COVID-19 & the Hospitality Industry

Thoughtware Alert Mar 23, 2020
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Across the nation, thousands of travelers are canceling long-held vacation plans, spring break trips, business conferences and more. With many consumers electing or being forced to socially distance themselves, many businesses canceling nonessential travel and cities postponing large events, one of the industries most detrimentally affected by the coronavirus disease 2019 (COVID-19) outbreak is the hospitality industry. Many hotels, resorts and restaurants are navigating uncharted waters as they look for innovative ways to survive the pandemic as it crosses the globe.

The rapidly evolving situation in the U.S. due to COVID-19 is forcing hospitality companies to quickly manage payroll and employee benefits for hourly and salaried workers, update and evolve menu items based on accessible ingredients, communicate with consumers in a transparent manner and increase sanitation to reduce the effect on their business and keep people safe.

In both Dallas and Houston, all bars and clubs are closed, and restaurants are takeout only. The same aggressive measures are being implemented in cities that rely heavily on tourism, such as New York City, as the government takes drastic steps to enforce social distancing. Hotels across the country are reporting plunging occupancy rates, and millions of jobs are at risk as the federal government suggests that crowded travel settings increase the chance of community spread of the virus. All these factors will affect your employees and partners.

Guidance has been provided from various industry resources, including the National Restaurant Association, American Hotel and Lodging Association, the U.S. Small Business Administration and others. Some best practices and tactics shared over the past few days include:

Internal Communications

Helping your employees understand the virus’s effect on their job and best practices to limit risks is the key to a good communication plan. Here are some examples:

  • Clearly Defined Internal Communication Plan
    • Dedicated company area on your intranet for Q&A relative to the virus
    • Regular communication and updates from company leadership – Let employees know hours are being reduced, dropped or changed
    • Where appropriate, consider your work from home policy
      • Understand the effect on your technology
      • Understand technology risk management/cybersecurity – Fraudulent emails are already being received
    • Consider implementing health screenings at each location
    • Help your employees understand what “social distancing” means at work and at home
    • Help employees understand health insurance coverages
    • If you operate with labor agreements, include the appropriate unions/associations in your communication plan
  • Revisions to Company Travel Policies
    • Policy for travel already booked
    • Policy for nonbusiness-related travel
    • Waivers of travel policy need senior management approval
    • Company policy for mandatory quarantine based on location of travel
  • Communicate Plans for Paid Time Off/Salary Continuation
    • Remind employees of policies
    • Note any updates or changes from existing policies
    • Provide guidance on claiming unemployment, when applicable
    • How is this affected by the recent Families First Coronavirus Response Act to provide employer tax credits?
  • Changes Affecting Each Company Location
    • Determine appropriate changes to limit potential exposure to the virus at each location
    • Consider implementing site health screenings at each location
    • Hold daily meetings to discuss how to operate under the current environment
      • How to operate with a limited staff and vendors
      • Discuss how to operate in a limited touch environment
    • Clarify policies regarding what to do if someone is exhibiting virus symptoms
    • Communication plan for vendors
      • Retain social distancing where possible
      • Quality control and proper approvals should be retained
    • Mental health for employees
      • Proactive communication with your employees and other stakeholders will be vital – The stress levels over potential loss of earnings, sick family members and housing and caring for children or others will be high

External Communications

The hospitality industry depends on many outside organizations that are critical to its success, some of which may need to become flexible on payment terms for a period of time. It will be important to have a well-thought-out external communication plan with:

  • Your bank and other lending institutions (equipment suppliers, leasing companies, etc.)
    • Inform them of your action plan
    • Understand the terms and conditions in all your agreements
    • Evaluate and discuss your options
  • Insurance coverages
    • Review health insurance coverages
    • Review business interruption insurance
    • There are indications that if someone contracts the virus while performing job duties, it could be deemed a reportable incident for the Occupational Safety and Health Administration and workers’ compensation
  • Your landlord or real estate owner
    • Inform them of your action plan
    • Ensure them that you intend to agree to a restructure or workout
  • Customers
    • Clear communication of your action plan
    • Let customers know if you are open or closed
    • Communicate what has changed
      • Push to carryout and/or delivery
      • Intensified sanitization
      • Focus spending on loyal customers as you conserve cash
  • Be transparent

It’s important for each organization to develop and coordinate action plans with employees, customers, investors and vendors. Equally important is to take action and implement those plans as effectively as possible.

Changes to counter the effect of the virus on our economy are happening quickly. BKD has created a COVID-19 Resource Center to help disseminate important information as we evaluate ways to mitigate the inevitable financial effects. Check here to keep up to date with relevant news, changing guidelines, new regulations and anything else we believe you need to know, or reach out to your BKD Trusted Advisor™.

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