Building resilience will be vital for hotel chains and leisure resorts
Few industries have been hit as hard by COVID-19 as the hospitality sector. Aon’s recent Aon’s recent COVID-19 Risk Management and Insurance Survey found that 53% of those hospitality businesses surveyed globally had seen their business severely impacted and would take significant time to recover, with 37% expecting recovery to take more than two years. Despite the challenges, there are reasons to be optimistic for a sector that is reinventing itself to cater for the changed needs of its customers beyond the pandemic.
No travellers, no guests
Hospitality has been particularly vulnerable to COVID-19 for several reasons. For hotels and leisure resorts the business model is all about inviting people to their premises for not just a stay, but an experience. Travel restrictions and country wide lockdowns impacted the hospitality industry in an enormous way. In other industries, work from home (WFH) opportunities allow companies to maintain a workforce and maintain some level of business continuity. other industries have opportunities for employees to work from home. WFH doesn’t really apply for hospitality; employees must be on the premises to provide the customer experience.
Given these vulnerabilities it was perhaps surprising that, according to Aon’s survey, 84% had not identified pandemic or a major health crisis as a top 10 risk. One reason – at least in the US – may have been that many hotels and resorts are hit by natural catastrophe such as hurricanes and wildfires on a frequent basis; risks which have occupied their risk management and risk mitigation activities but are all perils with a different profile to a pandemic. Some health crises like H1N1 have had a limited effect in the past but not on the scale of COVID-19.
Creative response
Despite a pandemic not being high on the agenda, hospitality venues have responded creatively, in ways that support a short-term answer, but lay the ground work for more permanent ingenuity around guest services and the ultimate experience. Some hotels in the US, for example, stepped up and volunteered to be used as alternative use facilities providing overflow accommodation for hospital networks and their healthcare staff to allow them to reduce their commute times, or by hosting other emergency staff such as FEMA representatives. They filled an emergency need which spoke well for the entire industry.
Pushed to manage expenses while partially or entirely closed, many in the hospitality industry implemented thoughtful and strategic practices focused on protecting their cash position through flexible furlough arrangements for employees and in other areas such as working with bank lenders to modify their loan covenants on their property insurance programme.
Resilience: a priority
A priority for the hospitality industry will be to build resilience to address future health crisis or economic disruptions. Many of the safety procedures and protocols implemented to address the pandemic will become standard practice, which should prove attractive to guests after the pandemic, striking a good balance with the need to create an inviting experience while supporting safety and wellbeing protocols for employees.
Hotels may use the lessons from the pandemic to better address the differences in addressing the business traveller need from the pleasure traveller need. Pandemic safety measures may be deployed differently depending on the experience being delivered.
Bring transparency…
Transparency in communications between hospitality businesses and their stakeholders will play an important role in the post COVID future, particularly as enterprise risk management responses are designed and implemented. The dynamic between the hotel management company and the hotel owner may strengthen in support of innovative business practices aimed at lessening financial exposure in the event of a future crisis. We may see greater transparency between the hotel guest and the property to demonstrate the efforts being taken to provide a safe hotel experience.
…innovation
Innovation will play a central role as the industry builds resilience in the post COVID era. Many venues will take significant steps to make permanent the utilisation of outdoor space – building on providing permanent facilities outside such as yurts and other outdoor banquet, dining and convention spaced. These won’t just help during a health crisis but will keep events running in periods of bad weather, again bolstering their resilience. It may help them cater for different types of events such as resorts putting on weddings as an interim measure to returning to the big live events, they may previously have specialised in.
…and trust
Ultimately, the focus needs to be on re-establishing trust with the traveller; ensuring they arrive into a safe and inviting space. Many hotel companies have taken significant steps to create branding around the delivery of a safe environment by partnering with third parties to help them provide a safe experience and become a destination of choice.
The future’s bright
Despite the obstacles thrown up by the pandemic, the sector should be optimistic. The growth of the new digital economy was providing challenges to the traditional hospitality industry through organisations like Airbnb and other home sharing platforms well before the pandemic, so most hospitality businesses have already had experience in trying to be resilient against marketplace disruption. COVID-19 has again challenged their business model and the industry is responding, preparing and looking ahead to a post-COVID world.
To find out more about the impact of the pandemic on the hospitality sector and how future decision making will be shaped, download Aon’s recent COVID-19 Risk Management and Insurance Survey.