TOPHOTELNEWS Live Blog roundup: industry risks, new models & roadmap to recovery

by | 19 Apr 2020 | General News

(Photo from Unsplash by Dimitri Karastelev)

Summarising info shared on the TOPHOTELNEWS Covid19 live blog, Europe is bracing for the worst that is yet to come, while sectors of the hospitality industry in Asia start to plan for recovery.

As the impact of the ongoing Covid19 crisis begins to be more deeply felt around the world, the TOPHOTELNEWS Covid19 live blog is capturing the most up-to-date information from the international hospitality industry. We round up some of the most pressing developments.

Risky business

Many hotel groups, operators, investors and developers are having to assess their positions as the crisis continues. Lockdowns are still in force in much of the world, and life is only beginning to return to normal in areas such as China, which dealt with the spread of the virus efficiently, so it’s safe to say that the hotel industry will be navigating these choppy seas for quite some time.

Risk-sharing in the post-corona age will be one of the pivotal points when negotiating contracts, according to a discussion had during a Hospitality Tomorrow online panel. “There’ll definitely be a third leg, too, a loud voice, which is the banks,” said Keith Evans from Ennismore. “Do they want hotels to open as soon as possible? Will they be waiving debt payments, and for how long? When will they enforce shortfalls and non-disturbance agreements, and will they be moving from what their positions were to this new world? Will hotels be allowed to open only when cash flow can be shown?”

New models

Much of the discussion in the hospitality industry in recent years has centred around how brands differentiate themselves. Well, according to some expert voices, this crisis might present an opportunity to reinvent some old, and potentially worn, ways of working. Experts reckon that the franchise business model of hotels might be under strain, with tensions arising between hotel brands, franchisees and third-party managers.

Dirk Bakker from Colliers International said, “We will see more friction. Brands might prefer to see fewer hotels open but with greater occupancies, while operators might want to reopen hotels where there is not the market demand,” Bakker said. “That would be the classic fees-versus-revenue debate, with operators not wanting to fund losses over time.”

Preserving cash flow

Anyone in business knows that cash is king, which is why Hostelworld and TUI have suspended their dividends payments in an effort to keep a steady stream of cash flow. This is a trend across the global hospitality and travel industry, and Johanna Bonhill-Smith from GlobalData says, “Periods of financial difficulty and unforeseen expenses are factors that cause a company to suspend dividend payments.

TUI recently secured a US$2bn bridging loan, offered by the German development bank KfW. This action, alongside the suspension of dividends and an existing credit of US$1.9bn, puts the company in a stronger position to withstand the impact of COVID-19.”

Russia and Covid

With new cases discovered on the China/Russia border, Russia is preparing itself for an extensive outbreak of the coronavirus that will no doubt have a huge effect on all aspects of life and the economy. However, before President Putin issued warnings of “complex and extraordinary” circumstances set to befall Russia, domestic travel across the country was being encouraged, leading to a swell of national tourists heading off to typical Russian tourist destinations including Sochi, the Black Sea and Crimea.

Kirill Agapov, CEO of developer Umbrella Hospitality CIS, said that for “highly competitive markets, COVID-19 has already led to closure of some hotels for an indefinite time, (but) there is some positivity in this situation, though, since the performance in the out-of-town hotels in Russia is up by 15% to 20% since mid-March, and this trend is expected to continue until the end of summer.” It remains to be seen how the crisis will be handled in Russia, and Putin is already talking of bringing in the army to manage the situation.

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