The Current COVID-19 crisis has put incredible strains on hotel owners, operators and managers. Steps to alleviate the current pain points are well noted - fee reductions/deferrals, closing of properties, reduced staffing and services - but these are likely not sustainable over a long period. Still, solutions to the problem created by drastically reduced occupancy and rates are required. 

Hence, the question is what do you believe are the most important steps/accommodations (a) owners and (b) operators can/should take to establish an even stronger relationship that will better enable their hotels to (1) recover from the current crisis in a timely manner and (2) better withstand future crises.

Marco  Rentsch
Marco Rentsch
Partner, Global Tourism & Hospitality Center of Excellence, PwC Middle East

The current situation is likely to speed up several trends we have seen before C-19. Firstly, owners will likely want operators to take on more risk. As a counterbalance owners will need to support operators in adjusting their service offering. This follows the increasing trend of convergence.

Secondly, operators will have to innovate to leverage existing infrastructure and human capital, offering services beyond the confines of the assets they manage.

Moreover, operators will have to optimise their cost base. Entering collaboration models for staffing and procurement and distribution beyond levels seen today.

Post C-19 sales of non-performing assets will likely introduce new players in the market, fulled by private equity “dry powder”. Also, groups with strong balance sheets will likely use the situation to further grow their portfolios.

In order to prepare for the next down-turn investors and operators will have to be more realistic and balanced in the underwriting process. However, considering the severity of the current crisis it is unlikely that investors, other than private equity players and expert section investors, will have significant appetite in the sector. Hence, naturally decreasing the over-supply driven by capital seeking unrealistic high yields we have seen pre C-19. After a market “clean-up” the sector could therefore be in an attractive position. For demand to return both owners and operators have to lobby their respective lawmakers. The focus should be on a sensible lifting of travel restrictions to happen as soon as possible. They should also negotiate other relief/support packages such as VAT decreases, and/or continued support with conditional loans. Such support, however, should only be targeted at businesses which have done their home-work pre C-19.

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