The Impact of COVID-19 on the Hotel Industry in Saudi Arabia

 COVID 19 or coronavirus has brought the world to a standstill. Apart from costing lives, it has shaken and affected various industries across the world. And the hotel industry is one of them.

Like the rest of the world, the hotel industry in Saudi Arabia has been plagued by mass-scale cancellations for travel booking and hotel accommodation during the peak time of COVID 19 and lockdown. 

The lockdown has hurt the hospitality sector where the occupancy levels have been at an alarming all-time low, leading to the shutdown of some hotels while forcing some to run with limited facilities. 

Here we have rounded up such issues faced by the hotels in Saudi Arabia:

Discouraging the Consumers from Traveling:

The demand for travelling and consumer confidence is not that high due to uncertainty and fear. This has led to reducing the spending of people as minimizing the disposable income with limited activities and homebound life to lower the risk of infection. 

Mass Layoffs:

Hotel employees play an important role in ensuring guest experience and act as the cornerstone of the hospitality industry. However, the huge layoff, furlough or leave without pay that is being executed across the industry are impacting this core element of the hospitality industry. 

There is a need to implement better strategies to address the issue of staff retention in the current circumstances. The long term effects of these mass dismissals have yet to be experienced but will have long-lasting consequences for the industry as a whole, and might forever harm the reputation of the hospitality industry.  

Following restrictions on travel, border closures and quarantine measures, many hotel workers were not able to move to their places of work or do their jobs which impacted their incomes, particularly for informal and casually employed workers. 

Debt Financing:

While many banks have agreed to provide relief to affecting industries and businesses, hotel owners are required to talk with their lenders to agree on the rescheduling of debt and alternative security packages, as hotel valuations decline triggering loan to value ratio recalculations. 

Complicated and disturbing results can occur if the lenders don’t play an active role in the process. 

Hotel Closure:

Occupancy at many hotels hasn’t gone beyond 10%, prompting the owners to consider partial or complete shutdown of their hotels until the uncertainty is over. 

However, owners are required to pay close attention to the terms of the HMA in some instances, especially with the agreements that were not extensively negotiated, conditions exist that require hotel owners to continue to pay management fees in circumstances where the business of the hotel has been interrupted or the hotel has been closed. 

A Silver Lining in the Cloud…

Good thing is that the patient recovery rate in Saudi Arabia is higher than the global average despite the fact the Kingdom has the second-highest number of COVID 19 cases in the Middle East. Saudi Arabia has been relaxing the restriction while the domestic tourism went ahead by 18% while hotel occupancy bouncing back to between 80%-90%.

Bottom Line:

At no point in history has such an uncertainty occurred, where industries across the world have been paralyzed by a common factor. It will take time to determine the full impact of COVID-19 on business scenario worldwide. The landscape of hospitality could change forever, and to stay efficient, there is a strong need to find new ways to protect the industry. 

While the hospitality industry in Saudi Arabia is slowly recovering, the COVID 19 aftereffects continue to impact the operations of hotels. 

Hotel industries are required to make substantial changes to their operations to ensure health and safety to both employees and customers. 

Once the hotel industry overcomes the impact of this pandemic, the major focus will be on regrowth.