Critical Analysis in an International Business PDF

UNIVERSITY OF DERBY
DERBY BUSINESS SCHOOL
Critical Analysis in an International Business
Context
(6EC506)
The impact of COVID-19 on the Hospitality industry

Student I.D. 100540135
Date Submitted: 12th November 2020
Coursework 1 Word Count:1590
Introduction
COVID-19 is an infectious diseases that has spread rapidly around the world since
2019. It has spread to more than 140 countries, with more than with over 48 million
confirmed cases as of November 2020 (Hafsa, 2020). The epidemic has had a
ravaging impact on the global economy, and in particular, the hospitality industry.
From reduced bookings to closures, hotels have been hardest hit by the covid-19.
Evidence shows that sales in the UK hospitality sector plummeted 87% in the second
quarter with the same period last year (Bloomberg, 2020).
Based on the above information, this essay seeks to examine the impact of covid-19 in
the hospitality industry. To achieve this aim, the essay is divided into three key parts.
The first part assesses the key impact of covid-19 on the hospitality industry. Next, the
essay presents some suggestions on how the hospitality industry can mitigate the
adverse effects of the pandemic. Lastly, the conclusion summarises the key findings
of the essay.
Effects of covid-19 on hospitality industry
Reducing occupancy rates
The emergence of covid-19 have led to the reduction of occupancy rates among
various hotels around the world (Nan, 2020), which have adversely affected their
revenues. In China, the nationwide travel ban, just before the New Year 2020 caused
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hotel occupancy rates to reduce to 7.4%, with some hotels closing their businesses
owing to low sustainability of operations (Hot Stats, 2020). Elsewhere, in Australia,
the travel bans implemented in March saw the Hyatt Regency’s 892 rooms remain
unoccupied since then (Djeebet, 2020).
Overall, the occupancy rates among hotels is used to measure hotel performance
(Hotel News Now, 2020). When this figure dropping, it can cause a decline in
Revenue Per Available Room (RevPAR). Even though their income decreases, there
are still a lot of huge fixed expenses such as labour costs, water and electricity
charges, rent, and various taxes. Hence many hotels will face the crisis of capital
chain rupture and then may go bankruptcy or lay off staffs, once there is a serious
imbalance between revenue and expenditure for a long time. Moreover, World Health
Organization and many epidemic experts presented that the second wave worldwide
has been coming and it will not endknot be over by the end of this year (World Health
Organisation, 2020). It can be explained that negative influence brought by COVID-
19 will last a longer time. Therefore the global epidemic has seriously battered the
annual performance of the industry.
Job losses
The hospitality sector have experienced high job losses due to pandemic. With very
few people visiting hotels, it means that employees had little to do (Baum et al, 2015).
Therefore high labour costs and declining profits make management realize that it
uneconomical to keep employees in the workplace. This leads to a social
phenomenon. Specifically enterprises need to choose between "retaining talents and
cost surge", while employees should choose between "leaving or changing jobs, and
remaining a basic salary" (Wang, 2020). Overall, once employment loss, it will
increase the work volume of human resources department and the management
difficulty, and then affect the companies' efficiency. The core staffs leaving maybe
make the original customer resources of the hotel follow the staff to the competitors.
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Moreover, Almost 300,000 jobs in the UK’s hospitality industry have been lost
(Davis, 2020), which also make workers lack of income source, and compromise
their livelihood. Economists argue that rising unemployment could hurt incomes and
consumption, lowering the possibility of economic recovery once the pandemic is
contained.
Figure 1: Global unemployment situation in the hospitality industry due to the
coronavirus in 2020
Source: Statista
According to the above chart, 108 million jobs will be lost globally in 2020.
Particularly, Asia Pacific region has been the most impacted and will lost
approximately 63.4 million jobs. Therefore it would have a catastrophic effect on less
developed countries because social development and welfare system are in the initial
construction stage, for example there is no financial support from government and no
organised trade union protection for workers. Therefore this will not only cause
millions of people to fall into the abyss of poverty (Jones and Comfort, 2020), but
also bring all kinds of social problems, deepen class contradictions, and is not
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conducive to social harmony.
Infection of staff
As covid-19 infections soar, staffs’ health in the hospitality industry are at risk as well.
Staff in restaurants, hotels, and resorts are consistently in contact with visitors which
increase their risk of getting infected (Biwota, 2020). This is especially the case in the
hospitality establishments that do not follow the laid down government health
guidelines and safety protocols. Failure to wear masks, wash hands, and observe
social distance have increased the infection rate of most staff in the hospitality
industry. If the covid-19 spread quickly among staff, they will most certainly stop
working, get quarantined with some with risk of losing their lives (Kaushik and
Guleria, 2020). Such incidences will jeopardise with the sustainability of the hotels, as
well as their reputation.
Heightened focus on hygiene and cleanliness
The public's health awareness and consumption demand have changed significantly
following the outbreak of COVID-19. Studies indicate that customers are affected by
hygiene and cleanliness conditions when making their visit or booking intentions in
hotels (Jiang and Wen, 2020). Therefore those companies which provided food, drink
and rest services should provide products closely related to the physiological needs of
customers, and upgrade their hygiene and cleanliness measures. Specifically, many
hotels are requiring guests to sanitise or have their temperature checked firstly before
they are allowed entrance (Kilgore, 2020). Hence it can be forecasted that their future
business will accept more strict health requirement and new consumption habits from
customers.
Embracing artificial intelligence and robotics
Moreover, epidemic has made the public pay more attention to the low contact
between people. A rising number of studies have focused on hotel-linked effects of AI
and robotics at both individual and organizational levels (Jiang and Wen, 2020).
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Therefore, Hotels can incorporate robots to offer completely contactless services, for
example check-ins, reception, deliveries, and guest control can be taken over by them.
Especially in high contact environments, it can guarantee the guests and frontline
workers' safety. Meanwhile, the aging population is increasing. According to
evidence, the proportion of the population aged 65 years already increased to 9% in
2019 and will rise to 16% by 2050 (United Nations, 2019). Therefore artificial
intelligence can also better help the human-resource intensive hospitality industry to
solve the problem about lacking of employees.
How hospitality industry can minimize covid-19 impact
According to Jones and Comfort (2020), about 48% of the firms in the hospitality
industry are facing financial hardships and may need financial assistance to remain
sustainable. To avoid any further financial issues, the firms in the hospitality industry
need to bargain with relevant financial institutions such as banks to obtain affordable
loans that they can use to boost their businesses (Deloitte, 2020). Furthermore, to
further control daily costs, enterprises take full advantage of the achievements of the
new technological revolution. Specifically they can outsource in non-professional
fields, and use artificial intelligence machines to replace manual services to reduce
unnecessary labour (Chen, 2020).
According to the Maslow's Hierarchy of Needs (Maslow, 1954), Self-actualization
needs are the highest level. Specifically, management can redesign the content and
process of work, and then make the work more challenging and creative. For example,
firms can adopt 'employee sharing' schemes where they send workers to those
industries with dire need for man power, such as food delivery and mask production
(Tianyu, 2020). The new work contents is conductive to mobilize the enthusiasm of
employees. Moreover, the firms in the hospitality industry can use the low season to
train staff on service quality improvements. This will be helpful in the sense that when
the COVID-19 restrictions are finally lifted, the workers will be more experienced
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and effective in their jobs.
Third, hotels can shift to online delivery options to cushion themselves against total
revenue loss. Instead of relying on having customers eat at the physical premises,
hotels can collaborate with online food ordering firms to deliver food to paying
customers (Wu, 2020). Online deliveries will also help hotels and/or restaurants to
comply with social distancing policies and ensure that their premises are not
congested.
Even if hotels are closed, it is important to use online platforms, such as websites, to
keep contact with customers because it illustrates that the hotel is open and can accept
reservations, conferences, etc. Importantly, hotels or restaurants should assure guests
that they are complying with health precautions. Health protocols such as social
distancing and checking guest temperature are some of the methods that the firms in
the hospitality industry can use to assure the safety of customers (HN, 2020).
Conclusions
The pandemic has adversely affected the performance of the global hospitality
industry. Owing to travel restrictions, hotels have experience a drop in occupancy
rates, leading to a decline in RevPar and profitability. Job losses, in addition to health
risks paused to staff, are some of the other negative impacts that the covid-19 is
pausing to the hospitality industry. Further, Based on the seriousness of the infection,
it have necessitated hotels to observe stringent health and cleanliness protocols, while
aligning their operations to sustainability. Meanwhile, affordable financing options
should be sought to improve liquidity, while firms can use Internet technology to
reduce operation costs, and engage in manpower sharing to ensure that the operations
do not come to a halt. Online deliveries can also be used to reduce contacts with
guests as much as possible.
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