Hotel Survival Tips During COVID-19
By Travis Crabtree President & General Counsel, Swyft Filings | June 14, 2020
The hotel industry, among many others, is feeling the impact COVID-19. According to the American Hotel & Lodging Association (AHLA), seven out of 10 hotel rooms were empty across the U.S. as of March 25th. Since then, shelter-in-place orders and social distancing have essentially put life, including travel, on hold.
At the beginning of 2020, the accommodations industry had been experiencing steady growth for a couple of years. A 2019 report found that accommodations businesses had seen 38% year-over-year growth in regards to new businesses formed. The emergence of vacation home rentals through sites like Airbnb and Vrbo drove innovation across the board, particularly by utilizing more technology. The healthy competition within the industry paved the way for new businesses to form and hotel industry veterans to adopt new trends.
Yet, the industry is now faced with a new challenge which is also driving innovation and adjustments: COVID-19. Mass cancellations, orders that prohibit or discourage traveling, and uncertainty around how long until life resumes to relative normalcy are making it extremely difficult for hotels to remain profitable, if open at all. Undoubtedly, more hotels will continue to close their doors and be forced to layoff or furlough employees.
While there's much that's out of our collective control, for the time being, there are steps hoteliers and hotel management can take now to help increase the chance that there's a hotel to open back up when the dust settles. Below, we'll discuss the hotel industry's role in the U.S. economy and explore a few options worth considering in the coming months.
The Success of Hotels Goes Beyond a Single Industry
The impact of hotels goes beyond the accommodations industry. They play a pivotal role in the U.S. economy. According to an Oxford Economics Study, the hotel industry supports 1 in 25 jobs in the U.S. Looking at these figures annually, that totals to $97 billion-plus in wages and salary income and contributes nearly $660 billion to the U.S. GDP. The sheer volume of profits lost from the hotel industry will have very negative implications for the economy as a whole.
Aside from the financial impact of hotels, they also serve a very basic and practical need for accommodations. While traveling has been greatly reduced across the globe, there are still people heavily relying on hotels being open. Travelers who've been quarantined while on vacation, for instance, can't simply leave for other accommodations. This, of course, weighs the question of who's obligated to pay in these unique situations. There are also doctors traveling to support COVID-19 hot spots, like New York City, who need somewhere to stay.
Today, however, we're focusing on the situation for a majority of hotels, the ones that can't keep operations going. The fact of the matter is that not all hotels are going to stay open during this time. Most hotel properties have been banned from booking stays for leisure purposes, making it practically impossible for most to remain open. In fact, many have already closed. Even with doors shuttered, however, there are actions hoteliers can take.
Tips for Hotels That Have Had to Cease Operations
1. Take cues from how hoteliers survived the 2008 recession
The financial crisis in 2008 took a toll on the hotel industry. While this economic downturn during the coronavirus crisis is very different situationally, we can still benefit from the lessons learned during past recessions.
2. Audit expenses and clean house
In times of economic growth, it's easy to get lackadaisical about expenses. If you take an honest look at how your hotel has been spending money, you'll likely find there are expenses that really aren't worth the cost. If there was ever a time to cut unnecessary expenses, it's now. This includes performance, as well. There may be some individuals whose roles can be automated or outsourced for less. Consider that there may be someone who has demonstrated performance issues prior to the pandemic and is costing the business in other ways. While people are the heart of your establishment, take this time to ensure you have the correct employees to serve your customers with care post-COVID 19.
3. Flexibility and innovation are key
With the stark restrictions on travel, you'll have to get creative in regards to bringing in any profit. Some hotels, for instance, are offering their rooms for COVID-19 patients. This is allowing some staff to return, meticulously training them on how to handle details such as linen and food distribution.
4. Don't discount transparency
Weathering the financial fallout of the pandemic will require transparency. Without it, professional relationships will suffer, making it especially difficult to muster resiliency during the most challenging times. To maintain credibility and trustworthiness, business leaders must act responsibly and then be transparent about those actions. This means letting your employees know how bad it really is, how you're handling it, and how you're going to move forward. These steps can prove to create an even stronger team and business than before.
5. Consider strategic options for financing
In order to make mortgage payments or make payroll, many hotels will need to turn to financing options, including debt refinancing, mortage loan modification, and liquidation of assets. Learn more about your strategic financing options here.
If hotel operators learned anything from past recessions, it's the value in being prepared for future ones, regardless of how promising things currently are or the assumed trajectory of the economy and industry. While there are often economic indicators that can help predict a recession, there are many other events that cannot be predicted, be that an attack taking place, such as 9/11, or a global pandemic. Yet even the most prepared hoteliers may have not been prepared to handle the breadth of what we're currently experiencing. That said, financing options aren't just for those who are struggling at this very moment, but for those who will be struggling within the weeks or months ahead.
6. Engage savvy travel planners looking to book in advance
With the world on lockdown, travel plans as of now have been shut down, but they won't be forever. For those who aren't being negatively impacted financially by COVID-19, they might be more eager to take advantage of discounts and reduced rates promoting future travel. This applies to people who are postponing trips, as well as those who haven't yet planned them.
Experts have suggested that the disease might ease off in the fall, so eager travelers will likely be looking to book between September and December 2020. While this timeline isn't full proof, it's something that travelers, and hotel owners, can look forward to. Given the uncertainty, travelers will be looking for specific details as they plan future trips, such as:
7. Offer flexible booking policies
Travelers are likely more risk-averse than before the spread of the novel coronavirus. No one knows for sure how long travel restrictions will remain in place, so the chances of someone booking a non-refundable, inflexible trip are very slim. Be transparent and don't hide shady details in the fine print. Consumers are looking to support ethical brands and businesses, so be wary of potential backlash if you rope people in to use it or lose it situations.
8. Offer discounts and deals
Consumer-facing industries across the board have been offering discounts to help support their bottom line. Doing so will help to encourage spending while also providing you with some income to help during this time.
9. Help travelers prepare for the unexpected
Looking out for travelers, your potential guests, will go a long way to show that you care. As someone is booking a future stay at your hotel, educate them on resources such as travel insurance. Not only will this build goodwill for your guests, but it also helps to protect you in case their plans are canceled for whatever reason.
10. Prepare to accommodate social distancing-friendly practices moving forward
Wise hotel operators will also be proactive in the midst of this crisis, not just reactive. The fact of the matter is, COVID-19 has the ability to drastically change the ways in which we interact with one another. After weeks and possibly months of social distancing and, in many cases, quarantining, things aren't going to return to "normal" overnight. We'll need to approach things differently. This might mean less physical interaction, more stringent sanitation policies, etc.
With these concerns and precautions in mind, now would be a good time to:
- Finally invest in technology, such as remote check-in and room keys that can be downloaded on a phone, which reduces the need for human interaction.
- Make daily hotel cleanings an option for guests. This way, if someone isn't comfortable with someone else entering the room, they can easily avoid that discomfort.
- Increase sanitation measures and highlight those increases to guests.
As with anything, there will be silver linings. It goes without saying that many will be negatively affected during this time. Jobs will be lost, businesses will close, and previously-positive projections will mean little. But there will also be innovation and, eventually, growth.
Nothing could have prepared the hotel industry (or most other industries, for that matter) for this crisis. Even the most-prepared hotel establishments will suffer losses. This time, much like past recessions, will force industry leaders to mobilize. And in a couple of years, we'll have a whole new set of lessons learned.
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