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Covid-19 Executive Briefing

Understanding the economic impact of the Covid-19 pandemic and the implications for the hospitality sector

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- ECONOMIC IMPACT -

Latest update: 26 May 

Many economists have cut their GDP forecasts. The 2020 consensus forecast for GDP growth is currently negative and many predict a recession.

The European Commission predicts the EU economy will contract by 7.5% in 2020 but expects a recovery in 2021 despite exceptional uncertainty.

-4.8%

HSBC revised its global economic growth forecast for 2020 to -4.8% in May from -3.3% in April.

7.5%

The European Commission predicts the EU economy will contract by 7.5% in 2020, but expects a recovery in 2021 despite exceptional uncertainty.

Impact of Covid-19 on asset prices

- SECTOR IMPACT: TRAVEL AND TOURISM -

Latest update: 26 May 

Construction market impact

98%

of IHG hotels in China have reopened, while most construction work on IHG hotels in the country has also restarted

60%

In China, multi-national chains such as Marriott have seen an uptick in occupancy, with some hotels reaching 60% occupancy in April.

revenue predictions

Marriott reported net earnings of $31m, Hilton turned a profit of $18m and Wyndham announced a net income of $22m for Q1. Marriott's adjusted earnings of $0.26 per share severely lagged estimates and its system-wide RevPAR plunged 22.5%, which is very similar to the declines experienced by Hilton (22.6%), Wyndham (23%) and IHG (25%).

Travel & Tourism mitigation strategies

Short term (six to 12 months)

Covid-19 has hit the tourism industry hard. While it is predicted that 2020 will bear the brunt of disruption, it is impossible to say when travel will return to 2019 levels. Over the coming months, players at all stages of the value chain will need to focus on survival. For the hotel industry this may require decision makers to implement cost-cutting measures and/or secure credit and government funding. Hoteliers should also focus on promoting high hygiene standards to instil confidence in potential guests.



Mid-term (one to three years)

Looking forward, hoteliers should prepare for a change in customer behaviour. Covid-19 may change the way that travellers see the world and hotel owners and managers will need to adapt swiftly. Consequently, decision makers should assess how demands and expectations may change and adjust their product and marketing strategies accordingly. For example, by investing in marketing campaigns to entice international visitors or tapping into the momentum domestic tourism gained during global travel restrictions.


Long-term (three to five years)

One key challenge that hotels face is the possible long-term shift to reduced business travel as people have become more confident in videoconferencing. However, customer behaviour will not be static so hotels should continue to re-evaluate and adapt branding and services.

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