While the full extent of the disruption caused by COVID-19 is still uncertain for restaurants, hotels, and other hospitality establishments, weathering through this pandemic is still possible.
Expenses are expected to return faster than revenues for most Hospitality segments. Australian border closures, cost conscious consumers and a society adjusting to a new normal will continue to hit revenues in 2021. Government measures like jobkeeper and rent relief provide a temporary cushion, but economists describe a looming “economic cliff” as stimulus begins to wind back faster than revenues are predicted to return.
Melbourne broker Lloyd Nunn, of CRE Brokers describes the situation on the ground as a double-whammy effect where rent relief measures won’t catch up to the decrease in venue revenue, coupled with landlords who will seek to recover deferred rents. According to Nunn, “As soon as the eviction (moratorium) is lifted, you’ll see evictions happening everywhere. We’re putting off the inevitable.” This is a sentiment echoed by insolvency professionals who are preparing for an influx of work beginning in late 2020.
Insolvency professional Jarvis Archer from Revive Financial feels many in his industry are currently in a holding pattern, pointing to a “tsunami of insolvencies” as stimulus measures are wound back. To outpace the return in expenses, Archer says hospitality operators need to be deliberate about what services they return and when, which might involve fundamentally reconsidering previous offerings.
Uncertainty with the extent and duration of further lockdowns mean owners and managers should be reviewing their cost base to see which items can be brought back incrementally. Decreased household incomes and cuts to company discretionary spending are likely to cause a hit to luxury segments and fine dining, but present an opportunity for operators in other categories to attract new customers.
Productivity will drive decision making for years to come
Agile businesses will look towards operational efficiencies before re-hiring.
In Australia’s previous economic recessions, jobs were lost much faster than they were regained. The COVID-19 pandemic has created the most rapid loss of employment in modern history, but the slower return of jobs following a recession represents more than just an economic recovery.
Automation researcher Leslie Joseph points out that slow employment growth during economic recoveries represent periods of rapid automation, as necessity drives the adoption of automation: “As companies have recovered their revenues and reopened their supply chains, they have increasingly invested not on rehiring the workforce but on automation and on reducing their dependence on manpower.” COVID-19 will see the resurgence of leaner, more productive operations as old assumptions are challenged.
For the Hospitality industry, the pandemic has given operators an opportunity to trial offerings with less human contact with customers who are already expecting an altered customer experience. Businesses that introduced contactless services such as hotel check-ins, mobile ordering and drive-up options are also being given an opportunity to test if these could be viable long-term options.
Operational changes aren’t all temporary though – the pandemic has been the catalyst for businesses to pull forward long-term projects. Businesses rapidly adopted workforce technology, to support remote payroll automation, completing projects that previously were assumed to be long term projects in weeks – not months or years.
A rare opportunity for a fresh start
Many industry leaders are making use of the dip in traffic to step back, re-evaluate and review their current workplace processes. COVID-19 is a unique time where business leaders can capitalise on the opportunity to review and implement forward-thinking practices.
The hospitality industry has the most potential to recover fully, especially as the economy restarts. Right now, hospitality players have the power to set the tone for a more robust sector in the decades to come.
It is important to get systems ready for when demand surges again.
Profitable businesses are not necessarily the ones with the most bells and whistles, but those who are agile enough to take advantage of market changes.
Investing in technology can also help streamline many processes, and smart players know this. When you free up staff from time-consuming manual tasks, you provide them with a platform to focus more on things that provide more value to your business. With the right solutions, you can propel your greatest assets, your people, into success.
