Why weren't the major hotel groups rescued like the airlines?

While the health crisis brought the tourism sector to its knees, the airlines were able to count on massive state aid, which was not the case for the major hotel groups. Is this the result of a deliberate policy, of less attention being paid to the hotel sector, or is there a certain logic behind it?

Hotels suffered, but less than airlines

One of the first explanations is that while hotels have suffered, their situation has had nothing to do with that of the airlines.

In Europe, although the situation varies widely from country to country, the average occupancy rate was 35% instead of 72%.

A significant drop, but nothing to do with the total stoppage experienced by the airlines.

What’s more, it’s less difficult for a hotel to scale its operations than it is for an airline. It’s easier to put rooms on the market or not, and to “close” several floors. Closed rooms cost less to maintain than grounded aircraft, and costs less to re-open.

Once the first wave had closed, they also benefited from several phenomena: the “staycation“or vacations close to home, which enabled them to keep in touch with a local clientele that could no longer fly, for example, adapting their offer to workers looking for places to work remotely.

And if we look beyond Europe, we mustn’t forget that certain domestic markets have remained relatively dynamic: the United States, for example, where a more than significant proportion of the major chains’ hotels are located, has remained much more active than Europe.

Some hotels made money in 2020

Because it’s a figure that few have noticed, but some major groups like Marriott made money on the American market in 2020 ($198M) and didn’t lose any in Asia.

All in all, the books are almost balanced.

This is the result of markets suffering less and economic measures taken to reduce costs.

These measures have lowered their breakeven point to such an extent that some, like Hilton, no longer want to turn back the clock and re-establish normal service.

Rescuing hotels, but rescuing whom?

And massive support for hotel groups is not as obvious as it is for hotels.

Helping Air France or Lufthansa is simple: there’s a business headquartered in a country and, what’s more, a company with an easily identifiable “nationality”.

It’s more complicated in the hotel business

That’s because governments don’t make hotel groups a symbol as important as their airlines.

Secondly, hotel operations are more complex. The group can own and operate the hotel, just own it and entrust its operation to a local player, or simply license its brand with an investor who owns the estate and an operator who runs it. And each hotel is an independent business.

In fact, governments have rescued hotels

In fact, depending on the policy implemented by each country, hotels have indeed been able to benefit from aid. But it’s the hoteliers, entrepreneurs and local businesses that have benefited, just like any business established in the country in question, not directly the often foreign group behind it.

The aid may therefore have been granted to the Mercure or Hilton of an obscure city, but not directly to Accor or Hilton, as the capital structure of the hotel industry differs radically from that of the airline industry. It’s the hotels that have been helped one by one at country level, not the big groups.

[Mise à jour suite au commentaire d’un de nos lecteurs que nous publions ici car il donne une vue plus précise et pertinente de la situation vue de l’intérieur]

“Sizing activities is much easier indeed and you can better control costs, but the human cost is tragic. Either jobs were cut or all salaries were reduced. An estimated 6 million hotel jobs have been lost in the US alone.

And all this is not controlled by the big groups, but by the owners and operators.

So while the groups and brands haven’t lost that much, operators have been hit hard by the crisis, and the jobs lost are counted in the millions – I’ve lost mine twice in one year, for example! My last hotel before this one closed for good (300 people out of work) and the previous one lost 2/3 of its 555 employees. Ouch!”

Bottom line

Hotels were not left to their own devices during the crisis, at least not according to the systems set up country by country in the places where they are located, and irrespective of whether they belong to a particular group or are independent.

But let’s not forget that, at group level, even if the 2021 results are not good, they have nothing to do with the abysmal losses experienced by the airlines.

Image : hotel closed due to COVID by Gumpanat via Shutterstock