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How Coronavirus is Crippling the Hospitality Industry

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March 16, 2020

 

COVID-19, or the coronavirus, has officially reached pandemic status. Over 100 countries have been affected, many of them declaring a state of emergency, closing businesses and shutting borders. In a recent media briefing, Tedros Adhanom Ghebreyesus, the Director-General of the World Health Organization (WHO), said he was “deeply concerned both by the alarming levels of spread and severity.” 

 

As the virus continues to jump from country to country, hundreds of conferences, sporting events and flights have been cancelled, with more being announced daily. A few airlines have even suspended flights to China and other significantly impacted areas indefinitely. 

 

The suddenness of these cancellations is forcing multiple industries to scramble for contingency plans as they begin to realize the economic consequences of the virus. Hospitality is one of the industries being hit hardest. To put it in perspective, PredictHQ says that the cancellation of San Francisco’s Game Developers Conference will cost airlines, accommodation, transport and retail providers $125 million. Barcelona’s Mobile World Tech conference will cost them $325 million. And the International Air Transport Association estimates that, in total, these disruptions and cancellations could cost the global airline industry $113 billion in losses. 

 

Fewer flights, conferences and events also means fewer guests booking hotel rooms and short-term rentals. The cancellations are forcing the hospitality industry to face a serious booking drought just as they enter what could otherwise be their high season. As the virus continues to spread rapidly, hospitality providers have to issue cancellation refunds and significantly drop their prices for even a chance at bringing in new business.

 

In fact, the fallout has already started. During the first two months of 2020, the Baird/STR Hotel Stock Index dropped by 18.5%. This stock comprises some of the largest hotel companies in the world, including Hilton Worldwide Holdings, Hyatt Hotels Corporation and InterContinental Hotels Group.

 

The ‘local effect’

The United Nations World Tourism Organization estimates that in 2019 close to 1.4 billion people travelled internationally. But as countries shut borders due to coronavirus, that number is taking a nosedive. This means far fewer international travellers are booking hotels and short-term rentals, forcing hospitality providers to rely on local travellers—a riskier option—to maintain revenue. 

 

While not always the case, local guests are often associated with higher-risk reservations, tied to unauthorized parties and, on rare occasions, illegal activity. Their reputation has gotten so bad that property managers set up booking restrictions on their listings just to avoid them. Even vacation rental powerhouse Airbnb has banned locals under the age of 25 from booking a house in Canada.

 

While international guests often travel for work or family vacations, local guests are less predictable. If they live nearby, they’re unlikely booking a place to go sightseeing. Especially under current circumstances—when popular sports games, concerts and festivals are being cancelled—locals have even less reason to come to the city for a single night.

 

On average, local bookings in the short-term rental space make up anywhere from 15% to 35% of reservations, according to statistics collected by Autohost. In dire situations, this presents a huge opportunity for revenue. In order to stay afloat during the outbreak, hospitality providers will have to lower their risk tolerance and accept local guests. 

 

But how do they do this without getting hit by a party?

 

What Autohost is doing

Autohost has developed a coronavirus screening service that flags guests associated with locations under advisory. This means you know exactly where your guests are coming from and what kind of threat they may pose. You can even set up custom screens, giving you the ability to ask guests important questions about their travel history and health status.

 

If you’d prefer to rely on local guests, Autohost presents hospitality providers with the tools they need to expertly screen all guests, eliminating the threat of parties. In the midst of uncertainty, the best way to protect yourself is to know your guest. 

  

If you’re continuing operations, another alternative is offering travellers a safe place to quarantine. If you decide to take this route, make sure you learn about who you’re hosting. Know your guest and take the necessary precautions. Learn about the importance of knowing your guest with Autohost's latest blog.

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