleaning Standards as a step to fight the pandemic (Hospitality Net, 2020). Dusit International from Thailand also introduced a program that would be in accordance with the guidelines of the COVID-19 pandemic. Four Seasons Hotel also collaborated with John Hopkins to formulate a health and safety program to provide real-time guidance for guests with the evolving pandemic situation. Avani Hotels and Resorts have also started the AvaniSHIELD where all their rooms would be disinfected regularly so that no contamination takes place. Posadas, the largest hotel chain in Mexico has started offering complimentary sanitizers to all its present guests and for all future guests to come. Hyatt has also introduced regulations in collaboration with the Global Biorisk Advisory Council. Anti-bacterial bed sheets and upholsteries are also being provided and the use of gloves and masks has become mandatory.

Another important change as said by Nicola, et al., (2020) is in consumer behavior as mentioned earlier, where the focus will be on technology in pandemic situations. This can also be regarded as a sustainability effort on the part of the industry. Touch-less features are revolutionizing the industry, with self-check-in and check-out modules. Alternative TV remotes are also being used which lessens human contact. GIS tracking devices are installed in the rooms which detect infection and contamination of any disease. The use of UV light is also being used while cleaning rooms and other parts of the hotels. Cashless travel features are also taken into consideration which focuses on less contact between humans, thereby checking on infection and the spread of diseases. This shall also provide more transparency to the travellers and keep discretionary operations and capital expenditures in check. According to an article by Hollander (2020) Solar Mobile Apps has been launched in IOS App Store by Resort Technologies LLC, which provides hotels free inventory management systems keeping in mind rules of social distancing. Class II Medical Device has also been used by the American hotel industry, which acts like an air purifier which targets bacteria and viruses in the air. Another important step taken by the government is promoting ‘staycation’ ideas in the minds of the travellers. Doing so, will flourish domestic travel thereby also keeping the economy at a balance. New Zealand government is the first to initiate such a measure with a possibility of a GDP of USD 23 billion annually. A shorter workweek is therefore also into operation, with a 4-day work week, so that domestic travel can be flourished (Roy, 2020).

Conclusion

On a concluding note, it can be said that the impact has been massive on an economic scale as well as in the supply chain models of the industry.  However, all situations have a learning impact, which must be taken into consideration. In the current light, revenue management and planning for sustainable future has become of utmost importance. This has also bought up situation like ‘black swan’ events which makes hoteliers focus on future preparations by cutting vendors, switching to payment processors and others. Not only this, but the pandemic of COVID-19 has helped the management reassess its HR roles and develop new CSR policies in line with stricter health standards. It is therefore important that measures are taken beyond the current threat situation, so that a sustainable future is created. Sustainability now, is not a perspective but a necessary condition that is necessary for survival.

 

References

BW Online Bureau, 2020. COVID-19: Impact on the Indian Hotels Sector, A Report by HVS, London: BW Hotelier: Business World.

Combs, L., 2020. COVID-19 Implications on the Hospitality Industry, s.l.: HLB USA.

Diamond, J., 2019. Upheaval: How Nations Cope with Crisis and Change. 1st ed. s.l.:Penguin.

Dolton, C., 2020. The Sustainability in Hospitality, s.l.: Hospitality Net.

ETMarkets.com, 2020. Covid-19 to accentuate growth slowdown, impact on inflation ambiguous, s.l.: Economic Times.

Fernandes, N., 2020. Economic Effects of Coronavirus Outbreak (COVID-19) on the World Economy, s.l.: European Corporate Governance Institute (ECGI).

Hollander, J., 2020. Hotel digital transformation in the aftermath of coronavirus, s.l.: LinkedIn: Hotel Tech Report.

Hospitality Net, 2020. COVID-19 Resource: Global brands & Associations introducing Cleaning Standards - 6 Updates, s.l.: Hospitality Net.

Legrand, W., 2020. COVID-19: A stress test for sustainable development in hospitality?, s.l.: Hospitality Net.

Nicola, M. et al., 2020. The socio-economic implications of the coronavirus pandemic (COVID-19): A review. International Journal of Surgery, 78(1), pp. 185-193.

Ozili, P. K. & Arun, T., 2020. Spillover of COVID-19: impact on the Global Economy, s.l.: SSRN.

Roy, E. A., 2020. Jacinda Ardern flags four-day working week as way to rebuild New Zealand after Covid-19, London: The Guardian.

Schaap, J., 2017. These Major Trends Are Changing the Hospitality Industry, as You Know It, s.l.: Hospitality Net.

Simons, J. H., 2020. Hotel Sustainability, s.l.: Hospitality Net.

STR Data Solutions, 2020. COVID-19: Hotel Industry Impact, s.l.: STR Data Solutions.