For all of the talk around industries like hotels that have been harmed by our current state of affairs, there is a group of sub-industries supporting hotels, and the hospitality sectors as a whole, whose operational and economic challenges seem to have fallen off the radar.
As we have come to know, COVID-19 will leave enduring hardships on the tourism and hotel industries, and many economic experts speculate that these industries will not look the same as they did before lockdowns, travel bans, and social distancing.
According to many experts, the effects of this pandemic will continue to cause economic problems on hotel accomodations for at least the next two years. And then there are factors that, arguably, no economist can account for.
- People’s fear of travelling in the aftermath of the pandemic.
- The social distancing protocols required to reduce the virus in the long-term.
- How the economic impacts of a recession like this one will truly affect travel.
In the midst of these speculations, unknowns, and ongoing concerns, there is an industry of hard working people who are feeling the frustration and anxiety every day they don’t get to work. Behind every successful hotel operation is a massive number of small businesses that are taking action behind the scenes (and on the scene!) to make our travel and accommodation experiences as flawless and comfortable as possible. And these companies rely solely on the tourism industry to operate.
Linen cleaning companies, dry cleaners, limousine and transportation rental services, sanitation services, landscaping and gardening businesses, and a wide array of other independent contractors who make their living while helping people travel in style and comfort are looking at a dismal road forward.
In Part 1 of our series, we’ll take a more specific look at how Coronavirus has affected the hotel industry and its subsidiaries in the field. This will give us an insight as to how this trickle down effect on supporting industries and independent contractors really works. We’ll then explore what this means for the industries that support hotels, how they’ve been affected, and what outcomes possibly look like for the future.
In Part 2 of our series, we’ll further explore the impacts of Coronavirus on the businesses supporting hotels. We’ll then offer several options available for businesses supporting the hotel industry and present some helpful strategies to combat the effects of this pandemic.
First, let’s look at the latest facts and statistics as they relate to hotels according to the American Hotel & Lodging Association.
- As of July 8th, nearly 6 out of 10 open hotel rooms were empty across the country per STR. This is in addition to the thousands of hotels shuttered completely.
- Since the public health issue began escalating in mid-February in the U.S., hotels have already lost more than $40 billion in room revenue.
- This figure is devastating with hotels currently on pace to lose up to $400 million in room revenue per day based on current occupancy rates and revenue trends.
- The Bureau of Labor Statistics reported that 7.7M hospitality and leisure jobs were lost in April.
- With 70% of direct hotel employees laid off or furloughed, hotel workers are losing more than $2.4B in earnings each week.
- Individual hotels and major operators are projecting occupancies below 20%. At an occupancy rate of 35% or lower, hotels may simply close their doors, putting 33,000 small businesses at immediate risk.
These numbers are staggering and they give a revealing insight on just how bad things are getting. After you’ve finished reading this article, visit the following link to the American Hotel & Lodging Association website to read a more detailed breakdown of how the hotel industry has been affected, and listen to what leaders of the largest hotels are saying about the economic impacts of COVID-19 on their operations. https://www.ahla.com/covid-19s-impact-hotel-industry
To bring this into a more local perspective, in Minnesota the hospitality industry (at large) supports an estimated 300,000 jobs. Thus far, nearly 59,000 Minnesotans, supporting the hotel industry, have lost their jobs due to the Coronavirus.
Testimonials from local lodging owners echo the same sentiments as so many other business owners in the United States right now.
“As a resort owner/hotelier in Minnesota I have experienced firsthand losses in all facets of our restaurant, bar and lodging and am at a loss as to how we are going to be able to pay our bills. Please help.” Jeanne Sorensen – Orr, MN
“As self-employed small business owners, we have no recourse for lost income as we are not eligible for unemployment benefits.” Sherrie Porth – Bigfork, MN
If you would like to read more testimonials from Minnesota hotel owners and operators, visit the following link as well after you finish this article.
So what are the outcomes and effects of this pandemic that can be expected for small businesses that support the hotel industry?
From an operations perspective, if a dry cleaning company was handling 1,000 items a day before Coronvirus, they might be handling around 50-100 pieces a day in the current environment. Usually, during this time of year, a limousine and transportation service would be providing more than 1,000 rides a month. Now, some of these companies are receiving requests in the double and single digits.
Many of those transportation companies would typically bring in $250,000 to $300,000 per month from March through July. There are reports that those same companies are currently making $1,000-$3,000 per month, forcing owners to lay off drivers while fleets of vehicles sit unused. And it’s not just the transportation companies who are feeling the brutal crunch, all of the businesses we’ve listed above are in this predicament.
This sort of drop in cash flow is like a vice tightening around a business’s livelihood. It places the company in jeopardy and hurts the staff. People are being furloughed and fired, leaving those folks who are still on payroll to take over an often overwhelming list of responsibilities.
It goes without saying that these impacts hitting the hospitality and hotel industries are causing massive disruption, leaving every business with the challenge of learning to function in a way that no one (or very few people) had foreseen. Building new forms of relationships between each brand and their consumer is now at the forefront.
Companies are focusing on regaining customer confidence while overcoming this current crisis. Strict sanitary and hygiene measures are being applied in every facet of the business. New practices that control foot traffic and touch points are being implemented to monitor and control the environment in which people are interacting within the business.
The outcome, in short, is that the face of business is changing and companies who want to have their doors open 1 to 3 years from now are looking at how they engage their customers from a completely different perspective.
At Auction Masters, we’ve been researching business strategies and monitoring federally mandated programs since the onslaught of this pandemic, in an attempt to give business owners the latest, impactful trends and helpful information available to combat the effects of Coronavirus. In our second article for this series, we’ll be exploring our research further, giving you ideas to consider while you navigate these extraordinarily challenging times.
And as always, we’re here to help business owners in any way we can. Call us at the number below any time during operating hours and we would be glad to help you work through your current situation and the options we have available.