Industry Update
Opinion Article23 April 2020

Further Insights on What Hoteliers Can Do to Prepare for COVID-19 Recovery

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

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In the previous article, I mentioned some thoughts on the position of hoteliers and restaurateurs in regards to this unprecedented crisis that the industry is facing. Now is the time to prepare and start some of the activities and conversations that might help for when things are picking up again.

  1. Have you considered all the support possibilities that the government and other official bodies have at your disposal? In some countries, you may get a lump sum to cover a part of the costs. In others, there are measures in place for continued payment of employees, up to a degree, so that you do not immediately need to severe the relationship with your staff.
  2. Have you talked to your bank already and asked them what they can and will do?
    In some countries the banks are themselves supported by the government, the national bank or by supranational instances, so that they can renegotiate loan terms with small businesses. In other cases, banks have already pledged that they will not charge for debt renegotiations or for creating new mortgages and new loans.
    Whatever the country's infrastructure, it will be a necessity for the interested party to start the discussion and go to the bank with a plan that includes recovery scenarios showing what has been done to limit the damage and what will be done once business returns.
  3. Have you talked with suppliers and looked at how you can reschedule some payments or how you can re-arrange your supply when things will pick-up again?
    One rather under-used system is 'vendor consignment'. I have used it in the past when managing cash-strapped properties. This allowed me to only pay the supplier once the goods have been actually sold and allowed for a different cash management, keeping more cash in the property.
    Although not widely known in the hospitality industry, now may be the time to start this discussion with your suppliers. I see it as a win-win situation that benefits both parties: one forking out less cash, the other being ensured of continued business.
    Some invoices may be worth paying in instalments, instead of in one lump sum.
    Insurances can be paid per month, same as with certain taxes.
    In some countries today, breweries have decided that the cafés and restaurants they own should not pay rent for 1, 2 or 3 months. This is certainly something worth pursuing with your landlord.
    Whereas in the past a landlord may have thought of the rent in a unemotional way, knowing he could easily find new tenants, this situation is different. It affects every player in the market and, coming out of this crisis, there may not be so many candidates for rent.
  4. Have you talked to your team, regularly updating them on what it is you are doing and how they could help? After all, their livelihood is also at stake and they suddenly face as much uncertainty as you do. They may have solutions or thoughts that could help the business.
    It would also be beneficial to see how, in respect of local labour laws, the worktime can be rearranged if and when business picks up again, as we all anticipate that a slow recovery will probably be the most realistic scenario.
  5. Apart from involving your team in the solution, what are your plans for motivating them and keeping them interested? Now is the time for them to possibly embark on a personal development scheme, follow online courses and gain new knowledge.
    Will you, as their employer, be in a position to support them financially? Maybe not now, but you could agree with some employees to reimburse their education costs in the future when business is back on track. We all know that in normal trading periods, there is very little time nor appetite to have staff develop themselves.
    Now is also the time to ask your team how they see business developing after Covid-19. I am convinced that in normal times, staff members do not have enough time or opportunity to think together with management about solutions, about new products, new ways of doing business. Why not include them in discussing the possible solutions? It is also a perfect moment to educate your team members about the situation of the business, the challenges and the opportunities that may lay ahead.
  6. Many hoteliers and restaurateurs are facing huge fixed costs. At this stage not much can be done it, but this could be the trigger for looking at costs and thinking very actively about how to transform fixed costs into variable costs, especially for the phase where the business will not yet be stable.
    Simpler said than done, I agree that staff costs are most certainly the biggest issue that the majority of businesses in our industry are having to face.
    Working with temp staff is probably a little bit more expensive, especially if you go through an agency, yet you only have to pay these costs in relation to your activity.
    Some of staff costs are semi-variable, insofar that you need a minimum number of people to man a department, regardless of the business.
  7. We know that once the situation clears up a little, our industry will have changed. Patterns of travel, distances traveled, the way we look at holidays and business travel will be hugely impacted. We know that the first business to come back will be the proximity business. The business coming from the immediate surrounding regions, i.e. people traveling by public transport.

What will also remain is the attention to detail, the attention given to the customer. In these dire times, many examples of solidarity have arisen, people have gone out of their way to help others. This is a fantastic opportunity to humanise travel and tourism even more, to become better still at our levels of service and at personalised service. Let's concentrate specifically on the practical, human assets that our business provides to get the ball rolling once more.

Stay tuned for further developments.

Pierre Verbeke

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