The global hotel industry has seen one of the worse impacts in history due to the spread of coronavirus that has infected over 3,130,000 people and taken over 219,000 lives worldwide.
Countries around the world have closed their borders and imposed stay home restrictions. Planes have stopped flying, large global conferences, sporting and entertainment events have been cancelled or replaced with a virtual event to save lives, by containing the virus spread.
This travel stop has put airlines, hotels, food and beverage, entertainment and other complementary businesses comprising the industry at huge losses and many businesses are at the risk of bankruptcy.
Hospitality: Once soaring industry comes to a standstill as staff asked to leave
The hospitality and tourism industry that employs globally around 119 million people is one of the worse hit. Due to minimum to no travel, hotels in many markets are either shut down or running single-digit occupancies. According to the World Travel and Tourism Council (WTTC), the travel and hospitality contributes to 10.4% of the global GDP with one in every 10 jobs related to the industry.
The current crisis has left millions of jobs at stake in almost every country. As per an estimate from WTTC, 4 million in America, 10 million in Europe and 1.8 million employees in the Middle East will be directly affected in the face of this crisis. These employees will be either furloughed or laid off from their jobs to manage the operational and fixed costs with no business demand.
The American Hotel & Lodging Association (AHLA) projects that with the 4 million job cuts in the US out of total 8 million employed, hotel workers will lose $2.4 billion in earnings and properties will lose $3.5 billion weekly in room’s revenue due to empty hotels across the country.
The Middle East particularly the GCC states that are known as emerging markets for massive hotel developments are also facing the brunt of this pandemic in terms of financial and employment loss.
Within the global hotel industry, Dubai has been worse hit due to its dependency on business from other international destinations. Dubai with an estimated current supply of 135,000 hotel rooms attracts travellers for the purpose of business or leisure from all over the world. The key travel source markets for Dubai are China, India, Pakistan, GCC, Americas, UK, Europe and the CIS states. Apart from business and leisure travel, the meetings, mega conferences and the transit stopover business through Emirates airline are the major components that make Dubai as one of the major hospitality hub.
The coronavirus travel and movement restrictions have caused hotel cancellations for rooms and meetings at a steep scale within a short time. During a peak business period, almost all hotels across Dubai are either closed or at the lowest single digit occupancies. With this financial loss in business, the estimated over 450,000 workforce employed directly or indirectly in the UAE hospitality industry are severely impacted. Hotels have either asked staff to leave or take unpaid vacations to survive this challenging time. According to Colliers International, a global advisory firm’s recent forecast, Dubai will see – 42%, Saudi Arabia -42% and Bahrain -44% decline in annual hotel occupancies for 2020.
Read more: G20 vows to help global tourism sector
Marriot employs cost-cutting measures
With the fallout of this economic situation, the leaders in the hotel industry globally took internal steps to control their costs and demanded bailout packages from governments. Marriott International, the largest hotel company with 1.4 million rooms worldwide has furloughed its employees almost at every level.
Arne Sorenson, CEO of Marriott International shared in March that they have stopped all new hires and all hotel initiatives and that himself and Bill Marriott, the Chairman will take no salary for the remaining of 2020. In his video message Arne said “As a leader, I have experienced so many wonderful highs and a good number of challenging lows. I can tell you that I’ve never had a more difficult moment than this one. There is simply nothing worse than telling highly valued associates, people who are at the heart of this company, that their roles are being impacted by events outside of their control”
Massive stimulus package but it will not be enough
The hotel chain owners in the US met President Trump in March and demanded a $150 billion stimulus for the industry. President Trump signed the CARE Act with a $2 trillion package for all businesses to pass through this crisis. However, the debate started around the hospitality industry including airlines that who benefits from this bailout as the CARE Act came with many provisions. For instance, the airlines can get $50 billion, half in grants and half in loans asserted that after airlines receive these funds, they cannot layoff their staff particularly the front liners e.g. pilots, cabin and flight operations crew.
The hotels will also gain from the stimulus package, however, many large chains argued that the hotel industry needs longer stimulus packages as the business recovery may not be possible until the end of the year or early 2021. The key point of argument was around a provision of the Act to rehire staff by June. Many hotel owners, especially the small operators or non-chain owners debated that 75% of the hotel rooms across the US are empty and it is less likely that business will return to rehire the staff with no demand.
The key hotel lobbying group requested in writing to alter the Act to address their concerns. The hotel unions also argued with the owners particularly with the large chains indicating that these large groups are using funds to pay their shareholders and lenders over employees.
Gulf nations protecting the hospitality sector, but how?
Across GCC, Dubai Govt. has also acted promptly to reduce the economic pressure and injected a stimulus package of AED 1.5 billion into the economy to provide relief to businesses. The major component of this stimulus package reduces municipality costs, utility bill reductions, reducing customs duties and commercial fees for businesses.
This timely and decisive stimulus package will help businesses including hotels to breathe financially for the next few months until the situation is reviewed again. With the help of this stimulus package combined with own resources as private entities, hotels should come together to protect their human resources. This could be the most effective form of a public-private partnership to ensure the survival of the hotel industry by protecting the workforce and to ensure the timely recovery of business once the market rebounds.
Many hotel companies in GCC have made strong commitments of protecting their employees by leave adjustments as they believe workers are the single most important assets and retaining them during this difficult time will help achieve long term sustainable profits. Muhsin Qandeel, the Commercial and Revenue leader from Kempinski shares “We treat our staff as family and ensured to retain them to be ready to serve our guests when market recovers. We are using this time to virtually engage and train ourselves for a better tomorrow”
Hotel and travel experts worldwide share that industry managed to rebound before through 9/11 and SARS and financial depressions. Although this pandemic is much bigger, this time shall pass too and markets will see some recovery by the end of 2020. However, many others argue that with the postponement of key events like the Expo 2020, Olympics and other sporting events across US & Europe, the recovery may not be easy until the first quarter of 2021.
Soufiane Elsallam, the senior commercial leader from the Ritz Carlton in Dubai indicates recovery sooner than later “With Dubai opening cautiously and gradually, we will see some movement in business after Eid with higher traction in July particularly within the region and local stations. The necessary business travel will also resume once Emirates starts flight operations in July.”
Running businesses: New models to be adopted
With all the above, it is clear that this crisis apart from loss of life has also taken its toll on the world’s economy. Just as after this pandemic individuals need to embrace a new lifestyle, hotels also need to adapt to new practices to overcome challenges. Events segment will see a more assertive trend where most meetings will continue to be held remotely via digital platforms.
Ajay Bhojwani, MD of MCI Middle East, a leading international events & conferencing organization says “Industry is in a shift state where some old business models and roles will be redefined. Digitization will play a key role than before in conferencing segment with emphasis on virtual events. MCI is already taking a lead in providing virtual solutions to its partners”
It is recommended for hotels to focus on the domestic market and maintain international marketing campaigns for the future. They should maintain rates but offer valuable benefits and flexible cancellations. Hotels should reassure guests by reaching them and most importantly prepare for rebound. Large hotel chains have already restructured their standards of operations based on revised hygiene and safety measurements. Hyatt, Marriott, Accor and Hiltons have all launched their standards campaigns to prepare for a healthy welcome.
I conclude my opinion per the Smith Travel Report’ recent industry update.
“Remember it is about lives, not numbers”
Hadi Pirzada, a management consultant has worked across Switzerland, Canada & Dubai. A graduate of Cesar Ritz Hotel School, Luzern, Switzerland and Brock Univ. Canada, he has worked in Global Sales & Marketing Operations with Ritz Carlton, Four Seasons, Marriott International, Starwood & Intercontinental Hotels and collaborated framework with private and public sector in global markets. Tweets @hadipirzada LinkedIn: www.linkedin.com/in/hadipirzada.The views expressed in this article are the author’s own and do not necessarily reflect Global Village Space’s editorial policy.