As the crisis caused by COVID-19 is hitting tourism and hospitality businesses particularly hard, owners and operators are doing their best to plan for the uncertainty ahead. While some hotels are mandated to be closed, some are still holding on to operating with single-digit-occupancies.
In this current situation, owners and operators have a number of strategically crucial tasks ahead of them, in order to best assess their situation and to protect their cashflows and asset value. As professional hotel asset managers, we are aware of the complexities of such an assessment and are ready to support hotel owners with a crisis management plan, which covers two main areas.
Settling in for the downtime. As hotels are either mandated by governments or forced by the economic realities to close, cashflow has to be brought under control and a due diligence has to be carried out on the available options going forward. HAM’s approach is to work with management, legal and tax advisors and map all the possibilities, while keeping the owners’ interest as top priority. When preparing for a downtime, we focus on the following:
assessing the feasibility of closing or keeping open
creating multi-scenario cashflow forecasts, depending on when a reopening could take place
managing payment terms with suppliers to enhance liquidity and salvage working relationships
communication with guests and OTAs, negotiating cancellations
reporting to lenders and investors, keeping them up to date
following changes to payroll and labour-related legislation
assessing the terms and attractiveness of government relief packages
Preparing for the reopening. While it is difficult to make predictions on how long the Corona Crisis and government-mandated restrictions will last, hotel owners and operators must prepare for the eventual reopening. Currently there are a number of plausible scenarios for the economic recovery after the crisis, however, from a tourism and hospitality perspective it is highly likely that guest needs and travel patterns will change. There are therefore both economic and qualitative aspects which will have to be taken into account before the re-opening. As hospitality advisors with extensive experience in hotel pre-openings, we are aware of the cost and effort required to coordinate such an effort. Re-opening hotels after the crisis will likely be very similar to that of the opening of a new hotel, both in terms of investment and coordination required. Re-opening costs for hotels will likely be as high if not higher than keeping hotels closed during the crisis. It is exactly for this reason that owners and hoteliers must have a strategic plan backed by forecasts ready for deployment. HAM can assist hotel owners develop such pre-opening plans and make sure that the budget is as streamlined as possible, money is being spent where it makes the most impact. Critical areas include re-employment of employees, sales and marketing costs and adapting to future traveller needs. Among other, we focus on the following points:
creating a pre-opening action plan, team and a pre-opening budget
managing employee retention and re-employment
adapting business model for a post-COVID-era tourism
adapting to low contact operations
upgrading housekeeping standards and procedures
The current situation also serves as an opportunity for hotel owners who keep the long game in mind. Renovation, operator change, changing of the concept are all activities which might best be undertaken now. With strategic planning and expert advice, owners can make the best of a bad situation and the current crisis to upgrade their investments.
HAM is a non-corporate, independent hospitality, tourism and real estate advisory company. We provide services throughout the hotel, tourism and real estate product life cycle starting from planning and development, through management to the final project sale.
We are a flexible boutique agency. When it comes to our core values, we focus on quality, flexibility, creativity and securing the highest return for our clients. Active in the industry since 2002 we focus on the CEE, SEE, CIS and Baltic countries as well as Africa and beyond.
We are at your disposal for any inquiries and are happy to prepare a crisis management plan tailored to your needs. Get in touch with us and let us know about your situation.