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The world of tourism in the midst of storm Covid-19, struggling for survival (part one)

The statement was dropped like a bolt from the blue. The Accor group announces the closure of two thirds of its units worldwide. The Covid-19 hurricane has passed through here, with all the restrictions, limitations and confinements it implies. But far from it, many other players, whether accommodation providers, transporters or other players in the world of travel, are suffering the repercussions of these health measures. Hospitality ON provides an overview of the situation, outlining the solutions and consequences that companies in the sector are facing. Part 1: The hospitality sector is stepping up to optimise spending while reaching out to the health sector.

Faced with such a loss of revenue, the world's sixth largest hotel group had no choice but to forego the payment of the dividends planned for the 2019 financial year, i.e. 280 million euros. Another measure, Accor CEO Sébastien Bazin agreed to waive 25% of his salary during the crisis in order to reduce the group's expenses.

In addition, a quarter of the 2019 dividends will finance a support programme for the group's teams and partners in difficulty. This €70 million budget, called the "ALL Heartist Fund", will be used to help employees, partners and healthcare personnel impacted by the current health and economic crisis. The fund will provide financial support for the hospitalization costs of 300,000 employees suffering from Covid-19 who do not benefit from social security coverage, but also to support "on a case-by-case basis" employees "in serious financial difficulty" due to "technical unemployment measures" or for other reasons, and lastly, to multiply actions to help healthcare personnel and associations, in particular through the loan of hotel rooms to provide free accommodation to those who are "on the front line in the face of the crisis".

Sébastien Bazin, Chairman and Chief Executive Officer of Accor, said, "Welcoming, protecting and caring for others is the very essence of our business. It is for this reason that "concrete, tangible and immediate measures" and "in the spirit of our values and commitments" have been put in place "in the face of the urgency and scope of the situation". The group thus expresses its willingness to show solidarity and gratitude "to all those who, in this crisis, are showing great courage and self-sacrifice".

Far from limiting himself to the medical teams, the director also conveys his gratitude to all "the Group's main shareholders, without whom the creation of the ALL Heartist Fund would not have been possible" as well as "all Accor teams around the world" who "are facing this situation with absolutely admirable courage, dedication and professionalism".

The CEO also made a point of recalling that despite this "difficult moment" which led the hotel owner to "take difficult decisions", the group is already looking to the future, enjoying a "solid balance sheet" which will enable it to overcome the crisis and "come out of it with strength when the recovery comes". He concluded by stating that he was "convinced that Accor will soon return to growth".

As for the return to growth, a glimmer of hope appears on the side of the rising sun. Indeed, the Chinese market, the source of the epidemic, which suffered almost two months of confinement between the end of January and the end of March, has begun to return to normal. The country has reportedly managed to contain the spread of the virus on its territory, so that the new cases detected on its soil now come from travellers coming from abroad. As the Chinese government watched the recovery of its population, it decided to gradually lift the confinement of its inhabitants, allowing them to return to their occupations and regain freedom of movement within the country. The first days already show a return of travel and stays in China, and thus a revival of hotel activity in the territory.

The group thus announces that among the 25,000 people employed in the Chinese market, no less than "80% of them have returned to the hotels that are in operation to welcome guests". This return of activity comes at a time when a "gradual recovery in occupancy rates and catering activity" is observed in the Middle Kingdom. A glimmer of hope that nevertheless remains relatively limited, since the recovery "is mainly in the economy segment" thanks to the domestic clientele, with occupancy rates around 50% for most hotels.

But while waiting for this revival of activity throughout the world, the earthquake caused by the Coronavirus is shaking all the players in the hotel industry. Among them is the NH Hotel Group, which had to close down 90% of its hotels in Spain and Italy and about half of them in the rest of Europe.

This drastic decline in business led the hotel chain to place most of its head office staff on short-time working, as did 75% of the staff at Accor's French and foreign headquarters, enabling it to raise €60 million in savings on fixed costs in the second quarter of 2020. At NH Hotel Group, all expenses have also been significantly reduced, in order to cut both fixed and variable costs. As a result, the members of the Board of Directors and the Management Committee cut their gross salaries in half for four months from March 1. Also, all expenses that are not essential to the temporary survival of the business, such as investments in marketing or business travel for the group's employees, have been reduced.

In parallel with this cost-cutting strategy, the group, aware that the first to be impacted remain the owners, is adapting the pricing conditions "in order to minimise the impact of leases", explains a press release. Thus "discussions are under way with suppliers to reduce supply costs and obtain better payment terms".

Finally, in solidarity in the crisis that affects all sectors, first and foremost the health sector, the Spanish group has decided to medicalize several of its hotels to cope with the influx of sick people and to overcome the lack of capacity of hospitals on site. One example is the NH Parla hotel which, with its 88 rooms, "will make it possible to recover coronavirus patients whose symptoms require isolated medical surveillance but without the need for hospital admission".

Hotels of the NH Hotel Group are also reserved for the accommodation of medical staff and other functions essential to the fight against the Covid-19 crisis. As for the other properties kept closed, their stocks of perishable food have been sent to associations such as the Food Bank "which donated the food to the REMAR Foundation".

On the Airbnb side, solidarity initiatives were not lacking either, with thousands of homes made available to care staff free of charge and the creation of an aid fund released to compensate for the financial losses of guests who faced cancellations between March and May.

In France, 11,000 overnight stays have already been made by health and social workers thanks to the hosting platform.  The scheme, announced on 24 March in France, is quite simple and has met with great success. It involves putting mobilised staff in touch with a host who offers the entire accommodation free of charge. However, the hosts receive compensation for operational costs (cleaning, availability, etc.) up to 50€ per accommodation.

This initiative is part of a pre-existing initiative: Open Homes. In the past, Open Homes had already helped people in need, in partnership with the Minister in charge of the City and Housing. One host testified to the platform's sustained solidarity actions over the past few years: "I live in Marseille and have been a host on Airbnb since 2016. In 2018, the collapse of buildings on Rue d'Aubagne led to numerous evacuations in the city, leaving hundreds of inhabitants homeless overnight. Thanks to the Open Homes program, the Airbnb community in Marseille was able to mobilize to urgently rehouse families who had lost everything. The Airbnb scheme has facilitated contact between hosts and people seeking accommodation".

Finally, the Californian startup has released an emergency fund of 250 million dollars to compensate for the financial losses caused by cancellations of stays with its hosts in order to "help them pay the cancellation fees of Covid-19" as Airbnb's director and co-founder, Brian Chesky, explained in a recent communication.

The measure comes at a time of community discontent. The community is said to have reproached the platform for having accepted a full refund of reservations following the containment instructions and travel restrictions in effect in various countries around the world. To compensate its owner clients, the platform announced that it would pay guests 25% of the revenue they should have received for stays cancelled between 14 March and 31 May.

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