The Effects of Corona Virus on UK’s Hospitality Industry

THE EFFECTS OF CORONA VIRUS ON THE UK’S HOSPITALITY INDUSTRY: A CASE OF TWO LONDON-BASED HOTELS

Abstract

Given the projected losses that the hospitality industry throughout the world is expected to incur during the coronavirus pandemic, the current study was conducted to determine the effects of the pandemic on the UK’s hospitality industry. Due to travel restrictions that were in force at the time of the study, two London-based hotels namely; Chelsea Harbour Hotel and Leonardo St. Paul’s Hotel were selected to take part in the study. Six research participants from the hotels’ management positions, three from each hotel, were included in the analysis. The study established that the performance of both hotels was impacted negatively by the pandemic because most of their bookings were cancelled as soon as the government-issued travel restrictions. As a way of helping the industry to recover from the pandemic, the study recommended that the UK government should consider developing stimulus programs and promoting the UK as tourists’ preferred destination once the pandemic is contained.

 

Results

A total of six research participants from management positions, three from each hotel, were included in the analysis. Two of them were event organizers, two sales managers and two hotel managers.

First research question: Effects of the coronavirus on UK hospitality industry

The first research question asked them to indicate whether they had any event cancelled by clients from the time that the coronavirus broke in the country. Five of them said that they had various events cancelled whereas one of them said that the event was postponed to a later date in the future as Figure 1 depicts.

Figure 1: The percentage of events either cancelled or postponed

The second research question asked them to explain the way they handled bookings’ cancellations. 67 percent of them claimed that they asked customers to postpone events rather than cancel them whereas 33 percent of them claimed that they asked them to wait and see before cancelling the events (Figure 2).

Figure: Response to bookings’ cancellation

The third research question asked them to explain their relationships with existing clients during the crisis. 50 percent of them claimed that it had worsened because they applied cancellation fees, 33 percent claimed that they had managed to maintain the relationship whereas 17 percent of them claimed that the relationship was uncertain (Figure 3).

Figure 3: Relationship with customers

The fourth research question asked them to explain the way travel restrictions impacted meetings and events in their various hotels. The respondents claimed that their hotels were affected because most of their events from international guests were cancelled. The fifth research question asked them to indicate whether travel restrictions that the government had issued a response to the coronavirus pandemic had any effect on the hotels. They claimed that their hotels and industry were impacted heavily because they relied heavily on international guests.

Second research question: Response to travel restrictions issued by government

The seventh research question asked the respondents to indicate the way their hotels responded to bookings’ cancellation. About 50 percent of them claimed that they requested clients to postpone events, 33 percent of them claimed that they refunded money to customers whereas 17 percent of them claimed that they were yet to respond to cancellations (Figure 4).

 

Figure 4: Response to bookings’ cancellation

The eighth research question asked the respondents to indicate the way they thought cancellations would impact the performance of their hotels. The respondents claimed that the cancellations would impact their hotels negatively, but they were hopeful that things would change towards the end of the year and in the future.

Third research question: Policies and procedures that can minimize the effects

The ninth research question asked them to indicate whether they were aware of what the government had done to minimize the negative effects of the coronavirus on UK’s hospitality industry in general. Although the respondents were yet to learn what it was doing officially, they claimed that they had learned from the media that it was doing something to open up the economy. In line with this, the tenth research question asked them to indicate whether they thought the initiatives were sufficient. The respondents claimed that the initiatives were not sufficient given the impact that the pandemic had caused on their hotels, but they were somewhat satisfied with them. The eleventh research question asked them to recommend the measures that they would want the government and other policymakers to take to protect the industry from the negative effects of the pandemic. 33 percent of the respondents claimed that they would recommend the government to develop stimulus programs whereas 17 percent of them claimed that they would want the government to extend the Furlough program that was already in place up to December. Another 17 percent of them claimed that they would recommend the government to offer hotels loans whereas 33 percent of them claimed that they would recommend the government to open up the economy as Figure 5 depicts.

Figure 5: Recommendations to the government and policymakers

The twelfth research question concluded the study by asking the respondents to indicate whether they had abided by social distancing measure. The respondents claimed that they had already implemented the measure to protect customers from the pandemic.

Analysis/Discussion

First research question: Effects of the coronavirus on UK hospitality industry

The first research question sought to determine the way the UK’s hospitality industry had been impacted by the coronavirus from the time that the first case of the virus was reported in the country in March 2020. It established that from the time that the UK government-imposed travel restrictions affecting movement within and outside the country, most of the hotel bookings were either cancelled or postponed to later dates. Even though not all the customers cancelled bookings, the results suggested that the relationship between hotels that took part in the study and existing customers were hurt negatively. This was in relation to the fact that some of the customers were opposed to the application of cancellation fees to their bookings given that they were not responsible for cancellations. Even though the hotels were able to maintain some of the relationships without hurting customers, the future of some of the relationships was uncertain. Accordingly, the hotels expected that their performances would be impacted negatively by the pandemic.

The results also suggested that the hotels were impacted negatively by travel restrictions because they relied heavily on foreign guests. In addition, they were impacted negatively by such restrictions because some of them addressed local issues that restricted people from travelling and even holding events within the country. In addition, others forced UK citizens to work from home rather than go to their places of work during the lockdown. While not many studies have been conducted in the country concerning the effects of the virus on the hospitality industry, the results were in agreement with those by Enemuo and Dim-Jacob (2018) who established that travel restrictions on outbound and inbound travel elements had negative effects on the hospitality industry. The inbound restrictions affect people coming into the country whereas the outbound ones affect those leaving the country. In line with these findings, most of the international guests who had planned to host events or spend their holidays in the UK were forced to cancel their events. In so doing, they impacted negatively the performance of the hotels that took part in the study.

Similarly, the findings were in agreement with those by the Guardian (2020) that established that hotel bookings were cancelled in certain instances as soon as the travel restrictions were issued by the government. Furthermore, they agreed with those by BBC (2020) that indicated that the industry had lost a substantial amount of money that it was expected to earn in 2020. In terms of performance, they agreed with the United World Tourism Organization (UNWTO) and Gossling, Scott and Hall (2020) who projected that the industry would be impacted negatively by the pandemic. Alongside the above, the new measures that the government has proposed going forward are likely to impact the industry negatively by reducing the number of people that hotels can accommodate at any given time.

Second research question: Response to travel restrictions issued by government

The second research question sought to determine the manner in which the two hotels included in the study responded to travel restrictions issued by the UK government from the time that the virus was reported in the country. The study established that the hotels had responded by asking customers to postpone events to later dates whereas in other instances they were yet to respond because they waited to see the way things would unfold. If the customers refused to postpone events to later dates, the results suggested that the hotels refunded customers their money, but they applied cancellation fees and terms prescribed by their business practices. Despite doing so, there was a general feeling that some of the customers were unhappy with the application of the cancellation fees because the cancellations were beyond their controls. Accordingly, even if the practice appeared good because it enabled the hotels to sustain their business practices, it hurt their relationships with existing customers. This was despite the flexibility that the hotels applied in charging cancellation fees.

The above findings were in agreement with those by the Guardian (2020), which suggested that most of the hotels in the country had responded to the pandemic by asking customers to cancel hotel bookings or even postpone them to later dates. In addition, they agreed with those by BBC (2020) that suggested that most of the hotels in the country were expected to perform dismally because customers had cancelled most of their bookings. It would be worth noting that the cancellation of hotel bookings has considerable impact on the performance of hotels and hospitality industry in general. As a result, the fact that the hotels were forced to refund customers their money, then they lost part of the incomes they expected to earn this year. The implication is that if the industry will continue losing such business opportunities, then the performance of the industry will be hurt as the United World Tourism Organization (UNWTO) and Gossling, Scott and Hall (2020) projected.

Third research question: Policies and procedures that can minimize the effects

The third research question sought to identify the measures that the government could take to minimize the effects of the pandemic on the UK’s hospitality industry. The results suggested that it would be imperative for the government to develop stimulus programs aimed at enabling the industry to recover from the effects of the pandemic. In addition, it established that the government should offer loans to hotels to enable them to kick start their businesses and even implement some of the measures such as Furlough scheme to minimize job loss. Furthermore, it established that the government should focus its attention on re-opening the economy to the international community.

The above findings were in agreement with Faladeobalade and Dubey (2014) who established that governments could establish stimulus programs aimed at boosting the economic growth of the industry to help it recover from such crises. Some of those programs may include developing funds aimed at boosting the industry in general by offering loans to hotels struggling to recover from the negative effects of the pandemic. They may also include promoting the country as a preferred tourists’ destination and developing pandemic’s related policies that would not hurt the industry further. Some of those policies would be critical in re-opening the economy once again. The stimulus programs may also extend to reducing taxes levied on the industry and duty levied on air transport (Oxford Economics, 2015). A reduction in taxes would reduce the tax burden on hotels struggling to recover from the pandemic whereas a reduction of duty on air passengers would encourage international tourists to visit and spend more time in the country.

In addition, the findings were in agreement with Van Der Wagen and Goonetilleke (2011) who established that governments could boost the industry by giving grants to the most affected hotels as a way of boosting them. Similarly, the findings were in agreement with Enemuo and Dim-Jacob (2018) who established that the removal of travel restrictions would go a long way in opening up the economy. The results suggest that the opening up of the economy would enable the industry to recover from the effects of the pandemic.

Implications

In terms of implications, the results suggest that the UK’s hospitality industry is likely to be impacted negatively by travel restrictions implemented both locally and internationally. At the local level, the UK citizens may be barred from hosting events or even congregating in public places including holding meetings in hotels. At the international level, international guests may be discouraged from coming to the UK because of some of the existing restrictions on international guests. Such measures include requiring international tourists entering the country from other parts of the world except for Ireland to self-quarantine for about 14 days once they land into the country (HM Government, 2020). Others include the social distancing measures that hotels are supposed to observe going forward (Gossling, Scott, and Hall, 2020). This will hurt the performance of the industry as it has been projected by various people and international bodies.

Even though the dissertation did not evaluate the way employees working in the hotels were impacted by the cancellation of hotel bookings, the general implication was that most of them lost their jobs or even they were forced to go on compulsory leaves. Given that the hospitality industry ranks among the fourth highest employers in the country employing about 3.2 million people by the end of 2017, then the effects of the pandemic are expected to be dire before the year ends. In the event this happens, then the industry will not create the 518,000 new jobs it was expected to create by the end of 2021 (BHA, 2017). If anything, jobs may be lost rather than created thereby impact the industry and national development negatively. Thus, it would be vital for the government to intervene to minimize the negative effects that the pandemic might have on the industry.

Conclusion

With the help of two London-based hotels, the dissertation sought to determine the way the London-based hospitality industry had been impacted by the coronavirus since March 2020 when the first case of the virus was reported in the country. Its overall objective sought to determine the performance of the hospitality industry in London during the coronavirus outbreak whereas its specific objectives include;

  1. Critically evaluating the way the hospitality industry had been impacted by the coronavirus.
  2. Evaluating the way hotels in the industry had responded to travel restrictions and businesses that had been cancelled.
  3. Implementing an in-depth exploratory study of stakeholders’ views on the effects of coronavirus on UK’s hospitality industry.
  4. Formulating policies and procedures that may be implemented to lower the risks of the virus on the national hospitality industry.

Concerning the first objective, it established that the two hotels included in the study were impacted negatively by the outbreak because most of their bookings were either cancelled or postponed to later dates. In addition, it established that the hotels’ relationships with existing customers were affected negatively throughout the bookings cancellation processes. Even though the hotels managed to maintain some of their relationships with customers, it was evident that the future of some of the relationships was uncertain. Accordingly, it was highly likely that the hotels may lose some of the potential customers in the future. The research participants feared that the performance of their hotels was likely to be impacted negatively by the pandemic. Concerning travel restrictions issued by the government, the study established that the hotels were impacted negatively because most of the bookings from international guests were cancelled. As a result, there was a likelihood that the performance of the industry would decline as various bodies had projected and continue to project.

Concerning the second objective, the study established that the hotels responded to the pandemic by urging customers to postpone their events to later dates. However, because of the uncertainty about the future of the outbreak, some of the customers opted to cancel bookings, which forced the hotels to refund customers their money or even wait and see the way forward. By establishing, the study was able to meet the second objective.

Concerning conducting an in-depth analysis of the way stakeholders in the industry viewed the impact of the coronavirus outbreak on the UK’s hospitality industry, the study was able to interview several stakeholders. However, due to the prevailing social distancing measures and other restriction measures, the process was somewhat hindered because most of the potential respondents were not at their places of work during the data collection process. In addition, the hotels had not resumed their normal operations fully. The study managed to obtain stakeholders’ view from the people who were already in their places of work at the time of data collection. This enabled the study to determine the way the hotels were impacted by the pandemic. Even though the study was not exhaustive, it achieved part of its objective; hence, there would be a need for further studies in the future.

Despite the above shortcomings, the study was able to formulate policies and procedures that may be implemented to minimize the negative effects of the pandemic on the UK’s hospitality industry. Some of those policies are provided in the next chapter as recommendations of the way forward. In addition, they are narrowed down to specific areas to contribute to the body of existing knowledge about the impact of the coronavirus pandemic on the hospitality industry.

The study had the following limitations, which may hinder the generalization of its findings. Firstly, the study was a case study of two London-based hotels namely; Chelsea Harbour Hotel and Leonardo St. Paul’s Hotel. Since the study narrowed its focus on both hotels and did not include other hotels in London, then its findings may not be generalized to the London-based hotels. The findings may be utilized to depict the way most of the hotels in London have been impacted by the coronavirus outbreak. Secondly, the sample size included six research participants only who were in the management team. Even though they were key people in both hotels; hence, understood the way hotels were impacted by the pandemic, they did not represent the other employees. For this reason, the study did not evaluate the way individual employees were impacted by the pandemic meaning that a gap was left unfilled. Accordingly, similar studies should be conducted in the future to determine the way employees were impacted by the crisis at the personal level. In addition, similar studies should be conducted with larger sample sizes to determine the way different London-based hotels were impacted by the crisis.

Recommendations

The dissertation has established that the hotels included in the study have been impacted negatively by the coronavirus outbreak. Accordingly, it recommends that going forward, the UK government should make effort to help the industry recover from the effects of the pandemic because doing so would help the industry to recover fast; hence, contribute to national development as it has done in the past. While recommending so, the dissertation appreciates the fact that the government has made effort to see the industry recover from the pandemic because it has allowed hotels to start operating once again and even made effort to remove travel restrictions affecting international guests. However, it acknowledges that despite the effort made so far, more needs to be done to boost the industry at local and international level. Accordingly, it recommends the following specific measures to be implemented now and in the future.

  • Firstly, the government should consider lowering taxes levied on hotels or even scrapping them all together throughout the period that the pandemic will continue impacting the industry negatively. Even though such a move would reduce its tax collections, it would at least enable the hospitality industry to recover from the pandemic faster. Indeed, it would minimize the cost burden on the industry thereby enable it to recover from the negative effects of the pandemic.
  • Secondly, the government should consider offering loans and grants to hotels struggling to maintain their businesses. Even though such a move would be costly to the government, it would revive the industry, which plays an important role in national development. Accordingly, it is a move worth taking despite the huge amount of money that would be required to implement it.
  • Thirdly, as soon the pandemic is contained, the government with the help of relevant ministries should focus its attention on developing programs aimed at promoting the UK as a tourist destination for international conferences and other related activities. While developing such programs, the dissertation recommends that the government should join hands with other major players in the industry to ensure that its efforts succeed. By recommending so, the dissertation appreciates the fact that exclusion of such players in the process of developing stimulus programs may undermine the implementation of such programs. In addition, it appreciates the fact that the implementation of such programs would encourage people from other parts of the world to visit the country and contribute immensely to reviving the hospitality industry.

Alongside the above, the dissertation recommends that similar studies should be conducted to determine the way employees were impacted by the crisis at a personal level. In addition, others should be conducted with larger sample sizes to determine the way different London-based hotels were impacted by the crisis.

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