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Global hospitality groups are suffering from the pandemic

The year 2020 is not over yet and global hospitality groups have reported their earnings with their shareholders and it doesn’t look good at all

The Accor Group has posted 1.5 billion Euros net loss for H1 2020

During the first 6 months of 2020, Accor posted a loss of 1.5 billion Euros net income and had to take some measures to reduce its staff by 1,000 people according to Reuters.

Source : Accor Group

The bad news unfortunately is not happening solely to Accor, we can see that other hotel groups such as Hilton, IHG and many others are facing significant drops in revenue, profit and occupancy rate.

Source: Accor Group

As global occupancy rate has dropped to 14.7% during Q2 2020 and revenue has been cut by half year over year from 1,926 millions of Euros in the first half of 2019 down to 917 millions of Euros. What shall we expect for the next couple quarters remaining since tourism is not going to pick up anytime soon?

Source: Accor Group RevPAR breakdown by geographic and segment for Q2 2020

On Bloomberg, the CEO of Accor, Sebastien Bazin, has shared his thoughts on the new way hotels can find revenue like turning the rooms into offices and charging a subscription instead and believes that the worst is behind us.

What does it mean for small and medium hotels?

We could see that since the lockdown was lifted off, a strong focus on domestic tourism was key for survival with a more attractive pricing in order to maintain a RevPAR high enough to finance monthly expenses.

However, it seems that a leaner cost structure was also necessary in order to ensure survival. It is time for hotels to renew themselves and figure out what else they can do to attract revenue if they want to be able to go through the rest of the year 2020 and onward.

Sadly for many hotels, they’ll simply have to shut down. The cash to meet all the financial obligations will be simply too high and there’s just not enough hotels with the amount of cash on hand to deal longer the new normal.

The big uncertainty is time

No one else is able to predict really how the situation will last. It would be good to assume that this will be going maybe forever in the worse case. From that assumption, we can derive what would be the right course of action in order to move forward.

That will lead to create a new value proposition and drive a new demand, it will definitely require to think outside the box and see what could be done like we could see in the airlines industry offering some flights to… nowhere

To our surprise, these flights were sold out within… 10 minutes like Qantas offering a flight from Sydney to Sydney.

What do you think the hotel industry should do?

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Anything. Anytime. Anywhere.

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