Impact of COVID-19 on Hospitality Industry

This document discusses the negative impact of COVID-19 on the hospitality industry, specifically focusing on the challenges faced by Loch Fyne restaurant. It includes a Porter's 5 model analysis and a PESTLE analysis to understand the factors affecting the industry. The document concludes with insights on how the sector's environment influences the challenges faced by the organization.

UNDERGRADUATE MAJOR
PROJECT (RESEARCH STRATEGY
PLAN)

TABLE OF CONTENT
INTRODUCTION...........................................................................................................................3
Porter’s 5 model analysis:......................................................................................................3
PESTLE Analysis...................................................................................................................5
Influence of sector’s environment on the challenges facing the organization.......................7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Due to the global pandemic COVID-19, the business travel worldwide has seen decrease
that created a negative effect on hospitality industry. The present time of COVID-19 has hit the
world negatively and hospitality industry has deteriorated by large number of degrees but day by
day hotels and restaurants are working to gain back its position in the market. Generally
hospitality industry is one of the biggest competitive industries through factors like tastes of
consumers, income levels and demographic. These are the factors that have direct impact on
increasing and decreasing demand of customers towards hotels and restaurants. The services of
hospitality industry are depending on each other because it provides services like
accommodation, restaurants, events and tourism (Thams and et. al, 2020).
Porter’s 5 model analysis:
Porter’s five force model analysis on hospitality industry during the time of COVID-19 as
Loch fine is a restaurant that comes under hospitality industry. COVID-19 made economy to
sudden shut down which has decreased the business of every sector and face other challenges
(Panda, 2020).
Threat of substitute goods:
Hospitality industry is very competitive because its locations are very close to each other.
In these restaurants have prices according to the different level of facility and services they are
providing so customers face challenges while making decision regarding a particular restaurant.
COVID-19 has created a negative impact on restaurants in hospitality industry because this
situation made customers to take a step back from eating Loch Fyne restaurant. Customers are
now more dependent on consuming products from stores that are convenient from their home
location. They started buying products from grocery stores so that they can make food by own at
their home, they have started reducing to go outside for having lunch, dinner or breakfast in
restaurants. During this global pandemic home cooking has substituted restaurant food.
Hospitality industry faces the change where people less prefers to go to a restaurant or travel,
stay at any hotel rooms (Singh, J. and Singh, J., 2020). This pandemic has created negative
impact on Loch Fyne as people are now less likely to do more expense on luxury hotels or
restaurants. Now they prefer those hostels and local restaurants which are providing low rate of
accommodations and food. So, this pandemic made customers of hospitality industry cost
conscious because people are losing their jobs and their salary has cut down (Adamkasi, 2017).

Bargaining power of buyers:
Customers of hospitality industry are quite demanding and quite tough to please. This
global pandemic has generated a feeling among customers of wanting value for their expenses
and spending. In COVID-19 people prefer to stay home only and they want Loch Fyne to give
value added services to them. Now people expect from hospitality industry especially from
restaurants that they deliver their items or orders directly to the customers’ house in lower price
and on time (Lakshmi and Shareena, 2020). The pandemic situation has increased the bargaining
power of customers of hospitality industry because of this hospitality industry has to adapt in
situation and try to find ways to deliver products to customers in low cost so customers remain
happy as well as cost of hospitality industry does not increase. Loch Fyne comes under pressure
to provide services to customers in a very low price and hold their hotels and restaurants at a
unique position in the market.
Industry competition:
Rivalry and competition have increased during COVID-19 pandemic because consumer
behavior has changed. Their demands related to product have changed; number of competitors
has increased, prices of commodities have increased, cost increased and raised cost of managing
risk in the industry (Brizek and et. Al, 2021). There are restaurants that have added offerings
according to the need of global pandemic as of now people are more into healthy products and
items. Hospitality industry is famous for providing luxurious services to consumers, but this
pandemic people need only essential products or items so they are doing expenditure only on
needed and required products. Grocery stores and departmental stores are providing essential
services to customers which have become rivals to restaurants. These stores are providing
products to customers simply by one click so hospitality industry is facing problem because it is
not providing essential or basic services to customers (Gursoy and Chi, 2020).
Barriers for new entrants:
The main problem Loch Fyne restaurant is facing in this COVID-19 situation is that new
entrants are not able to enter in this particular industry because it needs high investment that is
not possible in this COVID-19 situation as people or investors do not have enough funds to
invest in this specific industry. Potential entrants are not able to invest in such locations which
are attractive and in advance technology because it needs a lot of funds even many entrepreneurs

are now scared and hesitant to enter in hospitality industry because this industry has seen very
negative downturn because people or customers are not able to travel or go outside (Abouk and
Heydari, 2021). Customers prefer to not travel even a short distance because they're scared of
global pandemic so many entrants who were interested before COVID-19 to enter in hospitality
industry have taken their steps back. Hospitality industry has become the most uncertain industry
to get success. Investors are facing problem to get funds to enter in hospitality industry as they
need funds for innovation and provide great quality service to the customers.
Supplier’s bargaining power:
A lot of differences have come in supply during global pandemic that is COVID-19. This
pandemic has stopped the transportation services that have created a problem for Loch Fyne
restaurant as they are not able to get raw products or raw materials for their products and
services. There are only some suppliers who are supplying their supplies to hospitality industry
which provided them opportunity to charge higher prices from Loch Fyne restaurant. Hospitality
industry has a great dependency on farmers and other companies for getting supplies that are
goods and products. This pandemic situation has reduced the production in farms and there is no
such good substitute to that particular production which created a negative impact on Loch Fyne.
Suppliers who are providing materials of packaging to restaurants are charging high prices from
hospitality industry because the demand of packaging materials is very high as products are
delivering to the door step of customers (Abouk and Heydari, 2021).
PESTLE Analysis
Pestle analysis is used for gaining a macro picture of environment of an industry. The full
form of pestle is political, economic, social, technological, legal and environmental factors
through these entrepreneur finds out all the factors that may impact their business or industry.
During COVID-19 situation pestle analysis would help in identifying the risks that have impact
on hospitality industry and all those forms which are working under it (Alberico, 2020).
Political factors:
It shows the control of government over an industry or an economy. In this COVID-19
government has come with certain rules and regulations, policies to reduce the spread of this
disease. Government has made rule of proper lock down in countries which has created problem
for hospitality industry as it has to shutdown their all the hotels, restaurants and eco-lodges.
There is a strict law that do not allow gathering of people at one place. So Loch Fyne restaurant

cannot have tourists and customers at same place because it is directly related to their health
(Nhamo, Dube and Chikodzi, 2020).
Economic Factors:
This is directly related to the condition of economy and this pandemic situation has taken
economy to downwards which has direct impact on Loch Fyne. In this unemployment rate has
increased, inflation levels have increased because customers are not able to travel or spend their
money that is one of the economic threats on Loch Fyne restaurant. Customers are looking for
opportunities there they can get inexpensive travelling or accommodations (Jones, P. and
Comfort, 2020).
Socio-cultural factors:
Socio-culture of people has direct impact on Loch Fyne restaurant especially in the
COVID-19 situation as people do not have much disposable income with them because they
have lost their job and people have developed feelings of saving money for their health need for
future uncertain situations. Global pandemic has created a cultural shift in which social
gatherings are totally not allowed that has negatively impacted. The hospitality industry has
created the billions and millions of losses for hotels and restaurants (Bufquin and et. Al, 2021).
Technological factors:
Technology has great power to take Loch Fyne Restaurant towards success, growth and
development but this pandemic has created problem for hospitality industry as they do not have
enough Funds to invest in new and advanced technology. This restaurant has also focus towards
using technology so that people can safely visit their restaurants and hotels. Customers can book
their hotels or restaurants in advance so that gathering of people could be avoided but it has
created a risk to security and privacy regarding personal information of customer (Luo and Xu,
2021).
Legal factors:
Legal factors and political factors are interrelated, but legal factors are kind of more strict
laws and if they are not followed by particular industry then they have to give penalty. In this
COVID-19 situation Loch Fyne restaurant has to follow strict health and safety rules so that
impact of COVID-19 could be decreased but hospitality industry has faced issue in following the
Health and safety rules that has created problem for them (Davahli and et. al, 2020).

Environmental factors:
Hospitality industry has to be more focused towards laws related to environment,
sustainability, supply chain, pollution, ethical way to source labors and materials (Kim, Bonn
and Cho, 2021). Loch Fyne restaurant faced problem to follow laws related to employees as this
pandemic made them to lay off employees because their business is not working they have to use
resources for restaurants and hotels that are more eco friendly and help in keeping guests away
from the effect of COVID-19.
Influence of sector’s environment on the challenges facing the organization
The environment of hospitality industry has influence effect on challenges facing Loch
restaurant. COVID-19 has created negative impact on hospitality sector as well created
challenges for Loch restaurant. Hospitality industry is facing problem to do business so Loch
restaurant is also facing issue of attracting customers towards their offering as now people prefer
to stay home. Loch restaurant is facing problem in getting supplies from suppliers because
suppliers are charging high rates for their supplies (González-Torres and et. al, 2021). The
restaurant has to work as per the rules and regulations made for hospitality industry by
government. Because of influence of COVID-19 gathering of people is not allowed at same
place for a longer period of time that has put negative impact on restaurant as they have to come
up with different and effective measures so that gathering of people at one could be avoided and
they can operate their business successfully (Dube, Nhamo and Chikodzi, 2020).

CONCLUSION
With the assistance of above given information it is being concluded that COVID-19 has
negative impact upon hospitality industry. This industry has to shut down suddenly that has put
them in a negative situation. Pestle analysis and Porter’s 5 forces model have helped in
determining challenges and issues facing by hospitality industry. These analyses have helped
organisations working under hospitality industry to determine the long term effect of this global
pandemic on the performance of business. With the assistance of such analyses organisation
could review their strategies to cope up with the uncertain situations like COVID-19.

REFERENCES
Books and Journals
Abouk, R. and Heydari, B., 2021. The immediate effect of COVID-19 policies on social-
distancing behavior in the United States. Public Health Reports. 136(2). pp.245-252.
Alonso and et. Al, 2020. COVID-19, aftermath, impacts, and hospitality firms: An international
perspective. International journal of hospitality management. 91. p.102654.
Brizek and et. Al, 2021. Independent restaurant operator perspectives in the wake of the COVID-
19 pandemic. International Journal of Hospitality Management. 93. p.102766.
Bufquin and et. Al, 2021. Employee work status, mental health, substance use, and career
turnover intentions: An examination of restaurant employees during COVID-
19. International Journal of Hospitality Management. 93. p.102764.
Davahli and et. Al, 2020. The hospitality industry in the face of the COVID-19 pandemic:
Current topics and research methods. International Journal of Environmental
Research and Public Health. 17(20). p.7366.
Davahli and et. Al, 2020. The hospitality industry in the face of the COVID-19 pandemic:
Current topics and research methods. International Journal of Environmental
Research and Public Health. 17(20). p.7366.
Dube, K., Nhamo, G. and Chikodzi, D., 2020. COVID-19 cripples global restaurant and
hospitality industry. Current Issues in Tourism. pp.1-4.
González-Torres and et. Al, 2021. Managing relationships in the Tourism Supply Chain to
overcome epidemic outbreaks: The case of COVID-19 and the hospitality industry in
Spain. International journal of hospitality management. 92. p.102733.
Gursoy, D. and Chi, C. G., 2020. Effects of COVID-19 pandemic on hospitality industry: review
of the current situations and a research agenda.
Japutra, A. and Situmorang, R., 2021. The repercussions and challenges of COVID-19 in the
hotel industry: Potential strategies from a case study of Indonesia. International
Journal of Hospitality Management. 95. p.102890.
Jones, P. and Comfort, D., 2020. The COVID-19 crisis and sustainability in the hospitality
industry. International journal of contemporary hospitality management.
Karim and et. Al, 2020. The movement control order (mco) for covid-19 crisis and its impact on
tourism and hospitality sector in malaysia. International Tourism and Hospitality
Journal. 3(2). pp.1-7.
Kim, K., Bonn, M. A. and Cho, M., 2021. Clean safety message framing as survival strategies
for small independent restaurants during the COVID-19 pandemic. Journal of
Hospitality and Tourism Management. 46. pp.423-431.
Lakshmi, B. M. and Shareena, P., 2020. Impact of COVID 19 on the restaurants. Journal of
Interdisciplinary Cycle Research. 12(8). pp.1327-1334.
Larue, B., 2020. Labor issues and COVID‐19. Canadian Journal of Agricultural
Economics/Revue canadienne d'agroeconomie, 68(2). pp.231-237.
Luo, Y. and Xu, X., 2021. Comparative study of deep learning models for analyzing online
restaurant reviews in the era of the COVID-19 pandemic. International Journal of
Hospitality Management. 94. p.102849.
Nhamo, G., Dube, K. and Chikodzi, D., 2020. Restaurants and COVID-19: A Focus on
Sustainability and Recovery Pathways. In Counting the Cost of COVID-19 on the
Global Tourism Industry (pp. 205-224). Springer. Cham.

Ntounis and et. Al, 2021. Tourism and Hospitality industry resilience during the Covid-19
pandemic: Evidence from England. Current Issues in Tourism, pp.1-14.
Singh, J. and Singh, J., 2020. COVID-19 and its impact on society. Electronic Research Journal
of Social Sciences and Humanities. 2.
Thams and et. Al, 2020. An initial assessment of economic impacts and operational challenges
for the tourism & hospitality industry due to COVID-19 (No. 2/2020). IUBH
Discussion Papers-Tourismus & Hospitality.
Online sources
Panda .I., 2020. Porter’s Five Factor Model in Hospitality (Restaurants) [Online]. Available
through: <https:// https://ivypanda.com/essays/porters-five-factor-model-in-
hospitality-restaurants/>.
Adamkasi ., 2017. Porter’s Five Factor Model in Hospitality Industry [Online]. Available
through: <https:// https://www.porteranalysis.com/porters-five-forces-model-of-
hotel-industry//>.
Alberico .R., 2020. How to do a pestle analysis of business [Online]. Available through: <https://
https://www.phlywheel.com/articles/marketing-strategy/how-to-do-a-pestle-analysis-
of-your-business/ />.