Covid-19: A wake-up call for the hotel industry

‘The pandemic has given all of us a window of opportunity to step up the game together as an industry’

by LYDIA NATHAN

ONE of the biggest-hit sectors across the globe was the hotel industry as Covid-19 cases grew daily, forcing governments to impose lockdowns and travel restrictions, bringing the state of tourism to a complete standstill in almost every nation.

Malaysia, predominantly known for its tourism, was not spared, as the country has lost billions in revenue.

The Ministry of Tourism, Arts and Culture (Motac) said an estimated loss of RM100 billion will be incurred this year, while the hotel sector’s loss is estimated to be about RM6.5 billion with room occupancy averaging below 30%.

The Malaysian Association of Hotel Owners (MAHO) ED Shaharuddin M Saaid said hotels have certainly suffered a great deal with a recovery in the tourism segment only expected in 2023 or by the end of 2022 at the earliest.

“Cases are still high globally, and the Movement Control Order (MCO), including the international border crossing ban, is still being enforced.

“No doubt the easing of the MCO will greatly help domestic tourism and the hotel sector, but this will not be good enough since revenue from international tourists contribute a substantial amount to receipts,” he told The Malaysian Reserve (TMR) in an interview.

Shaharuddin said the hotel share of the domestic tourism receipts is only about 8%, while overall it is 24.7% of total tourism receipt with international tourists.

He added that hotels, especially resorts, enjoyed a kickstart in business when the Recovery MCO was implemented, but face uncertain times now that some parts of the country are under the Conditional MCO.

“It is pertinent to mention that quite a number of hotels have closed for good since the MCO was implemented, while many closed their operation for unspecified periods, even up to December 2020.

“Motac Minister Datuk Seri Nancy Shukri recently mentioned at Parliament that a total of 204 hotels and tourism companies have shut their doors, including 107 hotels, resorts, motels, homestays and chalets,” Shaharuddin said.

Hotels, he said, have been impacted the most in the way operations run, as well as the downsizing of employees.

MAHO’s Shaharuddin says hotels are suffering with a recovery in the tourism sector only expected in 2023 or by the end of 2022 at the earliest

“To survive, hotels have had to diversify their business. For instance, the food and beverage outlets have strict regulations, including limiting the number of people seated at a table and being served by restaurant staff only.

“Information technology is being used for communication instead of face-to-face communication to minimise contact. What is worrying is that the real concept and ideology of hospitality, where human relationships and factors are involved, would slowly cease to be practiced and eventually become less important and diminish over time.”

Shaharuddin said keeping the cost of operations low and at appropriate levels will help sustain businesses, but not withstanding limitations.

“Hotel operators certainly need to do other business activities related to hospitality in an effort to minimise losses and generate alternative revenue to secure the expected return of investment and payback period.

“For food and beverage outlets, providing takeaway services will help. Now that travel restrictions are more relaxed, hotels should offer special packages and highlight what is being done to ensure hygiene, cleanliness and safety for guests’ health.

“Hotels can also work with event managers to promote the trend of virtual meetings, as well as ‘work from hotel’ packages which will encourage people to have a change of scenery.”

Shaharuddin added that hotel associations will continue to extend and give necessary assistance to hotels, while working with the government.

“The government must look at and consider other costs which hotels have to bear monthly and periodically when they have very poor or no business and revenue due to the pandemic.

“We have asked for discounts for electricity, other bills and deferment,” he noted.

The Malaysian Association of Hotels CEO Yap Lip Seng said 2021 is expected to be highly dependent on domestic tourism, which will also be the lifeline of the industry.

According to Yap, it will boil down to the survival of the fittest throughout next year, while the nation looks forward to welcoming international tourists in the third quarter of next year (3Q21).

“We are anticipating a slow 1Q21 to a moderate 2Q21 and a transition 3Q21, hoping for the return of international arrivals.

“2021 will see fierce competition among Asean countries, so Malaysia needs to step up its game now,” he told TMR.

Yap said there are two main ways to manage the situation — through revenue and cost.

“With little means of generating additional revenues now, hotels are turning into heavy cost-management measures, including manpower.

“We have seen hotels cutting down on headcount just to stay afloat, hence the need for government intervention to help the industry with overheads such as utilities, licence fees and compliance costs, as well as other operating expense.”

Yap added that the pandemic has forced guests and staff apart.

“Many other interaction points have changed, from the buffet line in a restaurant to the handling of guest luggage, hotels now need to add on additional steps and standard operating procedures not only to protect guests but also its employees.

“Hotels are presenting themselves now as more than just (having) style and standards, but also for added assurance,” he said.

Next year, some of the main challenges will include establishing international travel bubbles and its workings.

“We need an immediate forward blueprint on reopening borders commencing with selected bubbles and its corresponding set of requirements such as special insurances, healthcare deposits as well as movement tracking guidelines. Managing this will be the key to recovery,” Yap said.

He added that managing and maximising yield through room rates is an opportunity, despite everything heavily discounted already.

“Malaysia’s hotel rooms had always been dubbed the cheapest in the world and the pandemic has created a window for the industry to review and relook its pricing strategy.

“Malaysia’s hotel industry got an abrupt wake-up call through the pandemic and along with it an opportunity for both the public and private sectors of the industry to reunite and strategise on a higher level for the greater good of the industry.

“The pandemic has given all of us a window of opportunity to step up the game together as an industry. We needed to realise that we need each other, and more so at times like this,” Yap concluded.