Industry Update
Opinion Article27 March 2020

Covid-19: What Should Hoteliers Keep in Mind In the Midst of the Current Crisis

Covid-19: What Should Hoteliers Keep in Mind In the Midst of the Current Crisis

By Pierre Verbeke, Director Hospitality Advisory Services at EHL Advisory Services

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We are reading a lot these days about this unprecedented crisis and the profound impact this has and will have on our business. Stock exchange wealth has been wiped away, thousands of hotels have had to close and many of our employees are affected and are assigned to residence. Never before have we seen mandatory hotel or restaurant closures on a scale as today. Even during some of the worst crisis in the past, hotels or restaurants have not been forced to close.

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Because our business works with very small margins and because it is a very cash-heavy industry, sadly many a hotel or restaurant will see dire times ahead. We are in uncharted waters and despite what some may say, we do not have, now, a solution for fixing this. Demand short term is close to zero and only because of the unknown has the long term demand not really been affected. Sports events, Olympic games, business travel has all but ceased.

But what can be said about the situation today?

  • We are definitely not alone in this and by that we mean to say that no matter what individual actions you may take, they will have little to no impact.
  • Discounting or dropping rates will not help you in any way, even if you think it might be a good idea. Remember that you are not alone and that if all drop the rates, recovery will be painful and slow. As a reminder, during the 2008 financial crisis, it is commonly accepted that, even if demand was showing clear signs of recovery after 6 to 8 months, the ADR took over 3 years to come back to pre-crisis levels. All because a majority of hotels decided to drop their rates. But that impacted the market for everyone.
  • Visibility on the future is currently almost non-existent : 6 months, 8 months, 1 year?
  • Showing understanding with your customers will be key. Not saying you should pay everyone back the money they may have paid you, but certainly showing flexibility and allowing for postponement, Even on previously non-flexible rates.
    I was amazed to still see advance, non-refundable, rates available for booking in major cities in Europe yesterday and today.
  • Your customers are as lost as you are and most will appreciate you keeping in touch with them. Packaging deals, upgrades on first visit or added value proposals will go a long way in helping also your customers feel better, whilst allowing you not to cut too deeply in your future profits.
  • Your staff will need support. Some of them are at home, some of them will man the proverbial fort. They will need attention and support in the weeks and months to come. They will need to reconnect or stay connected. Organizing virtual team meetings, virtual coffee breaks and regular information sessions will be an excellent idea. Our company decided to have a start of the week and end of the week informal meeting. With our consultants scattered all over Europe and the world, we have noticed this does boost morale.
  • Even if visibility is difficult at the moment, now is the time to think about recovery scenarios. Who will come back first, what rates/packages are best suited for these, etc We know the domestic/regional markets will pick up first and the more distant markets will come later. How will that translate into your action plan?
  • Look around and see what is happening elsewhere. With our office in China, we are in a very good position to monitor closely what is happening there and see how we could learn from that situation. 70% of the hotel sin China closed, now at the time of writing, this is already down to 40% and first timid signs of business wanting to resume is showing. Car plants in China have resumed production, food production is trying to catch up the lost weeks, these are some of these signs.

We will continue to monitor the situation and share insights with you as we go along.

Hope you all stay safe.

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Pierre Verbeke

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