Gesa Rohwedder is Head of Hospitality Europe at the international construction and real estate consulting company Drees & Sommer. In the interview, she talks about how the hotel sector can combat the COVID-19 crisis, and what political measures are required.
Gesa, do you know where we are currently allowed to travel to?
The level of uncertainty has increased greatly, especially in the past few days. The travel warnings are changing almost daily, and this is a real challenge for everyone concerned – airlines, tourism businesses such as hotels and, not least, the people planning to travel. What’s particularly difficult is that the restrictions are inconsistent. Eating out, meeting in small or large groups… It’s impossible now for travelers to keep track of what’s allowed in which German federal state. Just a few weeks ago, everything was very different. Politicians of all persuasions were asking people to spend their vacations in Germany. Brandenburg instead of Barcelona, the Black Forest instead of Southeast Asia. However, owing to the current ban on overnight stays in many places, people who believed they were keeping on the safe side with these bookings are now battling their way through terms and conditions, and cancellation policies. Everyone is losing out, and I can really understand it when hoteliers have to invoke the relevant policies, and holidaymakers hesitate to make reservations.
Some German federal states have now overturned the ban on overnight stays. Do you think that’s right, despite the increasing number of COVID-19 cases?
It’s been proven that hardly any infections have arisen from hotel stays. In view of this, I can’t understand this German domestic ban on overnight stays. In recent months, hotels have made huge efforts, from developing complex hygiene protocols to investing in building modifications, in order to offer guests a high level of safety and hygiene. However, I can also completely understand that, with the sharp rise in new infections, policymakers are currently under great pressure. Many of the measures introduced by the federal government and the individual federal states are absolutely right, and Germany’s management of the coronavirus crisis has earned it great respect internationally. However, both experts and politicians have to play things by ear with the virus and learn from the experience of the earlier months of the year. In my opinion there is an urgent need for a revision of policies – particularly in the case of the ban on overnight stays.
Was it wrong, then, to be guided by the fear of virus infections?
In the case of the ban on overnight stays, yes. A large number of courts are coming to this conclusion anyway – for instance in the federal states of Lower Saxony and Baden-Württemberg. The ban on overnight stays has been declared unlawful there, on the grounds that it’s not a necessary protective measure. On the other hand, Saxony-Anhalt is so far maintaining the ban. The patchwork of different rules not only causes confusion among travelers; even more serious is the loss of trust it causes, as the implication is that hotels and restaurants are partly to blame for spreading the virus, although this has been proven not to be true.
But it could be the case, couldn’t it?
I’m not a virologist, so I’ll refrain from conjecture. However, if even virologists and medical representatives don’t consider the ban on overnight stays to be helpful, why use a sledgehammer to crack a nut? The vast majority of hotels have excellent hygiene protocols, and the potential danger of infection is no higher than in a store, underground railway or office. Of course, no one in the sector wants to play down the seriousness of the pandemic. However, the safety of guests and staff is only served if the measures keep down infection rates. Many hotels, restaurants and companies in the events industry are now struggling to survive. It’s therefore essential that the demands made by policymakers be reasonable and the measures imposed appropriate.
Beyond policy measures: what leeway do hotels themselves have?
Of course, necessity is the mother of invention. At the moment, what’s most important is constant communication and close cooperation between owners and operators. Flexible lease forms can ensure the survival of everyone, and ease pressure on operators as well as owners of hotel buildings. In many places, businesses are currently negotiating hybrid, turnover-linked, significantly reduced lease payments, paused payments, or a lease extension. The key to this is transparency as well as a constructive and trusting relationship between the parties in these turbulent times.
Models such as these can tide a business over for a certain period, but is that enough to survive the COVID-19 crisis?
That depends primarily on how long the pandemic’s impact on professional meetings and travel behavior will be felt. Also, some hotel businesses are already coping better with the crisis than others, for instance city hotels where there is a higher level of domestic and leisure demand for overnight stays, as well as long-stay hotel concepts and holiday hotels. On the other hand, hotels relying on international guests, business trips, and trade fair, exhibition and conference visitors are some of the biggest losers in the coronavirus crisis. Long-haul travel will also continue to lose out to domestic tourism – at least during the next two years. Hotels are currently preparing for this, consolidating their expansion strategies and focusing on core markets.
What does this involve, in practice?
For investors and owners, the most important thing is to focus on their hotel concepts and products, manage them optimally, and adapt to changed needs. Whereas, in pre-pandemic times, mediocre hotel concepts were able to compete successfully in the market in many places owing to the almost unstoppable demand, these hotels will struggle to recover after the crisis. Operational efficiency and marketability are now more important than ever. Alternative concepts and the potential for a change of use, such as conversion of hotels into student apartments or micro-apartments, will also have to be considered in the future. Sharing models such as co-working and co-living are in vogue, as are long-stay hotels and megatrends such as sustainability and digital transformation.
That all sounds very good, but how are hotels supposed to be able to afford the additional costs of environmental protection and climate change mitigation, especially now?
For many hotels, it’s true that there is currently no financial headroom. The most important thing for these businesses is to ensure they can stay afloat. However, anyone able to do so should give some thought to how their own businesses can be made more sustainable for the future. Even before COVID-19, societal trends such as ecological and economic sustainability meant increasing numbers of investors were putting their money into making their hotels ‘greener’ and more efficient. The cost and investment pressure for owners and operators, as well as the increasing environmental and health awareness of travelers, will strengthen this trend. Although our everyday lives are currently dominated by the impact of COVID-19, life will eventually return to normal. Those who make sound, forward-looking decisions for their companies will be able to hold their own in the new normal. This also applies to tourism and the hotel business – for the investors, owners and operators of hotel buildings.