Coronavirus Impact: Hospitality Industry To Suffer The Most

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As no one wants to get sick, people stop going out and spending money. But there is other people who make a living of people spending money.

The hospitality industry is notoriously precarious even in the best of times. With the coronavirus pandemic now spreading widely across the world, the situation for restaurants, bars, hotels and other businesses in the hospitality and tourism fields may soon become dire.

The impact has already been felt in the countries where COVID-19 has struck first, and as the situation continues to rapidly evolve, there’s strong potential that many of these businesses will suffer a devastating blow.

Fallout on the Frontlines

Luxury hotels in Dubai experienced the threat of COVID-19 earlier than most, and by now a few five star hotels are officially closed for a few months. Even some restaurants have already closed down permanently in the face of the crisis.

For most of the fast and casual dining operators, so far it has been business as usual, because they are keeping the same high cleanliness standards as prescribed by the authorities. Most have issued circulars asking team members who feeling sick to stay home.

Events cancellations guidelines have prompted large corporate groups to cancel reservations because it’s against their company’s protocols to gather in large groups during the outbreak. 

Across the country, the coronavirus virus is already being felt. The shift is broadly felt with the last two weeks being slower than they should be. Some businesses revenues are down around 30%, while others more.

Across the board we would expect to see cuts in operations and expendable operating cost, and that is going to start with job cuts and go down the line.

Some businesses have suspended hours and overall operating schedule to both cut cost and limit exposure. Small businesses are going to hurt the most, and the more travel bans and social distancing they are going to need to follow, the less they will be capable of operating and weathering the economic downfall which incurring on restaurants and bars. Some neighborhood places will do better than those that thrive in high-volume and high-rent markets.

Hotels and airlines have taken steps such as waiving reservation cancelation fees so that customers can more easily choose to stay at home, whether out of preference or need.

In the unlikely event residents are told to stay home to self-quarantine, restaurants may or may not close. Restaurant owners would have to see how the situation presents itself and make decisions based on customers’ demand and the security of their staff.

Strong brands will likely be able to weather the challenges, including a possible closure, for however long is necessary. Overall, the safety and well-being of the customers and the employees should remain the biggest priority. In the worst case scenario of closing, some restaurateurs might be exploring options to upkeep their employees.

Not every business owner will feasibly be able to do the same. Some could support their staff and pay some annual leaves if the doors shut tomorrow. But no restaurant owner will want to dig themselves into debt in order to sustain for a six month closure while paying staff and fixed expenses.

Travel Downturn

It’s not just small businesses that are suffering, as major events across the hospitality, entertainment and sports industries have been canceled, postponed, or suspended. That includes festivals, exhibitions and a growing list of others. Of course, when these major events fall by the wayside, local businesses who rely upon them for traffic and sales suffer, too. Particularly in travel hubs like Dubai, many restaurants and bars also depend on tourists. And with travel decreasing, it’s another source of turmoil for the hospitality field at large.

Airlines have already made substantial cuts to service with more likely on the way as well. Under the directives of government authorities, the Emirates and Etihad arlines have entirely suspended flights to the most affected by coronavirus countries like Italy, Iran and more.

Some tour operators say that while they have seen decline in obvious places, such as Italy, their customers are thus far simply seeking out different destinations.

One peek at what could transpire is unfolding in Italy, one of the most heavily tourist destinations on the planet. The country is moving to shutter all businesses beyond those providing essential services. The lasting coronavirus impact on the country’s innumerable trattorias and osterias is yet to be seen.

Strategies for Business Survival

A few business owners outlined their concerns, with one essential point being the need to receive support from the government. That’s something that was seen in Singapore, where the restaurant and bar scene is a major driver of its tourism and overall economy, and the government stepped in to provide assistance to these businesses as they began enforcing strict protocols to shut down the spread of COVID-19. The government’s efforts are seen as some of the most successful for any country thus far, and they made efforts to assist businesses at the same time.

If the situation should deteriorate and negatively impact the dining industry in the country, more relief measures should be implemented. Loan interest rates have been reduced and number of banking and licensing fees waived so far. However, since this is a global pandemic, the government most likely will continue to offer additional relief as needed.

On the other hand, the hospitality industry should gain support for both business owners, as well as staff members. Both groups are going to face challenges and will be vulnerable in the current climate. To plan for scenarios, business owners should be talking with local and national organizations on how we can reduce budgets, get debt relief, and support staff, who are going to be hit the hardest. Provisions for paid sick leave could become major concern.

There are steps the individual consumer can take as well to support their local establishments as well. If people don’t feel comfortable going out, they can consider ordering takeaways and home delivery whenever possible.

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