Predictions of the post-Covid hotel sector

Despite the terrible situation facing our sector today, I am absolutely confident that the hospitality industry will make a full recovery as it has in every recession and economic crisis previously. This is because fundamentally we are privileged to be able to offer our customers a great product that they have and always will want to experience. Humans are inherently social animals; they love the hospitality and luxury of hotel stays and this will never change. This recovery of the hospitality industry will also cascade the recovery of other important sectors within the UK.

In my opinion, what we’re now going to see from the Spring onwards is the beginning of a long period of recovery from a very low base, probably the lowest in any recessionary crisis we’ve seen in modern times. We’ll see a gradual increase in guests returning to hotels as consumer confidence grows in line with the vaccination programme and the government easing restrictions and 2019 peak performance is likely to only be met again in 3-4 years depending on the market. This rate of recovery in the hotel leisure, corporate and meetings sectors will differ in line with the customer base.

The leisure business depends on consumer confidence; people are desperate to go away again, especially after such a long period of confinement, but there is a concern about the safety aspect and it may take time for this to build. Within this market there will also be holidaymakers who normally go abroad, but due to cost saving or indeed apprehension of overseas travel, will decide to staycation in the UK.

The corporate business may take some time to recover; many businesses have been seriously challenged throughout the pandemic and will be implementing cost-saving measures as we enter and navigate through the recession. However, I am not one who believes this sector is permanently damaged or will be replaced with Zoom calls. Business is a face-to-face discipline and I have no doubt that the market will fully recover as it always has done before.

The meetings business will most likely be the sector that takes the longest to recover. Summer weddings and events from 2020 are being rescheduled for this Summer but are likely to be smaller or postponed further. The big conferences and events are likely to take much longer to recover and we may not see signs of recovery until 2022-23.

However, I do believe there is optimism beyond this point. People are desperate to be released and return to socialising. When lockdown restrictions were eased in August 2020 and people were allowed to travel and socialise once more, the public flocked to bars, pubs and restaurants; they stayed in hotels, played golf and wholeheartedly embraced the return to the “new normal.”

Many hospitality businesses made money again and there was hope and optimism.

The staycation market will be strong in the short term and inbound tourism will recover in the medium term. We will start seeing positive signs of recovery in the former in May-June when the newly vaccinated older population in particular become confident enough to start travelling again. I do believe that the leisure market will be stronger than a normal recession and make a faster recovery.The market forecast for summer occupancy is currently 45% but there will be positive news by the time vaccine has taken effect from April- July and this will present a strong opportunity.

The corporate market will start to see signs of recovery from the Autumn. Travel restrictions are likely to stay in place to some degree, but may be less restrained and business travel will commence again.

The meetings business will be the most challenging market to recover and many hotels, particularly in London, rely on this business. As offices start to downsize and businesses continue to encourage flexible working from home, the importance of meetings and events will be all the greater. Bringing teams together to collaborate and socialise will be more important than ever, but this will be a slow burn as it works its way up the agenda.

The long-term outlook for the industry

Moving forward, customers will still have the same demands they always had. The right product, ease of booking, location and service levels will still have a huge importance and hotels will need to deliver. All of the perks built by hotels over the year such as rewards and special offers will continue and be used as tools to rebuild the industry.

The country has been in recession since March 2020 but we haven’t yet witnessed the effects as we normally would due to the government schemes such as furlough. It is an unreal market where supply and demand functions are not operating in the way we would normally expect. Consequently, we haven’t seen the natural behaviour from a recessionary period as we normally would. As I said earlier, from April/ May onwards, the base will be well below 2019 levels and will still take around 3-4 years to reach these levels once more. Inflation, food cost, new taxes and general operational costs will mean profit levels may take longer to rebound than revenue lines, but they will get there.

Guests will not be able to use hotels as they have been accustomed in the short-term. Breakfast buffets, room service, health club and spa facilities will all be operating differently but hotels will go the extra mile to accommodate guests and deliver a memorable experience. Normal, pre-Covid service will return when they can and hotels will embrace this.

With the majority of hotel companies this time round going into the crisis with a strong financial position, they will survive and recover and be able to develop and offer experiences better than ever before.
The hotel industry is renowned for invention, innovation and creativity in delivering exceptional service and experience for customers. The industry is resilient, robust and flexible, the core ingredients to ensure it survives and thrives once again.

By Hugh Taylor OBE, chief executive at Michels & Taylor