‘Unprecedented’ will undoubtedly be the word of the year for 2020, writes Robert Wilson from Minett Prime Square.
No other word can possibly describe what we are all going through at this time although ‘Unthinkable’ also comes to mind as it is unlikely any of us could have contemplated the global spread of COVID-19.
We thought SARS in 2003 was bad, and it was, however it was relatively short-lived and the rebound following its disappearance was strong and quick. This time though, the disruption looks like being protracted and, given the magnitude of the economic impact, a fast rebound seems unlikely and we are facing an unclear recovery timeline.
No matter the recovery time though, we are all in this together, and that includes hotel owners and investors, management companies, franchisors, lenders, suppliers of goods and services, advisors, designers, lawyers….in fact, anyone else who depends on the hospitality industry for their livelihood. From an operational perspective, the reality is that not a lot can be done when demand dries up. Revenue management is essentially pointless, and no amount of discounting is going to make a difference to hotel occupancy.
So, what can be done with an empty or almost empty hotel?
We are a people industry and without people, we cannot operate. Of paramount importance then should be the health and safety of hotel employees and any guests that may still require accommodation. The Australian Government has introduced its ground-breaking Job Keeper initiative which will maintain connection between employees and their place of work and hopefully provide enough income to be able to meet their basic needs. This will make re-engagement with their jobs much easier once restrictions are lifted.
Hoteliers could, however, aim to go a step further by maintaining not only the professional connection but the personal connection. Keeping in contact with team members, remembering employee birthdays, public holidays and faith-based events – even if only by email or social media – all keep the connection going. We work in hospitality so we need to stay hospitable and keep our teams engaged.
When many people are working from home, they are looking for content to share online now more than ever. Everyone is watching and looking for positive stories. Hotel management who are celebrating their teams and showing they care will be remembered fondly.
For most hotel owners, funds will short and closure of the property may appear to be the best way to deal with the situation. Closing a hotel can come with its own host of implications and owners need to familiarise themselves with the possible legal implications with their lender, management company, franchisor, suppliers and employees. Communicate closely with them all to demonstrate you understand the terms and covenants of your agreements and alert them to potential breaches. For example, some funding covenants may require the hotel to remain open. To circumvent this, some hotels have reduced their availability to a few rooms that are serviced by a handful of employees. Regular communication with these stakeholders will be appreciated and they are likely to be more understanding and lenient.
If you have the resources, then this is a good time to be planning and preparing for when normality returns. Maintenance and CAPEX can still be planned, and this is an ideal time to deep clean, touch up case goods, stocktake, check par levels and ensure the hotel asset register is up to date or introducing one if it doesn’t exist.
Most brands are likely to be flexible with brand standards and allowing owners and franchisees to delay planned renovations or deferring any required FFE funding. Adjust your plans accordingly.
There is no template for riding this time out however we can use the time to prepare for the recovery and to ensure we maintain our key relationships, especially the hotel employees.