Covid 19 has influenced every sector across the United States and the hotel business is among those hardest hit. This has been due to the fear of the spread of the virus. Social distancing has been the new norm for many people and the clients are taking no chances by ensuring they stay at home.
Entire lockdowns in some towns plus the curfews have created an unpredictable business environment. For instance, the enterprises dependent on visitors, cafes, bars, and restaurants. All these obstructions are broadly affecting the entire sector.
According to recent research done by Mckinsey, the recovery to pre-pandemic levels may go until or beyond 2023. Just as the other businesses, the hospitality industry may experience both significant and indirect transformations. This may take place particularly during the post-covid period.
This article is going to take you through the real facts and figures about the hotel industry in regards to covid 19. Hence you will realize how much the sector is encountering during these tough times. Let’s dig deep into it!
What’s the impact of covid on the hotel businesses?
A-Must-Know Facts and Figures
- More than 70 percent of hotels may not survive if they don’t get government aids.
- There is a decrease In the hotels’ key performance indicators in the U.S.
- Close to 9 out of 10 hotels have laid off their workers
- Less than 50 percent of hotels have rehired their employees
- Hotel debt borrowers have requested payment deferral agreement or debt forbearance.
More than 70 percent of hotels may not get through without government assistance
Reports have indicated that America’s hotel industry keeps drawing near to its downfall in case they can not get congress to give them a little bit of monetary aid. Over 70 percent of hotels revealed they may not survive past six months. This may happen in regards to their present state of occupancy and anticipated earnings if they don’t get any additional relief.
More than 30 percent asserted they may pull through within 1-3 months. Over 90 percent of the Hotels have made applications for other types of loans and the paycheck protection program(PPP).
There is a reduction in the hotel key performance indicators
Unfortunately, hotel enterprises around the globe have been hit hard and the U.S. is not an exception. It has noted a decline in the crucial key performance indicators. For instance, for occupancy, the average daily rate and the revenue per available room decreased.
Before mid-march this year the occupancy of the hotels in the United States was slightly above 50% and this is a reduction compared to the other years. The revenue per available room declined by over 15 percent while the ADR also experienced a drop of more than 14% of the past year.
Close to 9 out of 10 hotels have laid off their workers
In April the leisure and hospitality businesses lost millions of jobs, about 47 percent of them. Those affected much by the layoffs in the industry were in the foodservice, the cashiers, waiters, chefs, and some restaurant staff. Close to one-third of the hotels have managed to rehire their workers.
Over 8 out of ten hotels had to lay off the employees with the onset of coronavirus coupled with a decline in the demand to travel. Less than 40 percent have rehired the workers through relief measures like the paycheck protection program. Many hotel owners expect a complete restoration by at least the end of this year.
Studies indicate there is a need for Congress to urgently reach out to the owners and offer extra aid to help secure jobs. Two-thirds are operating with below 50 percent of the normal staff numbers.
Even though the PPP loans have been of help to some, it is insufficient to retain or rehire most of the workers.
It is also notable that the industry is among those who got affected by the initial stages of the virus and it may probably be the last to return fully.
Below 50 percent of hotels have re-employed their staffers
Last year, in less than five months, 37% of the hotel owners said they were able to rehire not less than half of the normal number of their pre-covid staff.
Another great news has also been about San Diego extending a law that needed the hotels to re-employ the veteran employees. Those who lost their jobs during the coronavirus pandemic.
Several tourism applicable enterprises laid off their workers and the city council spread it for a further one year. It requires the workers to get rehired based on how senior they are. Though the council says the law secures the vulnerable staff, the hoteliers refer to it as cumbersome and ambiguous.
The hotel workers who lost their jobs in San Diego received a boost after the extension was put in place for one year.
(San Diego; AHLA)
The debt borrowers have asked for payment deferral approval
The borrowers will be mainly concentrating on getting reimbursement deferrals, of a minimum principal, or perhaps some liquidity relief. Those borrowing may have to assess the credit terms agreements. This is to see whether there can be a prevailing pact in regards to the one they need to seek a waiver from the lenders.
The owners of the hotels in search of a break from their every month payments reported not having more achievements. This happens while negotiating with the companies and it has a role to return more cash to the investors. If there isn’t a commercial mortgage-backed securities (CMBS) debt forbearance, there can be a complete loss of jobs.
More than 80 percent of the hotel debt borrowers bid for a debt payment forbearance deferral agreement. However, below fifteen percent of the CMBS borrowers got a forbearance as compared to a larger number of the bank borrowers. Many of the banks upheld deferral appeals were for three months or less.
(Wall Street Journal; AHLA)
The hospitality industry is facing the possibility of a prolonged recovery. In the coming months and even years, enterprise circumstances may vary depending on several elements. They comprise demand profile, chain scale, and location.
There isn’t any correct reply for everybody, though there are some guidelines which apply without exception. Hotels may have to consider looking out for their staff members and also ensuring they are safe when their return to work. Also, They’ll have to re-examine their commercial policy for the revival, with a focus on the coming new normal.
Frequently Asked Questions
What are the Impacts of the coronavirus pandemic on the international hotel industry?
There is a significant drop in private and career trips which has inflicted considerable tension on the hotel industry. This has led to reduced revenue and occupancy for each available room. Additionally, the hotel and tourism industry actions do affect each other in one way or another.
Current reports reveal the almost complete lockdown enforced to fight the covid-19 pandemic caused a decline of about 98% in the international tourists. This occurred last year when compared to the year before the crisis. A reduction in guest arrivals around the world between the first five months was also noted.
Therefore, the Industry’s stakeholders are facing lots of drawbacks. It’s from the postponement of the main global events, travel restrictions, negative customer sentiment, declining room rates, and oversupply. Thus it’s leading to drastic liquidity and operational issues and also affecting hospitality.
The hotel proprietors have been compelled to reduce costs. Mostly through applying measures like partial or complete closure of hotels, reduced number of employees and salaries, and unpaid leave.
What will the future of the hotel industry look like during post-covid?
They’ll first reopen partially by operating with a curtailed number of workers, not using some floors, and reduced occupation levels to control the costs involved. All the expenses will have to be keenly examined against these recent limitations and will then have to denote value. Prior revelations show that the anticipation of fewer employee counts and further, an enhanced concentration intensified cleanliness, safety, and efficiency.
For safety, they will need to get reasonable equipment to sort out their issues. A luxurious activity is forthwith redefined based on cleanliness and safety. Sanitation has often been a prime concern in the hospitality industry.
Moreover, it is safe to speculate during post-pandemic, the hotel’s level of cleanliness will be more efficient, apparent, and in the open. Some hotels are installing new seals to the entrance, room cleaning robots, and sanitation stations.
What are the current issues in the hospitality industry?
In the previous year, technology has stepped up in the hotel industry. For example, payments through apps, online orders, contactless services, and self-check-ins have become the new normal. It is a challenge for the hospitality sector to offer an excellent client experience amid the tech-enabled and human interactions.
Retrieving the visitors’ confidence is among the issues in the hotel industry. The client has to be safe while in the hotel. Hotels can help avert the fears of their visitors by making sure there is proper sanitization.
And by conducting frequent check-ups of the staff’s temperature and having to wear masks throughout while in the hotel.