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How Coronavirus Is Affecting the Hospitality Industry

Trends 10 minute read 10 March 2020

Last month, hundreds of holidaymakers were ordered to leave a hotel in the Canary Islands after the coronavirus (otherwise known as Covid-19) was diagnosed in an Italian couple.

At the time of writing, this is now one of countless virus outbreak stories flooding social timelines and news channels throughout the world.

It’s hard not to be alarmed by the rate at which Covid-19 appears to be spreading, and if you work in the hospitality industry, you may be concerned about the potential impact it could have on your business.

The best advice at this stage is to listen closely to government advice and stay tuned to trusted, reliable sources of news, but let’s take a look at how the coronavirus has affected the hospitality industry so far.

The impact on consumer spending and going out

Up to 15% of America’s gross domestic product (GDP) consist of service consumption that could be curtailed if the coronavirus spreads throughout the country.

It stands to reason that, if no one goes out, millions of people could lose their jobs and thousands of businesses across a whole range of consumer-facing industries may go bankrupt. With 16 million people working in the hospitality and leisure industries, the potential impact on hotels and restaurants is unthinkable.

America GDP affected by coronavirus

This is not least because of the inability for most hospitality workers to operate from home if governments declare a lock-down or enforce quarantines.

Disruption to travel and entertainment

Travel is expected to take one of the biggest hits during the Coronavirus outbreak. With governments across the world advising against travel to Hubei province in China and Italy (one of the worst hit areas at the time of writing), one wonders how long it’ll take for overseas travel to be further restricted.

Coronavirus impact on travel

This has already resulted in airlines cutting flights, business trips being cancelled and holidaymakers revising their plans.

Air departures from China have been among the worst hit, with travel to America dropping by 63%, and outbound flights to Europe reduced by nearly 37%.

In a recent UK household survey, 9% of people said they were avoiding restaurants and entertainment destinations. Thirty percent of those surveyed also revealed that they’d stop going to restaurants entirely if the situation worsens.

Chinese flights affected by Coronavirus

The net result of this for hotels and restaurants is yet to be seen, but with fewer people travelling and more people inclined to stay away from premises that attract high footfalls, bookings are likely to take a noticeable hit.

How are venues handling the increased risk?

Hotels in the UAE are reportedly asking staff to take unpaid leave, closing full floors to save on utilities and putting a temporary freeze on recruitment.

The virus has hit at a busy time for the hospitality sector in that part of the world, subsequently setting off a price war between mid-tier and luxury hotel brands.

Big name restaurants are seemingly taking the lead with their response to Coronavirus, too, although there haven’t been any significant closures yet.

Coronavirus impact on restaurants

Starbucks, for instance, has temporarily banned reusable cups and suspended its 5p charge for customers using paper cups.

US McDonald’s venues are also taking measures to protect against the spread of Coronavirus, including more regular cleaning of surfaces and door handles. Dunkin’ Donuts has publicly confirmed it has “plenty” of hand sanitiser available and has followed Starbucks’ lead by temporarily banning reusable mugs.

Some see the tactics taken by restaurants as an excuse to ‘pivot’ and differentiate by bolstering delivery sales or boosting cleaning efforts. But there’s a big internal effort taking place, too.

For instance, CapitalSpring, the investment firm behind brands such as Wendy’s and Taco Bell, has sent out detailed instructions to its restaurant managers. They include advice on how to undertake more regular cleaning tasks and using video surveillance to ensure employees are following the new policies.

Beyond internal measures, there’s no evidence of hotel brands sending out mass guidance emails to guests regarding the Coronavirus, but that may change, depending on how the outbreak develops.

Recommended reading: Dealing With An Unwelcome Guest – Coronavirus and Operating, Contract and Loan Issues for Hotel Owners and Operators

What’s the greater economic impact?

financial impact of Coronavirus

As Covid-19 reaches deeper into other countries, events and conferences around the world are being cancelled.

The world’s leading travel show, ITB, was one of the first casualties, with its annual gathering in Berlin cancelled just weeks before the doors were due to open. This illustrates the potential impact of the Coronavirus on a much wider scale. At the time of writing, the FTSE 100 has experienced its worst day since 2008, losing £144bn in value.

In America, the Dow Jones has been similarly affected. Following a crash of oil prices, Coronavirus fears resulted in US stocks being temporarily halted on March 9th.

It’s a similar story across the world, with crude oil crashing in price, Australia’s S&P/ASX 200 dropping by over 7% and Japan’s Nikkei 225 sinking by 5.1%

Concerns over a global recession might be a little premature, but there’s no denying the far-reaching impact a virus like Covid-19 can have on finances across the globe.

Further reading

The best Coronavirus advice for hospitality brands at this stage is to sit tight, keep an eye on reputable, trusted news sources and follow the advice of the government.

In the meantime, we’ve found two great articles that may help.

Recommended reading: Coronavirus: how travel and hospitality brands should respond

Recommended reading: Coronavirus survival tips for hotels

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