Industry Update
Opinion Article13 May 2020

Unpacking The Impacts Of COVID-19 On Tourism And Repackaging The Hotel Service

By Ishmael Mensah, Associate Professor at the Department of Hospitality and Tourism Management, University of Cape Coast

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Due to increased globalization, the ripple effect of the COVID-19 pandemic has reverberated through every corner of the globe, causing loss of lives and jobs as well as a slump in general economic activities. The domino effect of the virus has brought untold pain and hardships to many individuals and organizations from all corners of the world. Apart from the loss of over 280,000 lives (as at 10th May, 2020), Bloomberg has projected that this pandemic could cost the world $2.7 trillion, equivalent to the UK economy. However, the impact has not been even across all industries. For instance, information communications technology (ICT) and its related industries have not felt the pinch as much as other industries.

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Impacts of pandemics and crises on tourism

The tourism industry has always been one of industries hardest hit by pandemics and crises. Throughout history, the industry has borne the brunt of major pandemics and plagues, notably, the Black Death (1346-1353), Spanish Flu (1918-1920 ), SARS (2002-2004), H1N1 Swine Flu (2009-2010) and Ebola Virus (2014-2016). The Spanish flu for instance, restricted travel for four months and killed 21 million people during that short period. Also, the swine flu pandemic led to the Mexican tourism industry alone losing almost a million overseas visitors over a five-month period which translated into losses of about US$2.8 billion.
The tourism industry is in a unique situation because transport serves as a vector for spreading the virus therefore it is usually targeted for breaking the chain of spread of the virus. Tourism has a dynamic element which involves movements and this invariably fuels the spread of viruses. The movement of people via air travel increases the risk of the spread of viruses at a much faster pace than normal. Thus, tourism is both a catalyst for the spread of viruses and a victim of the spread.
Pandemics and outbreak of diseases render destinations unattractive to tourists who are risk averse. Usually, travel restrictions, border closures, quarantine and social distance measures are instituted by governments to minimize or curtail the spre ad of viruses. The World Health Organization also issues travel advisories to discourage travel to destinations with cases of pandemics. These measures coupled with media sensationalism in news reports render destinations affected by pandemics unattractive. These result is fear of travel to those destinations and cancellation of flights, hotel reservations and other scheduled events.
During the outbreak of pandemics, almost everything connected to tourism is affected perhaps with the exception of the environment. In Italy, one of the countries hardest-hit by COVID-19, popular tourist destinations like Rome, Venice and Milan are deserted and occupancy rates have slumped to as low as 6%. On 26 March, the World Tourism Organization predicted a 20-30% loss in international arrivals in a press release. Meanwhile, the World Travel and Tourism Council has indicated that 50 million travel and tourism jobs are at risk due to COVID-19.
In spite of the monumental impacts on t he tourism and hospitality industry, it appears tourism's loss could be the environment's gain. There has been a concomitant fall in greenhouse gas emissions especially in industrialized countries as evident from satellite images of coronavirus hot spots around the world. This has been widely circulated on social media. In China for instance, emissions fell by 25% when factories were shut and cities were on lockdown. Also, the use of coal fell by 40% in the six largest power plants in the country. Whiles there is a lot of panic about the pandemic, nature is undergoing a healing process. It is expected that by the time we are done with the pandemic, nature would have been troubleshooted. Since the environment is the base product of tourism, destinations would become more attractive.
Airlines, tour operators, travel agents, attraction sites, car hire, restaurants and hotels have all been adversely impacted. All businesses and service providers along the tourism value chain including the farmer who supplies vegetables to a restaurant and a taxi driver who shuttles tourists from the airport to hotels are all affected.

Impacts of COVID-19 on hotels

Undeniably, hotels are one of the hardest-hit industries by COVID-19. As a result of massive cancellations of flights, tours, events, hotel reservations and a resultant decline in inbound travel, hotel occupancy rates and average room rates have dropped sharply causing unprecedented declines in profit margins. In Italy, 90% and 80% of all hotel bookings in Rome and Sicily respectively have been cancelled and for a relatively small tourist destination like Ghana, hotel occupancy rates are down from 70% to under 30%, with some hotels recording as low as 5%. Also, it has been reported that hotel industry REVPAR in the United States fell 11.6% for the week ending 7th March 2020. The problem is compounded by lockdowns and other social distance protocols announced by governments in an at tempt to 'flatten the curve'. Governments are in a dilemma as to how to flatten the curve without flattening their economies. Though hotels are experiencing substantial revenue losses, utilities, wages and salaries as well as other recurrent expenditure and statutory payments have to be made. From all intents and purposes, the hotel industry is headed for an unprecedented slump from COVID-19. According to experts, the pandemic will linger on for about two years. However, the fear of travelling and enforcement of social distance protocols will not go away soon after the pandemic subsides.
COVID-19 will leave the hotel industry badly bruised and there is a general agreement that the industry will not be the same long after the lockdowns and travel restrictions have been lifted. But hoteliers cannot afford to follow the existing model of operations. Hotels must adopt survival strategies against COVID-19. This calls for repackaging the hotel service to make it more attractive in this CIVID-19 era. After all, desperate situations require desperate measures.
It must be emphasized that the extent of the impact of COVID-19 on the entire economies of destinations and along the tourism value chain, requires government to provide leadership in managing the situation. Indeed, in most destinations, governments have instituted a number of austerity measures to help cushion businesses including hotels and restaurants off the debilitating effect of the pandemic. This has been in the form of relief funds, tax cuts, subsidies, credit facilities and employment support.

Survival strategies of hotels against COVID-19

However, hotels must also take their destiny into their own hands. The road to recovery is going to be a long one and hotels must start today. A journey of a thousand miles begins with a step. Hotel managers must take steps to institute crisis management plans which must embody survival strategies namely, Cost-cutting, Orderliness, Virtualization, Integration and Domestication (COVID).

Cost-cutting: Decline in demand for hotel accommodation resulting in decline in REVPAR requires hotels to embark on cost-cutting measures. Managers must identify non-essential services and areas with significant declines in demand during this period and mark them for cost-cutting in order to minimize or eliminate losses. This could be carried out by first shutting down unnecessary or redundant equipment in order to reduce utility bills. These include reducing the number of elevators and escalators in use, closing down some guest room floors and restaurants as well as stopping the use of some expensive but under-utilized facilities like washing machines. Another area to be targeted for cost cutting is labour cost. Specific measures in this area include laying off some of the temporary employees, negotiating salary reductions, requesting employees to clear their outstanding leave and take no-pay le ave as well as initiating no-pay leave and advance leave.Temporal staff could be laid off; however, care should be taken when dealing with permanent staff as management could be caught on the wrong side of the law for salary cuts and layoffs. Management could however hold discussions with labour unions and individual employees to agree on solutions that are mutually acceptable. Additionally, due to the low occupancy rates being experienced by hotels, managers can train their staff to multitask because of reduced work load in all departments. In a typical hotel, labour cost and utilities account for approximately 50% and 10% respectively of total operational costs. Therefore, implementing these cost-cutting measures will help reduce costs and improve the bottom line.

Orderliness: Indeed, we are not in normal times and we cannot afford to take chances or continue to live our lives the way we used to pre-COVID-19. COVID-19 has brought about a new nor mal. The new normal includes social distance and health protocols which must be religiously adhered to. Orderliness here includes sanitation, health and safety as well as operational procedures. Guests will now place more premium on their health and safety than service quality. The new standard for hotel operations includes measures instituted to curtail the spread of the virus. Hotels must strive to balance the need to reduce unnecessary expenses in order to improve the bottom-line and the moral responsibility to ensure the health and safety of their employees and guests.
The logical first step in ensuring that sanitation and health protocols as well as operating procedures are adhered to, is to involve employees in safety, security and health awareness training programs. This is referred to as the software approach. After training, management must institute measures to ensure that hygienic standards and social distance protocols such as frequent cleaning of surfaces, use of disposable materials, washing of hands and wearing of PPEs are adhered to by both staff and guests. The hardware approach involves installation of new hygiene equipment and facilities including chemical sterilizers, special air filters, sanitizers and sinks as well as procurement of thermometers for daily temperature-taking of employees and guests. Hotels have to demonstrate a strong commitment to providing services under strict hygienic standards in order to reassure customers and build guest confidence.
These measures must be instituted and enforced across all departments of hotels to prevent and decrease the spread of the virus because a hotel could easily serve as a medium for the spread of the virus. For instance, the SARS outbreak in 2003 was spread in a hotel by a physician from Guangdong who travelled to Hong Kong and while he was there, he stayed in a local hotel and infected other guests from Hong Kong, China, Vietnam, Singapore and Canada. These guest s subsequently spread the virus upon return to their respective countries and this sparked off the international spread of SARS. Strict adherence to sanitation, health and safety protocols must be ensured because any reported incident of spread of the virus in a particular hotel will seriously affect the brand image of that hotel in particular and the destination as a whole.

Virtualization: Another aspect of the new normal is that we must as much as possible avoid social contacts and live in a virtual world. Fortunately, advances in ICT makes this possible. For instance, apps like zoom, skype and zoho have facilitated videoconferencing. The reality is that there will be less people willing to go to a travel agency to book a hotel or a tour. Patronage of online channels, including online travel agents like bookings.com, expedia and priceline has become the order of the day. Also, hotels must leverage technology to fulfil social distance and lockdown requirements. U nder the new normal, robots, automated systems and digital systems will have to be deployed by hotels. The use of robots to sanitize and disinfect guestrooms and other public areas helps to avoid the spread of the virus through humans. Hotels should also integrate Customer Relationship Management System (CRM) systems into their websites and automate their revenue management systems (RMS) as this will help to collect and analyse customer data which could be used to tailor the hotel product to the needs of customers. Also, since the majority of people are staying at home in conformance to isolation and social distancing protocols, hoteliers should ensure that their hotels and activities are active on social media platforms. Social media should be used to engage with guests and relay vital information on services and other product offerings to them.
Certain functions such as reservations, digital marketing, sales and customer service support could be undertaken at home. Ho tel managers must ensure that some of their staff, including administrative staff work from home. Meetings could be held online. Hotels must also adopt digital marketing strategies including social media marketing, e-reservations and search engine optimization. Even in pre-COVID-19, 60% of guests did online search when booking a hotel. It is expected that this percentage will increase with COVID-19 through the post-COVID era.

Integration: The COVID-19 pandemic has affected every hotel. To deal with the pandemic, there is the need for hotels to integrate their efforts and embark on common programmes that will benefit all hotels at a destination. The hotels association at the destination should unify the efforts of its members towards finding a common solution to the problem. The hotels association is in a better position to negotiate with government and the national tourism authority for austerity packages like tax cuts that will help reduce the burden on members. H otel associations can also provide technical and financial support for members.
Hotels must work closely with other stakeholders to develop recovery strategies. There is the need for hotel managers to recognize that though the efforts of individual hotels towards recovery from the loss of business is essential, co-operation with other stakeholders is even more important to overcome challenges confronting the entire industry. This is even more imperative considering the fact that tourism is multisectoral and multidimensional, as such the success of hotels hinges on the efforts of other segments of the tourism industry and other industries. Integrated efforts should however not be considered as a substitution for the individual efforts of managers. A hotel manager who simply banks all his/her hopes on other hotels or stakeholders, will be shirking his/her responsibilities.

Domestication: The reality is that the tourists are no longer coming because borders and airports have been closed, cities are on lockdown, flight restrictions have been imposed and travel advisories have been issued. As a result of the pandemic, coupled with lockdowns and flight restriction, the inbound tourism market is almost non-existent, so for hotels to survive, they must reach out to the local residents through innovative promotional packages. Hotels, including upscale hotels and resorts which traditionally cater for the inbound market should reorient their marketing strategies towards the domestic market. For hotels to succeed at this, they should discount their rates and repackage their products. For instance, hotels could enter into arrangements with local health authorities and come up with 'quarantine packages' for local residents who have to be isolated. In the same vein, there could be special packages for frontline health workers who may want to detach from their families for a while due to the risk if infecting them. Already, some hotel s are collaborating with government to serve as isolation centres. Care should however be taken under such circumstances so as not to endanger staff and other guests. Human contact should be reduced as much as possible and social distance protocols should be strictly adhered to. Meals should be delivered to guestrooms on trolleys or by robots. Housekeepers should be provided with PPEs and trained on how to clean the rooms of guests who are under quarantine. Protocols on how to monitor guests under quarantine should be developed and enforced in collaboration with medical officers.

Conclusion

The tourism industry has always proven to be resilient in times of pandemics and crisis and it is expected that post-COVID-19 will not be any different though the road to recovery could be long. With the outbreak of coronavirus and the resultant impact on hotels, we can only say that the industry is down but not out. Hotel managers must institute a crisis management plan ba sed on the COVID model outlined above to ensure that they keep their heads above water.

Ishmael Mensah

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