Hoteliers deploy their crisis management skills in tough times for tourism

There has been much debate about which sector of the economy has been worst hit by COVID-19. Grant Thornton’s new Global Business Pulse index provides an answer: travel, tourism and leisure (TTL), which placed 12th out of 12 key sectors in terms of health in H1 2020 and saw the sharpest deterioration since H2 2019.

The better news is that the worst hit sector is also one of the best at dealing with change and adversity. We examine the index results on the overall TTL sector and take a close look at how one sub-sector, hotels, is rising to these challenges.

Hotels are facing real challenges, but…

Hotels may have escaped many of the negative headlines associated with aviation and tourism, but they still face real challenges. In common with other TTL sectors, hotels have significant fixed costs and depend on high levels of occupancy. With international tourist numbers projected to decline by between 58% and 78% from 2019 to 2020 and the tourism sector as a whole facing a $1 trillion loss.

Tracey Sullivan, Grant Thornton Ireland partner and leader for hospitality and tourism, explains why this will cause particular issues for hotels.

“Around 60% - or even more in some countries - of hotel revenue comes from the international market. While there is a push in all countries towards staycations, hoteliers will tell you it is expensive to stay in a hotel in your own country – it’s generally cheaper to go abroad. The domestic market, therefore, can’t increase enough to make hotels sustainable if they continue with their current business models and pricing.”

Hotels are also acutely exposed to changes in other areas of government policy towards COVID-19 – at home and abroad. Venues around the world that cater for weddings, conferences and meetings have been particularly impacted by restrictions on gatherings of large numbers of people. According to Tracey Sullivan: “Some wedding and conference venues have decided not to reopen this year. Having missed that key wedding season, they’d actually lose more money if they opened.”

Hotels must also deal with the need for physical distancing among their clients and staff, more staff time for administration and cleaning duties, not to mention the additional equipment. This is inevitably putting pressure on wage bills and operating costs.

Despite this intimidating list of challenges, Tracey praises the resilience of hoteliers during this period, and their ability to maintain standards while adapting their business models. “This crisis has given hoteliers the opportunity to look at different aspects of their business and think about what would work better.” Our research confirms this, with 61% of TTL companies saying they’ve adjusted or plan to adjust their strategy due to COVID-19, the highest of any sector in the mid-market.

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