O Treats Hotel

HOTEL INDUSTRY                                                                                                                          

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HOTEL INDUSTRY

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Business Strategy

Miguel Carvalho – Jaime Vega  – Marco Rodriguez

INTRODUCTION

On December 8, 2019, the Wuhan (China) government announced that health authorities were treating dozens of new virus cases, identified as coronavirus disease 2019 (COVID-19)^[1]. Since then, COVID-19, a new strain of SARS (SARS-CoV-2), has become a global pandemic and is spreading in many countries. COVID-19, a highly transmissible respiratory disease, spreads through contact with other infected individuals, with symptoms such as fever, cough and respiratory problems^[2]. Transmission can also occur from asymptomatic individuals, as up to 40% of infected individuals remain asymptomatic. Other factors that facilitate infection include: the speed and efficiency of COVID-19 transmission; airborne transmission; close contact between infected and uninfected individuals; the vulnerability of immunocompromised individuals with specific underlying health conditions (e.g., hypertension, diabetes, cardiovascular disease, respiratory problems); the susceptibility of persons over 65 years of age; and contact with persons who have traveled to places with a high number of cases.

Critical worldwide responses to manage the spread of the COVID-19 pandemic have included travel restrictions, shelter-in-place, and social distancing injunctions. Most countries around the world have enforced partial or total border closures, and travel bans have affected the majority of the world's population^[3]. With millions suddenly jobless, uncertainty about economic recovery and worldwide fear of the further spread of COVID-19 and its future waves, the hospitality sector was one of the first to be affected and will be one of the last to recover.

This study focuses on understanding the current research on the hospitality industry in the face of the COVID-19 pandemic, with the primary purpose of identifying the opportunities and threats arising from such an impact. To do so, it is important to first understand what has happened in order to arrive at the starting point of our analysis and thus be able to determine what will be the main lines of action of the hospitality industry on the road to recovery of the sector in terms of opportunities as well as to identify the main threats that will pose new brakes and impediments in achieving the goal of recovery. It is important to emphasize that many of the aspects that could be considered threats should already be identified as weaknesses, since they are already existing situations and are part of our starting point for the study. Threats resulting from the pandemic are those situations that are likely to call into question the foundations on which the main lines of recovery are based.

Like all other industries, the COVID-19 pandemic caused an unprecedented level of disruption in the global hospitality industry. The combination of local confinements and travel restrictions resulted in the temporary closure of many hotels or operations at a small fraction of their available capacity.

Before presenting the opportunities and threats arising from the impact of the pandemic, the main purpose of the study, it is necessary to present some of the data that demonstrate the complicated situation of the sector and that show and confirm both the opportunities that may arise for hotel chains as well as the data that support the main threats that hotels will face on their road to recovery.

Evidence of this major negative impact on the industry are the monthly occupancy rates in the global landscape, where year-over-year (2019-2020) drops of around 40% in occupancy rates are recorded^[4]. If during the month of April 2019 the occupancy rate in the hotel industry in Asia, Europe and America was around 70%, in April 2020 it was around 28% in Asia, 23.5% in America and even around 11.1% in Europe.

A Statista survey indicates that the global hotel industry’s revenue dropped to $198.6 billion in 2020, a 46% decrease year-over-year.^[5]

Revenues for the global hotel industry are expected to grow by 43.4% year-over-year and reach $284.7 billion in 2021, down $83 billion from 2019.^[6]

The entire sector is expected to witness a recovery with revenues rising by $86.2 billion in 2021.

Statista data indicates it will take three years for the hotel industry to recover from the effects of the pandemic. In 2022, revenues are projected to grow by 20% and reach $342.6 billion, $1.3 billion less than in 2017. In 2023, hotels around the world are forecast to generate $390 billion in revenue. By the end of 2025, this figure is expected to rise to $456.2 billion.

The number of users in the hotel industry halved amid the pandemic, falling from 1.1 billion in 2019 to 595 million in 2020. Statista predicts this figure will rise to 845.8 million in 2021, which is 218 million below 2017 levels. By 2023, the number of users is forecast to recover to 1.19 billion. These data are mainly marked by the mobility restrictions imposed by the authorities as well as by customers' fear of traveling again.

Among the data of this devastating pandemic we find that the world’s largest hotel chains lost $14 billion in revenue amid the pandemic. Wyndham Worldwide, the biggest hotel chain in the world by the number of hotels, saw revenues drop 36% amid the pandemic, falling from over $2 billion in 2019 to $1.3 billion in 2020. Choice Hotels International’s revenue was down 31% or $340.7 million for 2020. Marriott International, saw revenue fall $10.4 billion. Hilton Worldwide Holdings, had a $1.5 billion revenue loss in 2020.

Revenues for the U.S. hotel industry are forecast to rise 55% year-over-year to $65.6 billion in 2021.

In this process of recovery of the sector worldwide, many opportunities arise for hotel chains to recover or even increase their market share, thus positioning themselves above the competition. After the pandemic, many measures have been imposed as necessary and essential, mainly those related to hygiene and safety against Covid and other diseases. We have also seen how the digitization of the industry in general has been strongly driven as a first necessity and has experienced a period of acceleration in record time, as a result of which new opportunities arise to provide better services through the implementation of new technologies such as AI and Blockchain, technology that will serve to redefine supply chains among other very positive applications for the industry.