How is the Global Hospitality Industry dealing with the COVID-19 pandemic?

Preamble

The hospitality industry has been one of the hardest-hit sectors of the economy on a national and international level. With worldwide airline capacity down by 70-80 per cent in April 2020, international business and leisure tourism witnessed a drastic decline signalling a regression in business for the upcoming period. This article by the Iqbal Institute of Policy Studies (IIPS) investigates the different ways the tourism industry has responded to the restrictions placed on air travel and tourism by governments around the world. It also explores companies’ strategic business decisions to secure their businesses against the long-term effects of the pandemic. Finally, the extent of the pandemic’s effect was realised on the nascent Pakistani tourism, which has been shaken by the pandemic.

 

Research Questions

• What was the response of the hoteling industry to the pandemic?
• What was the post-pandemic business recovery model for hotelling industry?
• What was the effect of the pandemic on the employment levels of the industry?
• How to integrate the framework of sustainable tourism with the post-pandemic model of tourism?
• How to measure the effect of the pandemic on Pakistani tourism?
  

How did the Hoteling Companies respond to the Initial Effects of the Pandemic?

The hospitality sector economy is full of vibrant individuals and ideas at any given time of the year. The industry caters to the optimistic travellers and business enthusiasts all year round. The covid-19 episode cast a dark shadow over this enthusiasm. As of April 2020, 80 per cent of hotel rooms in the US were empty. Companies reported losses of more than 50 per cent for the first half with layoffs history had not witnessed yet. A whopping 70 per cent of the employees had been laid off. That is how the pandemic initially affected the hoteling industry (Krishnan et al., 2020). By the looks of it, the pandemic became a crisis which threatened lives as well as livelihoods (Kilburn, 2020).

The hotel companies saw this initial decline not as a defeat but as a challenge. They pushed for creating a hospitality industry that would cater to the safety levels while providing for the mobility required by travellers. According to a survey by the McKinsey consumer leisure travel, which surveyed 3498 travellers from five countries in April, respondents claimed that health and safety measures determined their travel options. Many corporations in the hoteling industry, driven to save their customers and themselves, hurried to implement measures like undergoing rigorous cleaning, conducting covid-19 tests for its employees and rapid tests for guests, no housekeeping during the stay to minimize exposure, enabling touch-free experience and religiously wearing protective equipment (Krishnan et al., 2020).

Will the Hoteling Industry return to the Pre-pandemic Levels?

As the tourism sector is opening, and the government is slowly lifting restrictions on international travel, the hoteling industry is driving from the survival mode into the business recovery model. The leisure travel industry had been shunned because of the fear of the pandemic and the spread of infections and partially by travel restrictions. As both causes are subsiding, the urge to travel for leisure and business reasons becomes a retreat for individuals who have been quarantined long enough. The lockdown had evaporated feelings of inspiration and joy from common people, and travelling is one of the best ways to bring it back. This rebound in individual travel will drive the hospitality industry’s business model post-pandemic (Brock, 2020). It is important to understand the myriad of ways in which the hospitality industry will significantly change its operations to become secure and sustainable in the longer run. Under the pandemic, one of the biggest lessons for humankind has been to endorse sustainable practices on a religious basis.

Looking at some of the major names in the hoteling market, their priorities before and after the pandemic can help us understand the depth of the pandemic’s effects on the hoteling industry. Viewing some of the post-covid trends endorsed by hoteling corporations, one is pushing the hoteling business online. The hoteling industry’s digitisation was vital for its survival, as in-store experiences went out of the option. Although digital and the online experience was already being used in the sector, the pandemic enabled the industry to invest in online transformation. For an industry which was notorious for resisting digitization, the covid-19 was a big step in clearing that resistance. Apart from the online check-ins and confirmation which went online, digitization was endorsed in departments of marketing. In their downtime, hotel companies doubled their digital efforts in improving their online website experience, booking engine, or generally improving operations by making them more sophisticated through digitization. In the post-pandemic hospitality industry, companies will differentiate based on their online experience.

A good example on this front is Marriott international’s realization that working on the vacation-renting model used by Airbnb through its luxury property lodging service called Homes and Villas offers private residence (Glusac, 2019). The home-sharing program was started in 2017 after Marriott realized that 30 per cent of its members preferred to stay in home rentals. Covid-19 triggered an increase in individual property bookings which proved Airbnb’s model to be more pandemic resilient than traditional business models. Marriott observed a falloff in room bookings and international vacation travel during the pandemic like everyone in the industry. But its private lodging project turned out to be more pandemic resilient. Before coronavirus crashed international travel, the lodging service observed historical high performance in most of its markets. Marriott tended to offer the customers what they wanted, and Marriott previously did not have (Rosenbaum & Sheng, 2020) (Hao & Xiao, 2020).

Another important travelling trend which has helped keep the hospitality industry intact is local travel. The pandemic has, in most part, scared people away from international travel or long-distance travel. However, travelling simply does not have a replacement, and it will take a different form. In the days leading to the lifting of travel restrictions, people have engaged in local travelling. This means the demand for hotels has not disappeared but has changed forms. As the world gains the courage to travel internationally, consumers will take a safer and shorter route to their destinations. The hospitality industry can respond by tweaking their marketing strategies to target the short distance, transient, corporate, and group travellers, which can keep the hotels profitable until the world resumes international travel.

 

The Effect of the Pandemic on the Employment Levels of the Hospitality Industry

The hospitality industry’s response can also be described through another important detail, and that is layoffs. The hospitality industry is responsible for the employment of many people. A 5-star hotel tends to have two employees per guest. With that figure in place, a hotel chain’s number of employees becomes a significant figure. As hotels prepared for a shutdown, the hospitality industry employees were first to observe massive layoffs. From 3-star to 5-star hotels, all at some point had to let go of a major chunk of their human resource. For instance, Hilton hotels laid off 2100 of its corporate workforces, making up 21 per cent of its workforce. Similarly, Marriott announced that it would be laying off 17 per cent of its corporate staff in October. Hospitality industry experts continue to view the post-pandemic world with scepticism as the business for hotels has not improved substantially following the lockdown’s lifting (Borden & Akhtar, 2020).

 

How is Sustainable Tourism going to Integrate the Pandemic to its Framework?

Sustainable and environmentally conscious tourism has been an agenda of policymakers, void of substantial acceptance with respect to implementation. The conditions created by the pandemic has forced the traditional hospitality companies to restructure their business models to include a diversified business scope and channels. The pandemic has triggered the rethinking of the hospitality industry with respect to its marketing strategy, delivery methods, and consumption patterns. In the post-pandemic industry, sustainable business practices will include reforms facilitating multiple businesses and multiple channels for business. 

Covid-19 created shocks in both the supply and demand side of the equation, which triggered a digital transformation of the industry. As the consumers demand more contactless service experience, this transformation has pushed hospitality into the digitization phase. The provision of digital services and intelligent technology will be guiding the next phase of competitiveness between different companies in the post-pandemic world (Klasko et al., 2020).

 

How much did the Pandemic affect Pakistani tourism?

A look at South Asian tourism during covid-19 shows a somewhat similar picture. There exists a difference between the tourism industry in developing and the developed world, but the underlying principles remain the same. Foreign tourists make up the bulk of tourists in South Asia, contributing to major revenue streams for struggling government departments. With that line of revenue halted with a lockdown on air travel, the tourism industry witnessed a major setback. Unlike the developed world, a halted revenue stream’s impoverishing effects are much more severe for developing countries like Pakistan and Bangladesh. Pakistani tourism sector reported layoffs approximated as 880,000 in a country already struggling with weak economic indicators. Luckily, Pakistan being one of the few countries to observe a smart lockdown, was able to restrict restrictions from local tourism in time to sustain its tourism. Although the current tourism conditions are grim, the local hospitality industry is optimistic about the future (Afzal, 2020).

Conclusion

As the world prepares for the second wave of infections and successive lockdowns, the hospitality industry has yet to observe the extent of the crises on itself. The survival of the fittest is now the survival of the sustainable as hotels and lodging services with a solid digital presence will survive the post-pandemic world.