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Impact of the Covid-19 Pandemic on the Hospitality Sector: Challenges and Solutions


Task: What are the challenges faced by the hospitality sector during the Covid-19 pandemic and how can they be addressed?


1. Introduction

The recent upsurge of the Covid-19 pandemic has stalled the hospitality industry and is facilitating organisations with a prospect to take a step back and evaluate their position within their respective market and charter the course ahead. Embracing the challenges brought about by the Covid-19 pandemic will determine the future of the industry. As the influences of the Covid-19 pandemic spread across the whole world, the principal emphasis for businesses and governments is the safety of their people. While this emphasis strives to continue, the repercussions for corporate profits and financial growth have to a sharp decline in equity markets throughout the world. The influence of the pandemic is shifting continuously as the number of confirmed deaths and cases continues to ascend. As a consequence, it is impacting travel brands across every industry from hospitality to cruise to air to tour operations. The main aim of this report is to evaluate the effect of the Covid-19 pandemic on the hospitality sector, generation and evaluation of potential solutions and implementation of solutions provided.

1.1. Scope and limitations of the research

The scope of this research is not only to identify the challenges faced by the hospitality sector during the Covid-19 pandemic, along with their solutions but also to find ways to implement the identified solutions. This will help the organizations to efficiently implement the given solutions during the emergence of a crisis while providing the researchers with the opportunity to further research and enhance the ways of implementation of the identified solution. The limitation of this research report is that, since the data and information analysed and evaluated throughout the study are likely to be taken from secondary data, the information may slightly vary from the original context and may lack clarity.

2. Initial Literature Review

2.1. Identification and Analysis of Issues and Challenges

According to Wahab (2021), the unprecedented pandemic has caused a devastating impact on the hospitality industry, while facing a dramatic shift in the hotels and restaurants. The outbreak of the Covid-19 pandemic contributed towards a long-term downturn in the global hospitality and tourism sector. With the implications of lockdown enforced by the government throughout the globe forced hotels and restaurants to function only through take-out delivery. In addition to this, the emergence caused by the pandemic crisis forced the organizations such as hotels and restaurants were forced to adopt new and innovative technologies, which also posed various challenges both to the employers as well as employees operating within the hospitality sector.

The hospitality and tourism commerce was substantially impacted by health emergencies. The Covid-19 pandemic minimised total human activity by 60% to 80% in 2020, while at the same time collapsing the world economy substantially (Crespi-Cladera, Martín-Oliver and Pascual-Fuster, 2021). Hotels all across the world felt the pinch and establishments like Hilton closed approximately 150 hotels, Wyndham closed 1,000 hotels and Hyatt closed 26 hotels in China. Further, it was predicted that the worldwide airline industry would lose $30 billion due to the outbreak. As per the study, Milovanovi? (2021) has identified that the novel pandemic has brought major disruptions in the operations of the hotels, while affecting the demand and services of the hotels, along with customer behaviour. The hotel sector has been one of the most vulnerable industries to the occurrence of the Covid-19 pandemic because the hotels and restaurants are interconnected with various patterns in terms of the supply chain, and therefore the issue hospitality sector is transferred upstream the supply chain. In concern to the behaviours of hospitality consumers, during the outbreak of the pandemic, domestic travel obtained more significance as travellers and guests tend towards travelling to closer destinations, which has a significant impact on the global hospitality industry. Therefore, the new role of hotel demands while dealing with the customers' psychological and needs, concern for health and safety also became one of the most challenging aspects for the hospitality sector.

Hospitality entities facilitate some services to their consumers through the transformation of various inputs, some tangible some intangible. It is evident that these services cannot be facilitated without the relevant inputs. Most of these inputs are derived from independent external entities that have their own objectives and goals. The resource-based theory aids in defining the role of strategic capabilities and resources within the entity and its supply networks (Aigbedo, 2021). The Covid-19 pandemic performed to be a high-impact, low-probability event which instigated substantial disturbances in hospitality supply chains worldwide. The vulnerability of the supply chains consequence of their interdependence and the complexity of their rudiments; hence the issues happening in one share of the supply chain are touched all through the entire supply chain leading to a "ripple effect". Since China was the first nation to implement travel restrictions, the hospitality sector of the US was mainly damaged from the very beginning of the occurrence of the pandemic, states Gomez et al.(2021). In addition to this, the enormous financial and global economic shockwaves cannot be neglected because it was not only the fear but the lack of income as well that restricted the consumers to travel, which had a significant impact on the hospitality industry. Furthermore, the outbreak of the Covid-19 pandemic led towards a decrease in stock returns, which was further, anticipated to worsen the condition. Following the new pattern completely changed the business operations, which eventually affected the working conditions of the employees operating within the hospitality industry. The pandemic led to an overnight shutdown of the world economy. The pandemic challenged the hospitality sector with an unparalleled issue. Hospitality businesses made substantial variations to their processes in the pandemic business environment to ensure customers' and employees' safety and health and augment consumers' readiness to patronise their enterprise (Gursoy and Chi, 2020). According to Fowler (2022), after the occurrence of the pandemic, hospitality sectors experienced the burden of the onslaught due to operation disruption, while trying to navigate through an ever-changing environment. Furthermore, the loss of labour within the market was another major impact of the pandemic on the hospitality sector. It is because the workers were not available on the market, or were unwilling to work due to fear of the infectious virus. With the same fear, there was a loss of customer demand as well which was driven by the closure of patrons of fear of being out in the public place. The impact is also interrelated to the halt of various forms of travel, which had an adverse impact on the supply of customers and customer demand within the hospitality sector.

2.2. Evaluation of possible solutions

In concern to the financial crisis during the pandemic, one of the potential solutions to control the financial crisis is employee layoff. The hotel must try to operate below their normal level by layoff employees as a measure to control cist during the crisis (Hervie et al., 2022). Taking into account the mass cancellation of bookings, less number of employees is likely to manage the operations; therefore employees layoff or asking them to stay home for a few days a month can help to save costs in the hotel industry. Laying off or downsizing the employees is generally the strategically planned exclusion of the massive number of workforce or personnel in order to improve the economic outlook and effectiveness of the organizations (Mujtaba and Senathip, 2020). Therefore, a well-planned laying of the employees is likely to provide various advantages to the organizations, mainly during the crisis, such as avoiding bankruptcy, boosting profits, and re-organization, while building a new relationship. Thus, during the Covid-19 pandemic, when the hospitality sector faces severe challenges along with low profitability and low customers, employee layoff can be one of the significant solutions for the business in the hospitality sector. The two major disadvantages of this solution are that the firm can lose skilled employees while increasing the workload on the remaining employees which may affect the operation adversely. The advantages of layoff are cost saving by freeing up cash, and machining positive changes after cutting the workforce. In concern to the issue of changing the needs of the customers, the hotel industry must develop new products and markets which will attract customers towards their facilities and to met their needs satisfactorily (Kariru and Ndungu, 2022). Developing new products and markets provides a competitive advantage to the hotels, in terms of attracting customers, and winning the trust of the customers through their new products and services. The major disadvantages of this solution are that it will take time for the customers to adapt and accept the new products and market, and it requires huge finance to develop new products and markets. To mitigate the issue in the supply chain due to the pandemic, the hotel industry must focus on supply chain resilience (SCRes). SCRes is the capability of the supply chain to revitalize its standard functioning while grasping the impacts of risks, vulnerabilities, and threats (Sayed and Kamar, 2022). The advantages of SCRes are that it minimizes risks, and it allows visibility into entire operations throughout the network. The disadvantage of this solution is that it requires time and financial investment, and cascading effect if the organization is not prepared.

3. Recommendations

Changing work environment- The employed lay will eventually have an adverse impact on hospitality, though it helps to control costs during the crisis. Therefore, the hospitality industry is recommended to change their work environment, so that employee layoff can be managed positively. Therefore short-time work schemes (STW), a labour market policy can be executed which facilitates the firm to minimize working hours for the employees while providing income support and retaining competence within the firm (Rydell and Storman, 2022). The workplace environment is known as the non-monetary element which formulates a conducive atmosphere where workers can attain their work. Workplaces flexibility and managers’/superiors’ behaviour have influenced one employee's perspectives which alter associations with their enterprises that in turn impact their organisational obligation and loyalty and turnover intention. As a consequence of the pandemic-driven layoffs organisations had to shift their focus and resort to other strategies (Abdou et al., 2022). Short-time work schemes can assist business leaders to adjust workers to match the demand during short periods of low demand such as pandemics or recessions. This scheme works exceptionally well when the benefits of unemployment are generous and work towards reducing their take-up (Cahuc, 2019).

“Dynamic pricing and booking tactics” -According to the theory of crisis management, strategies must be flexible as well as shaped by the rigorousness of the crisis, therefore dynamic pricing and booking policies can be an operative way to tackle the crisis (Piga et al., 2021). Hospitality workers necessitate a massive range of capabilities and resources that nevertheless are assorted across operatives. Low/high coordination and control of capabilities and resources generally linked with the hotel's corporate forms bring different hotel performance. Therefore, structural resources would assist in a rapid rejoinder to the undesirable occasion and the safeguarding of financial losses. To mitigate the impairment of crisis at both destination and organisation levels it is crucial to recuperate from the indirect and direct influences of the catastrophic events, necessitating workers to assume emergency and urgent premeditated actions.

3.1. Implementation of Solutions

Layoffs necessary or not can be jarring, unpleasant and wholly upsetting for the employees as well as for the bearer of the bad news. Therefore, it is crucial to handle layoffs with compassion and offer outgoing employees support and transparency which can make a substantial difference between a fresh start and a disaster. Further, it is recommended for the entity to engage outplacement expertise to handle the situation professionally since it is crucial in the contemporary world. Layoffs that are not handled efficiently can lead to disengaged highly productive workers, a bad reputation on social media, difficulty in attracting sound talent, legal implications and sometimes damage to physical property. Therefore undertaking a holistic approach that is not just confined to discussions or placements but also overall mentoring of an individual even after the layoff is pivotal (Varelas, 2021).

In order to develop new products and market it is crucial to research the idea, build and test the prototype, fulfil a marketing plan and strategy and keep reviewing to understand consumer feedback and alter accordingly. Innovation is one of the chief prerequisites for the hospitality industry to develop at a speedy pace. While most service facilitators and hospitality-associated facilities are undertaking their best performance to deal with the rapid changes, technological advancements have been crucial in ensuring industry growth. Some of the chief innovations in the industry are driven by blockchain, artificial intelligence, virtual and augmented reality and mobile technology. The industry can also integrate components of Industry 5.0 which encompasses the internet of service (IoS), human cyber-physical system (HCPS) and internet of things (IoT) to attain efficiency at different levels. The integration of these technologies assists in improved service safety and quality thereby reducing health risks brought about by the pandemic through contactless services and contactless human-to-human interaction (Pillai et al., 2021).

Simulating and planning for extreme demand and supply disruptions is the first step in building a resilient supply chain (Zhu and Wu, 2022). Further, it is also crucial to re-evaluate timely inventory strategies and enable digital trade to practice regulatory flexibility and sound procurement management. The hospitality industry usually undertakes a defensive strategy that encompasses inventory management. The primary assumption of this strategy is to safeguard such inventory can maintain sales and production without unjustified interruptions. Organisations that integrate this kind of management tend to have high financial liquidity, working capital and inventory levels but low profitability. The aggressive strategy on the other hand necessitates and maintains disciplined suppliers and most entities exercised this strategy during this period (Zimon et al., 2021). The best type of strategy for the industry will be an intermediary between the defensive and aggressive strategy that can facilitate an adequate level of management. It is also crucial for the industry to unleash the power of digital disruption by adopting flexible productivity and virtual collaboration processes and tools which allow it a high level of efficiency and speed compared to organisations that have resisted remote collaboration and working (Bhattacharya, 2022). Further, extensive use of smart devices, social media and sharing economy has accelerated organisations in the hospitality industry to revisit their organisational models.

4. Conclusion

Success in the hospitality sector is reliant on factors such as flexibility, emerging opportunities in workplace transformation and digital disruptions. To keep up with the growing needs of the customers and amplify brand offerings it is crucial for organisations to digitally transform their entity and undertake a significant shift in their capital investment in technologically advanced features. After the overall analysis, it can be said that the occurrence of the Covid-19 pandemic has posed various issues and encounters to the hospitality industry across the globe. The major issues faced by the said industry are mainly related to finance, supply chain, and changing needs of the customers. However, following the given solutions and recommendations, the hotel industry can mitigate the identified issues and operate efficiently during the crisis.


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