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How COVID-19 will shape and change the hospitality industry

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April 9, 2020

 

Since the outbreak of COVID-19, mass infections and travel restrictions have devastated the hospitality industry. With flights grounded, bookings cancelled and short-term rentals banned, hospitality providers are struggling to find their footing. The International Civil Aviation Organization estimates that the airline industry could lose $5 billion during the outbreak, and countries such as Japan and Thailand are at risk of losing over a billion dollars in tourism revenue.

 

The lack of travel, whether for business or pleasure, is causing many operators to face a harsh new reality: bankruptcy. Even for those with a solid financial backing to survive the next few months of lockdown, it’s going to take a while before people feel comfortable travelling again. As a result, the hospitality industry will emerge from this pandemic looking and operating differently.

 

Autohost’s co-founder Anton Zilberberg recently spoke in a podcast with Get Paid for Your Pad about the pandemic’s effects. Here are his thoughts on how to handle the COVID-19 downturn and what the hospitality industry will look like when this is finally over: 

 

Coping with the downturn

The first thing hospitality providers need to realize is that the current situation is out of their control. No matter how much marketing or operational work you do, nothing will noticeably increase your bookings. People aren’t traveling right now. They’re staying home, as they should be. Once you’ve come to terms with this, the next step is trimming unnecessary expenses.

 

With bookings in a serious recession, spend this time looking over your balance sheets and financial earnings. Identify which expenditures are losing you money. If you can operate without them, get rid of them. This should provide you with some additional revenue to help keep your company afloat.

 

This downturn is an opportunity to see how lean you can make your company while still operating efficiently. And once the outbreak has passed, you can use this freed-up revenue to reinvest in more beneficial avenues.

 

How COVID-19 will affect hotels 

Prior to the outbreak, hotels were struggling to compete with short-term rentals. You can pay well over $200 a night for a hotel in New York City and get little in the way of space and value. Short-term rentals, on the other hand, offer guests cozy, home-style experiences for lower rates.

 

With the outbreak, hotel chains are being forced to lay off thousands of employees. This is the hotel industry’s version of trimming expenditures. But once the pandemic has passed, these employees won’t all be hired back. In an effort to keep expenses and operational costs low, while they recoup from the downturn, hotels will likely adopt a similar business model to the major short-term rental companies. We’ll see more hotels minimizing their operational costs by transitioning fully online. Less reliance on staff and more reliance on automation.

 

Whoever has the lowest overhead will come out of this pandemic the strongest.

 

How COVID-19 will affect commercial real estate

What the pandemic has made many companies realize is that their operations can be performed remotely. Approximately one third of the U.S. job sector is now being performed from home. Businesses don’t actually need to spend exorbitant amounts on renting office space.

 

As a result, companies will relinquish office leases, placing a lot of commercial real estate back on the market. This gives property managers an opportunity to invest in commercial real estate, likely at a reduced price. These spaces can then be rented out as short-term rental offices to employers looking for a quiet, fully-equipped, temporary work space.

 

How COVID-19 will affect secondary vacation markets

While you might be hesitant to take a financial risk during an economic downturn, if you are going to invest in anything, invest in the secondary vacation market. Even though public health authorities have advised against it, there’s been a mass exodus of people from urban centres as they flock to vacation locales, such as the Hamptons and Napa Valley. 

 

There’s a reason these markets have existed as vacation destinations for decades. They provide a leisurely escape from the hustle and bustle of the city. Not even a pandemic can take them down.

 

Even though these markets currently aren’t thriving the way they normally do, they will bounce back faster than the urban markets. People will feel more comfortable travelling here before they hop on a flight to New York, Toronto or London. Not to mention, the urban markets are becoming crowded with short-term rentals, making it difficult to stand out and earn a profit.

 

When will travel pick back up? 

It may take a while before the travel industry’s gears start whirring again. To convince people to jump on a plane or a train or a bus, they need some kind of assurance of their safety, whether this is a vaccine or a better way of handling the virus. When it comes to COVID-19, we’re face with a lot of unknowns.

 

Either way, once travel bans are lifted, the first type of travellers will be those involved in essential business. This will include engineers travelling to check a mine or inspectors visiting a factory.

 

Next will come local leisure travel. We’ll slowly start seeing more and more families driving to vacation destinations or heading to a secondary property. It’s likely these trips will be done by car, with people staying relatively close to home.

 

Finally, international leisure travel will start up. Once COVID-19 has been sufficiently quelled around the world, countries will open up their borders and people will once again start booking vacations.

 

Moving forward

While it’s important to be prepared to capitalize on all of these future changes, right now your focus should be on weathering the pandemic. To effectively do this, you need to be attentive to the mental and physical wellbeing of you and your team. Check in on everyone regularly, asking how they’re doing and if there’s anyway you can help them. Remember: even if you survive the economic downturn, you can’t bounce back without a team. Keep them healthy, keep them happy and keep them productive.

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