There are few sectors more impacted by COVID-19 as the hotel sector. Border closures (both international and interstate) as well as movement and gathering restrictions within each of the Australian States, have had a significant effect on tourism, and consequently, the viability of Australian hotels. This article explores the effect that COVID-19 restrictions have had on the Australian hotel sector, what hoteliers can do in response to these changes, and how the market is likely to react going forward.
The obvious trend affecting the Australian hotel sector is the decline in international as well as interstate tourism as a result of border closures and travel restrictions. Interstate tourism has recovered slightly as some interstate borders have re-opened since the outset of the pandemic, however, inconsistency regarding border policies (particularly with regard to states shutting their borders to other states) has somewhat hampered this recovery.
Domestic hotel operators have, however, seen an increase in intrastate tourism. This increase has predominately benefited hotels located outside of major city centres. In fact, some hotels in popular regional tourism destinations are now as busy as they have ever been. This increase in demand has led to a consequent increase in prices for some hotel rooms.
Overall, however, there has been a general decline in demand for Australian hotel services, with occupancy rates falling to less than 60%. As previously noted, however, as a result of COVID-19 the market is constantly fluctuating as border closures and other travel restrictions change.
Hotel owners are also taking a more cautious approach when negotiating or renewing hotel management agreements with a greater focus placed on early termination rights, force majeure provisions and more stringent performance tests. Operators historically have been reluctant to grant such concessions, however are currently adopting greater flexibility given the climate.
Ensuring that hotels are COVID safe
In the immediate future, hoteliers may be forced to operate with reduced capacity. Social distancing measures will likely have to be implemented in hotels, particularly in indoor gathering areas such as restaurants and breakfast buffets. Hotels will also need to place an increased focus on cleanliness and hygiene and take extra precautions to ensure that their staff have a safe working environment. Additionally, ‘Room Service’ dining is likely to become more important as social distancing measures reduce the capacity of restaurants, and diners are less willing to congregate in communal spaces.
Other strategies to boost revenue in the wake of the pandemic
As COVID-19 case numbers and restrictions continue to fluctuate, hoteliers may consider:
In the long term, the demand for Australian hotels will eventually return to pre-COVID levels. In the short term, however, there are likely to be significant challenges for hotel owners, many of which are now carefully looking at their performance test and force majeure clauses.
Corporate travel is likely to remain below pre-COVID levels for an extended period, and large events such as conferences and sports will be difficult to organise for the foreseeable future. Interstate and intrastate tourism is likely to grow as restrictions are eased, and interstate borders are opened, however, international tourism is likely to remain low for an extended period. The fact that COVID-19 vaccines are now being rolled out in many countries across the globe may also provide some hope that the lifting of COVID-19 restrictions, and the consequent recovery of the Australian hotel sector, will come sooner rather than later.