Economic Impact of Covid-19 on the Hotel Sector in Nigeria
The global economy is still coming to reality with COVID-19 since its outbreak in November 2019. It is highly misleading to say that the pandemic has not changed the world as we knew it. Globalization is gradually going into extinction with partial or complete shutdown. Similarly, the overall impact on economic growth of businesses and above all, human life, is unquantifiable, both in the short term, medium term and long term, occasioned by evolvement of uncertainty of things.
Economists and Finance Analysts currently expect the global economy to rebound by some measure in the latter part of 2020. The exact timeline cannot be determined till the virus is contained across the globe as postulated by hospitality net.
According to Ishmael Mensah, an Associate Professor at the Department of Hospitality and Tourism Management, University of Cape Coast, due to increased globalization, the ripple effect of the COVID-19 pandemic has reverberated through every corner of the globe, causing loss of lives and jobs as well as slump in general economic activities. The effect of the virus has brought untold pain and hardships to many individuals and organizations from all corners of the world. Bloomberg has projected that this pandemic could cost the world $2.7 trillion, equivalent to the UK economy. However, the impact has not been even across all industries. For instance, Information Communications Technology (ICT) and its related industries have not felt the pinch as much as other industries.
COVID-19 Impact on Hotels
Unarguably, hotel business is one of the worst hit industries by COVID-19. As a result of the following:
-Massive cancellations of flights, hotel reservations, tours and other scheduled events,
-Decline in inbound travel,
-Drop-in hotel occupancy rates and average room rates leading to unprecedented declines in profit margins,
-Significant layoffs, furloughs, and hotel closures,
-Decline in sales in other departments such as bars, restaurants, and laundry,
-Unchanged cost of operations if not higher costs as all recurrent expenses are been incurred despite the low revenue being generated,
-Acquisition of high sanitation and safety measures such as PPEs, mounting of facilities used in carrying out these measures.
In Nigeria, 90% and 80% of all hotel bookings in Lagos and Abuja respectively have been cancelled, hotel occupancy rates are down from 70% to fewer than 30%, with some hotels recording as low as 5%. Though hotels are experiencing substantial revenue losses, utilities, wages and salaries as well as other recurrent expenditure and statutory payments have to be made causing expenditure to surpass sales. The problem is compounded by lockdowns, travel restrictions, border closures and other social distance protocols announced by the Federal Governments in an attempt to ‘flatten the curve.’ The hotel industry is headed for an unprecedented slump from COVID-19 which has left the industry badly bruised if the lockdowns and travel restrictions are not lifted.
Possible Survival Strategies Hotels can explore against COVID-19
Even after a vaccine may have been discovered, the fear of travelling and enforcement of social distance protocols will not go away soon after the pandemic subsides. However, to cope with the impact, Hoteliers must adopt survival strategies against COVID-19. This according to Deloitte calls for repackaging the hotel service to make it more attractive in this COVID-19 era in the following ways:
-Closing some guest room floors and stopping the use of underutilized equipment such as washing machines.
-Opening discussion with food and other items suppliers on discounts of supplies.
-Talking to suppliers, funders, project developers and contractors to manage expectations and maintain confidence.
-Putting pre Covid-19 business processes and operations under active review to understand the dynamic and fast-moving environment due to changes outside of normal operating and business processes.
-Focusing on Human Resource (HR), talent and communications on training staff to multi-task due to reduced workloads in all departments, providing clarity for people and maintaining morale in this difficult time.
-Re-evaluate your business and formulate new business models and try to develop new products to become more flexible in looking for new opportunities.
-Implementation of technology to remain relevant as technology always gives businesses an edge to strive.
By and large, the pandemic will linger for some time. However as earlier stated the fear of travelling and enforcement of social distance protocols will not go away soon after the pandemic subsides. Nothing could have ever prepared us for the COVID-19-shock and although, the current crisis is unlike any other we have ever faced, not all is lost. The Nigerian hospitality sector can recover from this crisis as well, by adjusting strategies in the near term and preparing for the not too distant future.
