The global outbreak of Covid-19 and the various travel bans, temporary border closures and advice to restrict the size of gatherings imposed by governments around the world to combat the spread of the virus are currently taking a toll on the tourism industry.
The impact on hotels has been far-reaching, with almost every country experiencing unprecedented cancellations of bookings and events amidst the pandemic, leading to significant drops in occupancy rates and performance declines.
Italy has been the worst affected market outside of China, with the current lockdown imposed by the government leading to a 93% plummet in occupancy rates. Similarly, the French and Spanish markets have been severely impacted by the government-ordered lockdowns currently in place and hotels throughout Spain were ordered to close on Thursday 19th March.
Luckily, in the UK, hotels are not among the list of businesses that have been ordered to close, but we know many are suffering some of the most severe declines in occupancy ever recorded and many independent owners and operators in particular are wondering where to turn for support.
As a hotelier what do I need to do now?
Below we provide some guidance on the key conversations you should be having as a hotel owner or operator as well as some suggestions on where you can find more information and advice on these key areas.
Keep your employees up to date
In the hospitality business, we all know that people are number one and taking care of them is part of day to day life. Maintaining regular communication with your staff will help them understand the situation and any decisions you need to make will be better received if they have been involved in the conversation and kept up to date on what is happening.
The job retention scheme announced on Friday 20 March will see the government stepping in to pay wages on behalf of private companies via a grant system. This will cover up to 80% of salaries up to £2,500 per month for an initial period of three months, applicable retroactively from 1 March.
These measures will be available to all businesses, large and small, and will allow employers to continue to keep employees who are on the PAYE system on the books as salaried employees, even if they are currently furloughed or would otherwise be laid off. HMRC is understood to be in the process of setting up a separate online portal for this.
In addition to the 12-month business rates holiday which has been announced for all hospitality businesses, under the latest Cash for Tax system, VAT will now be deferred for the quarter (20 March to 30 June), making no VAT payable until the end of June. This scheme will be automatic with no application required. Taxpayers will be given until the end of the 2020 to 2021 tax year to pay any liabilities that have accumulated during the deferral period.
Get in touch with your bank
We understand that many banks have been advised to help their clients through these difficult times. Some are redirecting resource away from new business into the client relationship teams in order to focus on assisting existing customers. You likely already have an overdraft facility, but it’s a good idea to find out what the bank is able to offer during these times and to discuss whether any modification to the current terms is available.
Although the exact details are yet to be clarified, the Coronavirus Business Interruption Loan Scheme (“CBILs”) will be made available via many banks from Monday 23rd March. Information regarding eligibility and conditions are currently limited, but the terms should be more favourable than traditional loans. The chancellor announced on Friday 20 March that the first 12 months of interest on loans of up to £5m will be covered by the government.
We understand these loans will still be subject to an application process and businesses are likely to have to demonstrate the viability of the ongoing business in a similar way to other bank loans, but the presence of a government-backed guarantee means banks may be able to give credit where it would otherwise not have been possible.
A list of accredited banks can be found here: https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-scheme-cbils/accredited-lenders/
Speak to your landlord
Get in touch as soon as you can to let them know you are impacted and to open the dialogue regarding rent reductions or deferral of payment.
The hospitality sector trade bodies have called for corrective action from the government, however without the support of landlords and other key stakeholders, there is the very real prospect of businesses in this sector ceasing trading permanently. Operators now stress the need for a two-quarter moratorium on legal action by landlords to take possession of commercial premises, which would provide six months of breathing space for business until the 29 September quarter date.
The BPF said in its statement on Friday that, “businesses will have immediate relief measures available to them – flexibility around rents and other lease terms could include moving from quarterly to monthly rent payments and providing rent deferrals or payment holidays, depending on individual business’ financial circumstances.”
Get in touch with your hotel chain representative (if applicable)
If you are part of a chain under a franchise arrangement, get in touch with your key account or owner relationship manager to discuss the situation, in order to negotiate payment terms for these fees. Whilst certain fees may be based on turnover, they are often subject to a minimum or on a per room basis, but you may be able negotiate holidays or deferral. It is in the interest of the chain too that your business is able to thrive in the long run, so they should be able to support you.
Consider alternative users
It remains to be seen how much demand falls from traditional hotel guests and this will depend upon any further travel restrictions imposed by the government. Whilst other business such as pubs and cafes have been ordered to close, hotels have so far not been ordered to do the same. However, given this has happened in countries such as Spain, it is not beyond the realm of imagination.
Where possible, seek to understand if there are any potential alternative users that may be in need of your hotel rooms. Within the UK, The Guardian has reported that major hotel chains including Best Western, Holiday Inn, Travelodge and Premier Inn are currently in discussions with the government to turn their properties into temporary hospitals to provide the NHS with emergency bed space or staff accommodation.
We are also in discussion with local authorities to identify where hotels may be able to provide additional bed space for non-Covid-19 patients, in order to free up bed spaces in hospitals for the expected influx of Covid-19 patients requiring more intensive treatment.
The government has said there will be a major national advertising campaign next week which will detail all the measures available to businesses and individuals and how to access them, so watch out for that.
For now, all the measures that have been announced so far are here: https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses
Contributed by Christie and Co