COVID-19’s Effect on the Hotel Industry

Rob Hays

March 2, 2023

COVID-19's Effect on the Hotel Industry

COVID-19 is one of the most disruptive pandemics ever to hit the global tourism industry. As a result, hotels worldwide have seen a significant drop in occupancy rates and RevPAR.

This article discusses how the COVID-19 pandemic has affected the hotel industry and what steps they can take to recover from it. It also provides insight into how hospitality firms can adapt their business and asset management strategies to mitigate their risks better.

Low occupancy rates

After the coronavirus pandemic, hotel occupancy rates have been lower than usual. As a result, many hotel owners need help to make ends meet.

One challenge for hotels is overcoming guests’ fears and demonstrating to them that their properties are safe. Research shows no single safety measure can satisfy customers who are concerned about the risk of contracting the virus.

Despite the low occupancy rates caused by COVID-19, hotel industry experts predict that hotels will begin to recover this year and return to pre-pandemic levels in 2022. However, a full recovery could take years.

Low revenue per available room (RevPAR)

The COVID-19 pandemic caused considerable declines in hotel revenue per available room (RevPAR) and average daily rate (ADR). According to data from STR, occupancy rates dropped as much as 30% in some markets.

RevPAR is an important metric for the hotel industry, showing how much revenue a hotel earns per available room. However, measuring a hotel’s profitability using this metric alone can be challenging.

A better way to evaluate a hotel’s performance is through total revenue per available room (RevPAR). This metric accounts for a hotel’s income, including fees, amenities, and services.

As with other metrics, RevPAR can be impacted by many factors, such as changes in occupancy rates and day-of-week demand. To increase RevPAR, a hotel should consider raising occupancy and room rates.

Low guest satisfaction

Hospitality properties struggle to reopen after COVID-19, and many remain at or below 50 percent occupancy. The industry needs more revenue and employees.

To survive, hotels are responding to the crisis with various strategies. These include implementing health protocols, compensating guests, and maintaining quality service.

However, a new study shows hotel guest satisfaction has declined in response to COVID-19. These declines occurred in both business and leisure segments.

Low employee morale

Hospitality is one of the industries most impacted by COVID-19, putting millions of jobs at risk. This can lead to a drop in employee morale, which is particularly difficult for hoteliers.

The study found that hospitality workers have been affected by COVID-19 in several ways, including low job satisfaction and a lack of trust in their employers. This can result in a loss of loyalty to the hotel and affect the business’s bottom line.

As a result of the negative impact of COVID-19, many hotels have had to cut back on employees’ hours or furlough them. This can cause a drop in morale, especially for employees who have been laid off. Furthermore, it can also lead to a reduction in staff turnover.

Low tourism demand

The low tourism demand caused by COVID-19 has affected the hotel industry in several ways. Many hotels have been forced to close temporarily or operate at a fraction of their capacity, causing severe economic damage.

The tourism sector is a significant contributor to global GDP and employment levels. According to the International Monetary Fund, a six-month disruption to travel and hospitality activities could cut gross domestic product by 2.5 percent to 3.5 percent across G20 economies.

In countries that rely heavily on international tourism, such as Barbados and Seychelles, the effects of COVID-19 have been especially devastating. These nations reportedly saw an almost 90 percent drop in arrivals during the pandemic.