By Sharon Hirschowitz
Watching the COVID-19 crisis unfold has been horrifying for the luxury hotel industry, who has never experienced such a rapid and sustained drop in demand and both small boutique hotels and larger hotel brands are maneuvering to survive an outbreak of this magnitude.
Arne Sorenson, president and chief executive officer of Marriot International, summed up the COVID-19 crisis in a video message March 19, 2020 as more severe for Marriott International than the Great Depression and World war 2 combined, and Chip Rogers, President & CEO of the American Hotel & Lodging Association (AHLA) characterized it as far worse than the 2008 crash and 911 combined. What is evident is that the devastation on the luxury hotel industry is unprecedented and dire, with revenue dropping down to single digits and thousands of employees being furloughed for at least 60-90 days.
Sorenson went on to say that, “The travel industry is being impacted in unprecedented ways by COVID-19. As the virus and efforts to contain it have spread around the world, demand at our hotels has dropped significantly. We are working tirelessly to take care of our associates, our guests, our owners and our other key stakeholders.”
Many are still eligible for healthcare and most of their benefits will not change but they can also file for unemployment benefits during this period. Hyatt are setting up a global Hyatt Care Fund, which will initially be financed by 100 percent of Hyatt leadership team’s salary reductions – the leadership team is taking a 50% pay cut through the end of May and Mark Hoplamazian, President & CEO and Tom Pritzker, Chairman of the Board, will forgo 100% of their salaries. The proceeds of the funds will be distributed to colleagues under financial stress due to loss of income. Their intention is to keep their teams as intact as possible so that they can spring back efficiently when the hospitality industry rebounds.
Chris Nasetta, CEO of Hilton will also forgo his salary for the rest of 2020 and corporate team members will not be furloughed but have their salaries reduced by up to 20%. Marriott CEO Arne Sorenson’s salary has also been suspended for the rest of the year and senior executive salaries will be reduced by 50%.
To quote Chris Nasetta, “In Hilton’s 100-year history, we have never seen anything like the current situation.”
Technology providers, World Cinema, have set up a COVID-19 accounting task force group run by Tisha, Accounts and Receivable Manager and Kirstie, Senior Sales Support, who are responding to customers at all hours of the day and night, listening to their concerns and providing properties with financial options to assist them while this pandemic is leaving their hotels partially or totally closed.
Their service and support teams are proactively monitoring all current customers’ technology and by way of remote monitoring can ensure any issue is resolved with their ongoing technology and engineering support. World Cinema are also supporting properties that are assisting by being a medical facility or home for medical personal while continuing to provide in-room entertainment suitable for guests.
Support for medical teams and first responders
ALHA’s Hospitality for Hope initiative was created to connect hotel properties within the health community and first responders struggling to find housing and support during the pandemic. There are over 16,000 hotels signed up for the initiative, where government officials will be able to search willing properties based on geographic location.
Chip Rogers, AHLA president and CEO: “As an industry of people taking care of people, the hotel industry is uniquely positioned to support and help strengthen our communities and first responders who are on the frontlines of dealing with this ongoing public health crisis. Hotels have always been an active member of our local communities, and this time is no different. AHLA, in partnership with our partner state associations, are proud to work on behalf of our member companies to facilitate partnerships with federal, state and local governments to support the health community during this critical time.”
Hilton and American Express announced that it will donate up to 1 million hotel room nights to frontline medical professionals working on the frontline in the fight against COVID-19.
“During this crisis, we have seen so many examples of medical professionals working in the most challenging circumstances, sacrificing their own needs for the greater good. They truly are heroes,” said Hilton President and CEO, Christopher J. Nassetta. “We are honored to extend our Hilton hospitality to them during this difficult time.”
They have also made it possible to donate Hilton Honors Points to partner organizations responding to COVID-19. The points will be converted into cash and sent directly to the organization.
Most hotels are allowing guests to cancel existing reservations at no charge and extending loyalty program benefits through the end of 2020 and into 2021.
Marriott and their credit card partner American Express and JP Morgan Chase have committed to provide $10 million in hotel stays for healthcare workers on the front line against COVID-19 in the United States. The initiative is called Rooms for Responders and is in collaboration with the American College of Emergency Physicians and the Emergency Nurses Association to match doctors and nurses with available accommodations at participating hotels free of charge.
They have also launched the Community Caregiver Program, available in the United States, Canada, the Caribbean and Latin America to supply significantly discounted room rates at nearly 2,500 hotels to first responders and healthcare professionals at hotels close to hospitals where they are working.
Hotels that have had to close temporarily across the globe have found ways to support their community, from donating unused produce and food to various charities, to providing cooked meals and cleaning supplies including masks, gloves, anti-microbial wipes, sanitizers and shower caps to medical teams. In a sign of solidarity many hotels are illuminating their hotel windows with symbols of love and positive messages.
The $2.2 trillion CARES Act is the largest financial support package in the history of the United States and does provide some relief for hoteliers, but according to Chip Rogers, President and CEO of AHLA , it is limited in that the legislation limits an SBA loan to 250% of average monthly payroll.
“This limit will not allow a business owner to meet both payroll and debt service obligations beyond an estimated 4 to 8 weeks,” said Rogers. “Consequently, it will result in furloughing the very workers the bill seeks to protect. Since the measure reduces debt forgiveness with any reduction in payroll, hoteliers would be forced to use the entire loan amount on payroll, at the expense of debt service. The harsh reality is that travel restrictions and mandated business closures remain in place. The outlook for the foreseeable future is zero revenue for most hotels. If a hotelier cannot make debt payments the business will go under and the jobs are lost.”
Marketing and promotional advertising
MMGY Travel Intelligence, in partnerships with Destinations International Foundation, released findings of surveys taken by resorts in the United States early and mid-March, which reported that 80% of destination organizations surveyed had reduced or postponed sales and marketing spend, and over 60% had asked employees to work from home. Expectations are that the coronavirus will have an extreme impact on business over the next six months as early surveys reported 40% cancellation of events, attractions, conferences and business meetings to 100% in mid-March. Interestingly, only 30% of resorts had a pandemic plan in place, though MMGY attributes this to organizations relying on state governments for national crises.
A third round of survey results found that 95% of North American destination professionals have chosen to reduce or postpone paid promotional advertising, and 80% have shifted sales, marketing or messaging and more than half expect to return to paid promotional email campaigns, paid search and paid social media campaigns in the next the next 60 days. Half of respondents said that they expect paid advertising to resume in that timeframe.
“COVID-19 has had a substantial financial impact on the tourism industry, and destination organizations have responded quickly by deferring marketing funds in a responsible manner,” said Craig Compagnone, chief operating officer, MMGY Global. “However, search data is telling us that there is still a strong desire to travel, and we believe this pent-up demand will result in a high volume of shorter booking window trips when bans are lifted and consumers believe it is safe to get out and explore again.”
There is no doubt that supply chains will be interrupted as effects of the virus unfold very rapidly on a daily basis. Chip McIntyre, Senior Vice President of Strategic Sourcing, Avendra told us that the biggest supply chain impact continues to be in critical short-supply items, specifically: masks, hand sanitizer and thermometers. They are putting a great deal of effort into sourcing and making these available for their clients.
“Eventually, he told us, “the supply chains will adjust to the “new normal” for these products, but we are still several weeks away from that happening. The foodservice (as opposed to retail) food supply chain is secure and operating with minimal disruptions. While there are some empty shelves at retailers, we do not anticipate broad food or food-related (e.g., disposable packing) shortages or widespread factory shut-downs to try to contain the virus. However, it is possible that some factories will run at lower utilization rates than normal for several weeks to accommodate skeleton staffs. As a result, distribution of food and other materials may be delayed, or distributors may go to fewer delivery days/week because of either skeleton staffs or reduced demand.”
Looking to the future, we believe that the supply chain will be even stronger in some areas than it was before. Increased scrutiny on cleanliness and enhanced quality assurance measures will drive improved business practices, more transparency and accelerated product innovation. We are working with our suppliers and clients to provide input on these new approaches so that our clients have what they need (masks, hand sanitizer stations, enhanced cleaning practices, social distancing signage, etc.) as the industry reopens.“
The future of work and travel
Already, hotels are reimagining the future, with leaders experimenting with everything, from business models and distribution systems to the organization of work and the management of a largely home-based workforce, according to Rohit Talwar, CEO of Fast Future. “At the macro level, previously unthinkable ideas are being considered and actioned, such as the notions of guaranteed basic incomes, compulsory health testing of an entire nation, total population lockdowns, and global flight bans. Organizationally, for many, innovation has become a true survival priority rather than just a budget line item,” says Talwar.
He goes on to say that effective leaders are needing to drive change at a far greater speed than ever before as they maneuver major culture challenges and new virtual realities as well as flattened management structures that yield increased responsibility due to redundancies.
Learning is constant at every level, from negotiating how to work productively with your children nearby to the need to use remote working tools and expanding your technology awareness. At the macro level, leaders and employees are needing to prepare for a COVID-19 future and are starting to think about the need to be better prepared for the unexpected in the short and long-term future.
“The situation has presented organizations with a “not to be wasted” opportunity to acquire new approaches, ways of thinking, and skills that can help navigate the current crisis and lay the foundations for the next future of work,” says Talwar.