Hospitality Sector Should Prepare for an Extended Stay from COVID-19
/"The impact to our industry is already more severe than anything we've seen before, including September 11th and the Great Recession of 2008 combined." A chilling statement from Chip Rogers, President of the American Hotel & Lodging Association (AHLA) on March 17—just as COVID-19 was starting to unleash its global fury.
Decimation
To understand the full scope, you need to look at the impact on the providers who support this $1.6 trillion industry. Many hotel properties that were running at 70% occupancy are now below 5%, and the industry is in danger of losing four million jobs along with $3.5 billion per week. With numbers like these, there's no "silver lining" and with all of the pain and uncertainty that remain, how can we realistically talk about a "new normal?"
Hospitality Company Impact
Liquidity - During times like these, cash is king. It's literally a lifeline. Public hotel companies are aggressively raising debt through note offerings to increase near-term liquidity. Hilton recently announced that it had pre-sold $1 billion in cash worth of loyalty points to American Express, a relatively inexpensive source of near-term liquidity for the company. Companies have slashed corporate staff anywhere from 15% to 50%.
Technology - Properties and companies that were early adopters of technology will be better positioned to weather the COVID-19 storm. We're already seeing a preference toward mobile pay options versus cash. Imagine hotels staffed entirely by robots; this is already a common practice in Japan.
Higher Costs - There will increased expenditures on quality assurance and sanitation programs. And while hospitality companies will need to invest in masks, sanitizers, gloves and enhanced training, until demand returns to normal these costs probably can't be passed onto consumers
Spatial Changes - Have we witnessed the beginning of the end of the Las Vegas buffets? Communal has become a dirty word across all industries.
Planning for the Next One - At some point, hospitality companies will need to create or update their disaster planning/recovery guides
Traveler Impact
Deep Discounts - A traveler's dollar will certainly go farther, specifically in cities that have had coronavirus clusters. It's a simple issue of supply and demand.
Government Involvement - Just like after 9/11, flyers had increased demands on identification. Similarly, we could see COVID-19 travel requirements such as antibody certificates; personal protective gear requirements; mandatory temperature taking upon entry of a restaurant, cruise ship, theme park, etc.
Risk Aversion Isn't One Size Fits All - Let's face it, traveling in and around Boise isn't the same as traversing Boston.
A Way Forward
The knock on the big established chains was that they were slow to change and adapt to consumer preferences.
