Leaving Covid behind

Some time ago, in the middle of the Covid crisis, we anticipated a swift(er) recovery out of this crisis as opposed to previous downturns in the hospitality environment.

We have experienced 9/11, SARS, Bird Flu, Swine Flu, MERS, Zika… but these were more localized events.

The main difference to previous ones has been the total ban on international travel that was imposed initially.

Another huge difference is that governments were quick to aid with massive interventions, as Covid affected the whole economic spectrum and not just Tourism. Layoffs were, in some countries delayed and fear exists that this might still occur significantly in the months ahead.

?Covid is a global event and it affects countries differently. Cash rich countries have been able to mitigate impact with massive government aid as well as securing vaccines that will allow for their economies to open more quickly than others.

?There is a well understood risk that because of this uneven vaccination distribution, flares of Covid infections will happen and cause havoc in targeted areas of the world.

As some of the poorer economies depend heavily on tourism, we see this as an ongoing risk.

?In previous occasions, we saw long recovery periods for both hotel occupancy as well as for average rates.

It took 6 years for the economy to fully recover from the effects of the 2008 crisis. In 2008, we were still recovering from 9/11.

?Today we’re facing a much different picture. Recovery is happening already and it’s fast. This recovery is so fast that we’re seeing first indications of inflation in the US as well as in Europe.

For some months, factories have been closed temporarily, raw materials and semi-finished products have been in less demand and therefore sourcing those has been reduced with a global shortage as a result today. Steel, wood, electronic components are scarce and affect industrial production. Demand for cars, for computers is now very high and because of shortage of components, some factories have to reduce output.

?We see the same for some of the indicators in Tourism.

As customers have been denied the possibility to travel, to see friends and family, the eagerness to go back to pre-covid conditions is huge.

At the same time, the uneven levels of vaccination, even in the richer countries, is causing concern.

As I write this article, in some countries the bulk of people hospitalized today are not vaccinated. One country, with a vaccination level of almost 80%, reported that 97% of all hospitalized people in August were not fully vaccinated ( not willing to or not being able to yet). Statistics fro France show that 80% of hospitalised patients for week starting Aug 23rd are not vaccinated.?

The number of flights to certain destinations is already back to pre-covid levels.

US plane occupancy numbers in June were already equal to pre-covid levels.

?Occupancy in London hotels, june-july numbers (STR data), is the highest since February 2020. Similar can be said for Paris, Berlin or New York, to name but a few.

Average rates are lagging behind for 2 reasons : the main segment travelling today is leisure and there is a lack of business travel still , as many companies continue torestrict travel.

?In the Far East we see mitigated results, with Japan still in a lockdown and having no positive results from the 2021 Olympics.

STR reports that China has recovered to the tune of almost 90% compared to pre-covid. For China in particular, rates are following the rebound in occupancy much faster than anticipated, fueled by huge domestic demand.

Some destinations like Thailand, Singapore are still some distance away but are showing signs of recovery too.

Hong Kongs still has very strict quarantaine measures, with up to 4 weeks of confinement. This prevents the economic pick-up in the region.?

When we wrote our first articles on the outlook post-covid for the Hospitality Industry, we coutiously anticipated a swifter recovery that with previous crisis, which seems to be the case.

Sadly this pandemic isn’t over yet and there are regional or continental differences.

India is still in a bad spot and Africa is hit hard with no real signs of immediate recovery.

?We are convinced that leisure travel will come back to some sort of pre-Covid level but the main worry will be business travel and how the long pandemic has changed some travel habits. We now all use Zoom, Teams and other methods of communication making some in person meetings void.

?There is a darker side to this swift recovery though : the lack of human capital.

This is very much apparent in Europe as most countries, with state interventions, have limited the job losses during the pandemic.

As a result, the available or mobile workpool did not increase and companies are struggling, in an already small pond, to find additional hands to deliver on recovery.

This was already an issue for Tourism and hospitality, mainly in operational positions, but this is now also visible in other industries.

Transport, logistics, manufacturing ; they all struggle to find employees.

As a result, good employees have left or leave an unpopular industry such as tourism or hospitality in search of better working conditions, better social lives and sometimes better salaries.

?For the UK alone according to the British Chambers of Commerce, there is an announced 900 thousand+ jobs openings to be filled, a staggering number.

We read reports about staff quitting because of customers' impatience or rudeness - said customers not being able to cope with the new reality.

Reuters posted that in the UK 5.6% of restaurant staff quit in the months April-May and that for the restaurant industry alone would have 1.34 million job openings (businessinsider.com). Similar can be seen in the US, according to the Washington Post in June.

Food and beverage or hospitality may become more expensive and be prepared for longer waiting times.

?We face challenges in the months and years ahead.

The next thing that will affect Tourism is already there : the environmental impact.

What will be the result on easy and cheap travel, on rates?

At this stage we do not know yet but we do know that some hotels will have to look again at their business model and at their customers’ origin.

Most hotels will have to integrate much more environmental measures and concepts in order to make their business perdure.

The way we use ressources like energy, water, human capital will have to be addressed differently.

Governments are already announcing environmental measures for personal transport and for the energy industries and these announcements seem to accelerate plans that were publicized previously , with 2035 announced as the year when petrol cars will no longer be produced in Europe.

?Some of these issues mentioned above will have to be structurally addressed :

-? Hospitality will have to create a better image for itself

- We must convince more people that hospitality is a career worth pursuing

- We must invest in education and quality vocational education will be a decisive factor.

- We must invest in durable solutions for the whole tourism industry and lessen the environmental impact to avoid making ourselves irrelevant in the future.

This will be true for the transport industry as well as for the hotel and restaurant business.

From use of energy to food waste, there are some big challenges ahead.

?At EHL Advisory Services we have advised owners in developing different or new business models for their business solutions, in the airline industry, the cruising industry, the automotive sector, the hospitality industry.

?With EHL, we have developed a vocational education model that is both easy to implement and very cost-effective to put in place.

Visit us at ehladvisory.com for more information.