The hotel and restaurant industry continues to grow steadily every year. Statistics has shown that within every 2.5 seconds, a new hospitality job is created, making the industry one of the most important sectors of the global economy. In addition to the benefits the industry brings to the international job market, it also generates huge profits for the local economies as tourists spend money on hotels, restaurants and entertainment venues. Moreover, tourism can be a factor that promotes investment in infrastructure and public transportation of the host country. However, this is considered to be one of the most affected industry in COVID-19 pandemic. So what are those influences specifically? How have businesses in this sector coped with the crisis? Let's find out through some analysis below.
During the complicated period of the COVID-19 crisis around the world, governments of many countries imposed travel and exposure restrictions along with the out-of-home restrictions that resulted in temporary shutdowns of businesses, causing the sales of most restaurants, hotels and entertainment venues to drop dramatically. COVID-19 negative effects on hospitality industry can be observed in many countries and regions around the world. In the US, the world's leading economy, the industry has also been influenced by the pandemic, according to data from the National Restaurant Association, there was more than $120 billion of lost revenue in the first 3 months when COVID-19 appeared in this country. Some other studies show that an average of 8 hotel rooms out of 10 at this time and predict 2020 will be a very bad year for the service tourism industry. The decline in the turnover of this industry also has many consequences, typically affecting the job market of countries in particular and the world in general. According to a report by the American Hotel and Lodging Association, restaurants and hotels have struggled to cut or lay off jobs up to 70% of their employees. Global job market also has many massive fluctuations when the rate of unemployed people in this field skyrockets. Large enterprises of hospitality industry such as Burger King Corp, Domino's Pizza Inc, InterContinental Hotels Group PLC, KFC Corp, Pizza Hut, etc .. have had to cut down a lot of staffs, introduce spending reduction policies or even bankruptcy announcement.
In Vietnam, the tourism and service industry is also one of the economic spearheads, along with many countries around the world, businesses in this field in Vietnam also suffer great losses. According to data from a survey conducted in collaboration with Grant Thornton Ltd. (Vietnam) and VnExpress online newspaper:
Out of 394 small and medium enterprises participating in the survey, up to 71% of enterprises said that the company's revenue in the first quarter of this year decreased by more than 30% compared to the same period in 2019; 77% of businesses expect the second quarter revenue to decrease by more than 80% over the same period in 2019.
In addition, 18% of enterprises surveyed had dismissed their employees and 48% of businesses had quit their jobs with the rate of 50% - 80%. All of these businesses have an additional cost for cleaning and disinfection. Even if there is no sales or lower than normal, all expenses such as rent, salary, interest still arise. Most of the enterprises surveyed expressed their wish to receive help from the government to overcome this crisis.
Thus, it can be said that the restaurant and hotel service industry is one of the sectors most affected by COVID-19 pandemic, also this industry is expected to take the longest time to recover after the pandemic. So have governments of many countries in the world had actions and policies accompanied businesses to overcome the crisis?
In the US, each state has offered different measures to the hospitality businesses affected by COVID-19. Typically, the U.S. Government's Paycheck Protection Program which aims at providing small businesses with funds, some $659 billion to support job retention and other account.
In Canada, The Federal Government was providing around $85 billion in liquidity support through tax deferrals. Furthermore, the government has also prepared and launched a series of relief programs for their hospitality industry.
In South Africa, SMEs and workers in this sector can get assistance through the Unemployment Insurance Fund and special programs from the Industrial Development Corporation.
The Vietnamese government has also launched major bailout packages such as a credit package of 250,000 billion VND and a financial package of 30,000 billion VND with a series of other bailout packages.
However, according to businesses and workers in this sector, they have many difficulties in accessing the subsidies because the conditions are too tight and the bailout package is not large enough for them to stay active through this crisis.
With such enormous losses, is there any other solutions for restaurants and hotels to revive after COVID-19 pandemic? Let's learn through some analysis and comments from economic experts in the world.
“I think it has a real chance to push people away from the delivery platforms, as you'll see restaurants start to figure out that they want to control their revenue a little bit more” – said R.J. Melman, president of Lettuce Entertain You Enterprises in Chicago. It can be seen that people have become accustomed to and even enjoy ordering food home instead of eating out, especially during epidemic times, this trend is becoming more and more popular. However, to catch up with and satisfy the needs of consumers, restaurants will need specific plans to change the business model, invest more in delivery platforms, shipping services, cut down on the workforce at the restaurant, and instead hire more drivers. This is a turning point and will require careful market research and food quality assurance.
In addition, focusing on attracting a few potential customer groups is also a good solution for businesses in the hospitality and restaurant sector. According to The New York Post, the younger generation are the ones who tend to travel more after COVID-19 has ended. Therefore, hotels and restaurants need to have new strategy to attract these customers. They often appreciate the authenticity of the service over the perfect advertising message. In addition, as they are more fluent with advancements on the internet, businesses may consider promoting their brands on travel websites or apps.
Perhaps we all expect that COVID-19 pandemic will be well controlled and terminate in the near future, but we still have to take into account new directions, new business strategies which are more effective to adapt to the current state. In particular, businesses in the restaurant and hospitality sectors need a series of effective measures to maintain and consolidate their business so that they can quickly seize the opportunity to recover from the crisis.
References
Missy Frederick & Amanda Kludt. “Chronicling the Impact of Coronavirus on the Restaurant Industry in America”. CoronaVirus. Eater. March 13, 2020.
Vik Krishnan, Ryan Mann, Nathan Seitzman, and Nina Wittkamp. “Hospitality and COVID-19: How long until ‘no vacancy’ for US hotels?”. McKinsey&Company. June 10, 2020.
Nancy McGehee. “How COVID-19 has impacted the hospitality industry, and how it will recover”. Pamplin College Of Businesses. Virginia Tech. March 26, 2020.
“How to Help The Hospitality Industry During the COVID-19 Crisis”. ImBiBe Liquid Culture. March 18, 2020.
Rebecca Santence. “What’s next for hospitality? Experts discuss the evolution of experiences and entertainment during Covid-19”. Econsultancy. August 7, 2020.
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