Investigating COVID-19 Impact: Resiliency is key to hospitality industry survival

The COVID-19 pandemic created waves of change across businesses worldwide. By many accounts, the hospitality industry was among the hardest hit with initial impacts in key areas reportedly worse than 9/11 and the 1933 Great Depression.

From the start of the pandemic in 2020 through the present, leaders in the hospitality industry around the world have been required to think fast, adapt, and create and implement strategies on the fly to stay afloat. Lockdowns initially led to temporary shutdowns and employee layoffs, while supply chain challenges and the current low unemployment rates continue to impact revenue and customer service.

With a deeply held interest in sustainability and risk management, Henry Aigbedo, Ph.D., associate professor, production operations management, at Oakland University’s School of Business Administration, was intrigued at how businesses decimated by the pandemic could recover and regain their positions.

“The impact of COVID was a global shock,” he says. “You have entire countries in lockdown, and you can’t run your business.”

This curiosity led Dr. Aigbedo to conduct a mixed-methods research to study the impact of the pandemic on the hospitality industry and its associated supply chain, focusing specifically on the accommodation and food services sector.

By comparing COVID-19 pandemic unemployment levels with the unemployment levels during the global financial crisis of 2008, Dr. Aigbedo gained a clear understanding about how companies can position themselves to successfully respond and operate during a crisis.

“One thing that became clear from the analysis of the unemployment data for COVID-19 and the 2008-09 financial crises, is that the impact of global shocks to firms and their associated supply chains can be significantly different depending on the industry to which the firms belong,” says Dr. Aigbedo.

Aigbedo notes that while unemployment rates in various sectors, including the hospitality industry, have continued to decrease, these decreases are not necessarily due to resilience of organizations in these industries.

“The factors responsible include increased vaccination rates that have made it possible for organizations to return back to normal operations and the changing dynamics in the workforce as people make changes to their personal plans and goals following COVID-19, for example the so-called ‘Great Resignation’,” he says.

In terms of resiliency, the results of Aigbedo’s recent study highlights practical applications for two entities: hospitality managers and governments that provide financial aid to businesses affected by catastrophes.

“While it is true that hospitality businesses are private entities, governments have the responsibility to provide more support for the sectors that are the most highly impacted as is the case with the hospitality industry,” says Dr. Aigbedo. “Such government support can help businesses maintain employment for some time while they seek ways to adapt in order to continue to be viable,” Dr. Aigbedo says, citing the $2.2 trillion CARES Act passed in late March 2020.

But, he says, the amount of assistance needs to vary.

“Clearly, given the differential impact of COVID-19 by industry, the citizenry of the country would be better served if assistance is provided on the basis of the severity of the impact by industry,” explains Dr. Aigbedo. “This would be better than providing all small businesses the same level of assistance, regardless of the industry to which they belong.”

For hospitality managers, the study identifies best practices to institute that would make organizations more resilient. For example, diversification of operations in different regions in a country and different parts of the world could better prepare an organization to withstand a similar crisis.

Hospitality leaders empowered to act quickly in response to adverse conditions improved their organization’s bottom line. Dr. Aigbedo highlights a few such innovations in his study:

• Domino’s introduced contactless delivery to increase customer’s feeling of safety, increasing same-store sales by 16%
• Wyndham Hotels converted its operations to better utilizing its outdoor spaces to increase safety measures.
• Hilton Hotels winnowed its services to essentials, eliminating items such as magazines and notepads to minimize possible contamination.
• Other hotel chains launched “Buy-Now Stay-Later” promotions to generate revenue while offering customers savings on a future stay.

“The biggest implication for hospitality managers is that you have to be resilient,” says Dr. Aigbedo. “You must be able to bounce back like rubber because some shocks are beyond your control. Thinking about different mechanisms for adapting is crucial.”