COVID-19 has had a profound impact on the global economy. It has cost the global travel industry an estimated $1.2 million. Experts believe more than 100 million jobs will be lost in the sector by the end of 2020. Millions of people have been forced to stay at home, which has led to a huge loss in revenue for travel operators and accommodation providers.
While some serviced apartment operators like Tom Smyth in Belfast have survived and thrived, many serviced apartment providers suffered a significant drop in revenue since the beginning of March, which is when global travel ground to a halt. Some travel corridors have since opened up, but the number of people travelling is far lower than it normally would be at this time of the year.
Loss of Revenue
Like hotels and holiday lets, many serviced apartments are currently empty. Landlords who traditionally let their properties via holiday rental websites such as Airbnb have been forced to change their business model to accommodate long-term tenants.
The loss of revenue in the serviced apartment sector has had a knock-on effect. Most serviced apartments are owned on a leasehold basis, with rents being paid to the leaseholder on a quarterly or annual basis. With no income, many serviced apartment operators have had to revisit their leasehold commitments and ask for a discount or even a payment holiday. Until the sector picks up again, many operators are likely to continue experienced significant cash flow problems.
Consideration must be given to the various factors at play while the pandemic continues to affect all industries, not least the travel sector.
Adapting to the New Normal
Serviced apartment operators can weather the storm, but they must be willing to adapt as quickly as possible. It’s likely that staycations will become the norm for the foreseeable future, as international travel continues to be affected by arbitrary restrictions and consumers remain wary of cancellations and curtailments.
To attract domestic travellers, serviced apartment providers must be seen to accommodate extra hygiene measures. Guests will expect operators to carry out deep cleaning between guests so as to minimise infection.
Businesses will need to manage their cash flow very careful to maintain sufficient levels of liquidity. This may involve letting some non-essential staff go and asking employees to work from home to cut costs.
Occupancy rates are likely to be affected for some time to come, so it’s essential that operators look at their business model and be prepared to adapt where necessary. If operators are reliant on short-term lets, consider switching to a long-term letting model or offer discounts for longer stays.
Operators with commercial leasehold agreements will need to speak to their landlord to come to a mutually agreeable arrangement with regard to the lease.
Innovate to Survive
COVID-19 will continue to affect the global travel industry for many more months, and possibly years. It will be some time before business and personal travel returns to pre-COVID levels, and it’s becoming increasingly clear that only operators able to innovate and adapt will survive in the long-term.