Daily updates on the economic effects of the COVID-19 outbreak are constant and ever changing. However, it suffices to say that hospitality is one of the industries that have been hardest hit by the virus with more than 80 per cent of revenue loss and approximately 75 million jobs lost to the pandemic. While companies scramble in an effort to minimize the impact and to do as much damage control as possible, the prospect of recovery remains bleak and one that is nowhere in the near future.
Unlike early predictions of the pandemic where the impact was greatly underestimated due to downplayed updates from China and the slow-to-react World Health Organization (WHO), the prognosis for recovery is that the hospitality company revenues will be 50 per cent of what they were in 2019. Revenues are currently down more than 80 per cent year-on-year in Europe and North America since the middle of March, and this is set to fall to a shocking 90 per cent if the lockdowns are not lifted soon.
With an opening of the economy, the prospect of recovery improves. June revenues might bounce back from March, April, and May lows, and on top of that, we expect summer travel revenues moving forward to grow as high as 70 per cent year-on-year and decline back to 50 per cent year-on-year once the year enters the winter in the year's final quarter.
Predictions, while reliable only to a certain extent, are crucial for companies to safeguard themselves from crises like such. Regardless of how bleak or positive the outlook, it is critical for managing expectations for industry recovery. Naturally, knowing that the industry will not embark on a path of a V-shaped recovery, but instead, one that is slow and competitive, will help brands stay relevant through changing tides and recalibrate their strategies.
For instance, hotels and travel companies should expect a predominantly staycation-based business once the economy opens up and begins its path on recovery. With that in mind, strategies should revolve around this prediction and bank on local tourism. We see 2020 being the year where people drive to mountains, lakes, beach resorts, or their go-to friendly place - essentially places that they are familiar with and feel safe in times of crisis.
Group events and corporate conferences, on the other hand, are set to be hit the hardest. Without a vaccine or guarantee, event coordinators will be reluctant to risk large losses of a second wave. However, this time should be taken to implement new procedures and safety measures as a collective industry to restore consumer faith and safeguard against future similar crises. It is important that with time, trust and faith is slowly rebuilt so that travellers start to feel safe.
Government stimulus and financial support should also be considered with prudence. While every bit helps in a crisis of this size, the priority should be placed in ensuring your company is ready for recovery. It needs to survive the slump with as little debt as possible and use this time to construct a stronger brand—a feat that will be challenging when accepting government stimulus. Companies like Expedia, TUI, Webjet, Airbnb, and Flight Centre Travel Group (FCTG) have chosen to opt for alternative sources of financing over government aid, in order to have the flexibility to lay off employees and cut costs wherever required. It also hints at the belief that the recovery, while inevitable, is not immediate nor quick as aforementioned—reinforcing the importance of being able to tide out future challenges.
What is advised is to be level-headed when seeking funding, and to assess if the company is suitable for it. It is critical that when the industry begins its recovery, your company has the flexibility to ride on the uptick, regardless of how slow it may be.
Tim Hentschel is the CEO and co-founder of HotelPlanner. His company is the leading online provider of group hotel bookings and individual hotel stays worldwide, and is set to revolutionise the way Southeast Asians travel, book and stay with the company’s extensive industry expertise and robust travel technology with highly specialised AI.
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