The Economic Impact of COVID-19 on the Hotel Industry

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The Economic Impact of COVID-19 on the Hotel Industry

By Del Ross, Chief Revenue Officer of Hotel Effectiveness - 04/13/2020

COVID-19 has impacted nearly every industry and everyone living and working across the globe. It’s no secret the hospitality industry is among those who have been hit the hardest with a real economic impact. Hotels employ approximately 4% of the total U.S. workforce, nearly 8.3 million people, according to AHLA. And with so many of these employees currently being out of work or losing hours due to limited travel as a result of Covid-19, the economic impact is just as huge and people are really feeling the effects quickly. 

This article will discuss COVID-19’s impact, how the hotel industry can make the most of their time now and how they can prepare for the future.

The impact

At Hotel Effectiveness we look at data daily. Of the 8.3 million Americans employed by the hotel industry, 85% are paid hourly. Knowing that the majority of employees are paid hourly, we have seen a drastic 71% drop in hours worked over the last two weeks. So what’s the potential economic impact of a drop like this? Considering most hourly employees receive an average hourly wage rate of $13, and assuming a typical 36-hour week, this would mean hourly hotel employees in the United States have lost about $2.3 billion of income per week. But we also know that in many markets, hotels had been struggling to find enough staff which meant the staff they did have were receiving a lot of overtime hours. All of that extra pay is also lost, so the real weekly impact is even bigger. Meanwhile, the volume of employee terminations over the same period has increased by nearly 470%, mostly the result of layoffs, furloughs and hotel closures.

 

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How to maximize time now

Not only do we analyze data daily, but we are in constant communication with hotel operators. Despite these alarming statistics in such a short period of time, we’re also hearing stories that are inspiring. Many hotel managers are working hard to keep as many people working as possible. They are also utilizing this time while less people are traveling and staying in their hotels to enhance their business and further train employees for a prosperous post-COVID-19 era. For instance, hoteliers are investing time to cross-train people on different jobs, to tackle preventative maintenance and to take care of deep cleaning projects that can be hard to do when hotels are full, and they are finding ways to share available hours in a fair way with involvement and suggestions from their team members.

Looking to the future – Lean on technology

During the last few years, the hospitality industry has been working harder to implement technology. We can see that through the development and utilization of mobile apps by hotel brands, investment and implementation of IoT in guestrooms as well as throughout the hotel, and the creation of software to manage and streamline logistics and employees.

Now more than ever, hoteliers need to lean on this technology to ensure they are utilizing their employees in the most effective way and reducing labor costs whenever possible. Many hotels are still using static staffing models instead of scheduling based upon calculated hours needed based upon guest activity and other factors. Technology can ensure that labor plans perfectly reflect the operating requirements of the hotel, eliminating waste and protecting the guest experience, even in these challenging times. They should start planning now to incorporate these tools into their daily management.