Russell Kett is chairman of HVS London. Established in 1980, HVS is a specialist consulting and services organisation focused on the hotel, mixed-use, shared ownership, gaming, and leisure industries.
While the hotel sector, both in the UK and across Europe, has experienced severe downturns before, nothing could have prepared even the world’s biggest hotel operators for the devastating impact of the Covid-19 pandemic.
Hotels and the wider hospitality sector – including pubs, bars, restaurants and nightclubs – have suffered hugely and while a slow recovery is now getting underway, whether we will ever get back to what we consider 'normal' trading is less clear.
By definition, the hospitality sector relies on people having social contact with others. As the Covid numbers start to climb once again and new variants enter the fray, many industry observers, myself included, are wondering whether we will ever return to pre-pandemic life as we knew it.
According to figures released by industry body UK Hospitality, the country’s hospitality sector took a massive £110 billion drop in sales in the 15 months that followed the outbreak of the pandemic. During this time the sector saw the permanent closure of nearly 10,000 licensed premises, according to industry figures.
While hotels, bars and restaurants had periods of trading in between the lockdowns, most of the UK’s hotels remained shut apart from some operators – primarily those running serviced apartments, which remained open for NHS workers, essential workers and the homeless. But these were few and far between. Most hotels stayed closed, with staff furloughed or made redundant, kitchen and storeroom supplies run down, and rooms mothballed.
Hotels are generally large operations, requiring a significant number of staff to operate, and with huge overheads in the form of business rates, heating and lighting, as well as loans to service, franchise bills to pay and staffing levels to maintain.
Because of this a swift return to operation was impossible. Staff needed recruiting and training, supplies ordered, rooms brought back into operation and new Covid-safe hygiene protocols implemented and communicated to both staff and guests.
However, a few hot months this summer and the easing of restrictions in the UK, coupled with the ongoing difficulty of foreign travel, became a godsend for many hotels as Brits clambered to book staycations in the UK. Some hotels were booked up for months ahead and suddenly it seemed like boomtime again. However, for many hoteliers, what looked like recovery was in reality far from it. New issues were fast emerging that gave operators as big a headache as Covid itself.
With many foreign workers having returned home, hotels were hard pressed to find staff. Data from the Office for National Statistics puts the staff shortage in the hospitality sector at around 10 per cent of capacity, amounting to some 210,000 jobs that need filling.
This was largely due to the fact that staff who were furloughed had found work elsewhere, often at better rates of pay and with more sociable hours. Moreover, more than 90,000 European workers had left the industry due to changes in visa requirements since Brexit. In London, for example, around 75 per cent of hospitality workers are thought to be from the EU. In addition, there was concern among some former hotel workers about customer-facing roles that may expose them to the risk of Covid.
The resulting staff shortages meant that many hotels have had to reduce their trading hours or days. Some no longer offer lunch or afternoon tea, while many are operating with a percentage of rooms kept shut and others have reduced service levels or closed gyms or health clubs. Finding staff to service large functions and events has proved particularly challenging, putting additional pressure on already hard-pressed teams.
While the risk of Covid may ease, these additional factors are not going away. Debt burdens, a staffing crisis, supply issues, food inflation and fragile consumer confidence, coupled with the withdrawal of government aid, and it's something of a miracle that we haven’t seen more closures or administrations in the sector.
We hope these issues will pass, but even less certain is the shape of consumer demand in the longer term, particularly when it comes to business travel. Not only has corporate and MICE business ground to a near halt, the long-term impact of its replacement – virtual meetings and improved communications via technology – is currently unknown.
So when as a procurement manager or travel buyer you next get round the boardroom table with your accommodation providers, be mindful of the multiple challenges they face right now – and don't expect too many 'bargains'.