Managing the impact of COVID-19

I have read just about everything that has been written about the COVID-19 pandemic and have some thoughts. One, this is not 9/11, nor is it a typical recession in any way. However, many of the tools we need are similar. The difference is in the quick drop from a strong economy to virtually no hotel demand. Previous recessions or events dropped demand by 30% to 40%. This drop is precipitous with up to an 85% drop in demand. The similarity is that all will be good again; it will just take some time to come up from this bottom.

Since negative news sells, we are blasted with more bad news than good news. Clearly, some of the bad news is caused by the lack of readiness of our healthcare sector. This is not something any hospital alone could have tackled, but it is something for us to consider going forward as a nation. COVID-19 is highly contagious, and this has put fear into our political—as well as healthcare—leaders. I believe that over 99% of people will recover if they are infected and that most deaths will be in those over 80 or with underlying medical conditions. Those are the people we must protect.

To gain traction in the hotel market, we need to get to a point of optimism that we have slowed the spread of the virus using social distancing. The impact of the “shelter in place” orders has crushed hotel demand. When STR finishes examining the autopsy that is COVID-19 market conditions, it will be reported as the worst drop in demand in the history of the hotel industry by a wide margin. This drop also will likely be followed by low consumer confidence, less disposable income and continued health concerns. Ergo, we will have to recover from the true bottom, and that bottom seems to be right about now. Is there a silver lining? Yes. An unparalleled stimulus to an economy that was strong through the end of February 2020 is coming.

So, how do we survive this low? We must preserve cash, treat our employees and guests with the utmost respect and manage harder than we have ever managed before. We need to look inward and reduce costs, risks and exposure. We need to look outward for relief from lenders in the form of forbearance, help from franchisors to extend invoices, breaks from vendors in terms of both pricing and terms, relief from tax authorities and more. It is time-consuming but well worth trying every possible angle, including SBA loans and local bank lines of credit.

Additionally, we need to find new sources of demand from the healthcare sector, universities, displaced office workers who have no office in their home and self-quarantined potential guests. Remember, the hotel industry is a noble profession and is one of the critical infrastructure industries as listed by the state of California and many other states. We help companies and people with important components: shelter, food, safety and comfort. We will find that our facilities will play a critical role in getting this great nation back on its feet.

The bottom line is that there are no days off during a crisis. Tweak your projections regularly from 10% to 15% to 20% and, eventually, we will be back to breaking even where we can begin to rehire all of those furloughed employees. Remember to be thoughtful about how we are communicating with guests. Everyone is going through the same challenges right now, and customers will be quick to judge how we react.

On a personal note, the single most difficult conversation is letting an employee go, whether it be through a furlough or layoff.

Hang in there, and if there is a need for help, reach out to an expert to navigate the waters of cost reduction, demand opportunities and government assistance.

Do not panic—this is not the end of the world but rather an opportunity to achieve success over this unprecedented event.

Stay safe and healthy. To the recovery!