Impact of COVID-19 to Hotel Business

Lockdown of The Country

COVID-19 has affected the hotel industry badly in so many ways. Prior to the emergence of COVID-19, many countries took action in tackling or preventing the surge of COVID-19 by putting their countries on lockdown. Lockdown may be an effective way for governments to curb the disease but that action is not really doable for most of the sectors especially hotel industry at the moment. The economy is greatly affected by the lockdown hence the hotel business is dropping. The poor business is an effect from zero sales when the pandemic was first announced. In Malaysia, movement control order (MCO) was introduced by the government in order to limit the activities of the people which explained the plummet of sales in the hotel sector (Pakirisamy, 2020). Besides, hotels and resorts were seen closing down because it was deemed as non-essential. Thus, interstate travel was not allowed which explains the downfall of hotel industry upon that time. There are still a lot of countries implemented travel ban which has prevented foreign tourists from travelling into that particular country that is on lockdown. For this reason, many hotels are suffering without demands in market when the restrictions were introduced in the beginning. Moreover, selected hotels are chosen as designated quarantine centres as a consequence of lacking of space in hospitals in some countries. Turning hotels into quarantine centre during this hard time will not do any good for hotels as the government are charging the people at the rate of RM150 instead of the initial rate imposed by the hotel (Malaysian Association of Hotels, 2020). This plan of the government is to collaborate with the hotels in order to fulfil corporate social responsibility (CSR). CSR can be defined as companies volunteer to do good in the society relating to their business operations that can form the value of the shareholders and stakeholders (Newman, Rand, Tarp and Trifkovic, 2018). Besides, lockdown prohibits the people from entering and leaving the country which results in poor occupancy rate. For example, there are a lot of local people are not willing to spend money to stay at hotel in their own country as they have the mindset of their own home provides everything they need and including freedom. 


Next, COVID-19 has affected the economy very badly to the extent of retrenchments. The definition of retrenchment is ‘terminating the employees’ contracts in a redundancy situation such as restructuring, reduction in production, mergers, technological changes, business takeover, economic downturn and others’ (Muniapan, 2010). The surplus of employees to the needs of the hotel companies resulted in retrenchment which is an action of dismissing those employees. There are hotel companies have been closed down permanently due to the great amount of losses suffered. Despite this, there are still a few hotel companies are struggling to stay alive during this unprecedented situation of COVID-19. While some of these hotels are still lucky to be in the industry, it is not the same for the employees of the hotels. Many employers are forced to let go of their employees even those who have been with the company for many years. Retrenchment is not an easy move to be made but it has to be done when a hotel is no longer able to be economically or operationally functional. As a result of that, hotel employees have no other choices whether to be unemployed or be on unpaid leaves. The hotel employees may not be able to find other jobs in other industries after being in the hotel sector for so many years. However, some employees who got retrenched are able to be compensated based on the companies they work with. The extension of MCO caused a lot of businesses in the hotel industry to cease operation which rooted from the incapability of providing financial support to the employees (Rahim and Amirul, 2020).


Furthermore, COVID-19 has a great impact on various stakeholders at the same time when travel bans and social distancing was enforced (Hao, Xiao and Chon, 2020). A decline in occupancy rate has affected the income of the hotel’s stakeholders. These stakeholders consisting of internal and external which all of them play a major part in providing excellence services to customers during their stay or time at the hotel. Internal stakeholders of a hotel are made up of individuals who work directly at the company whereas individuals are affected with the decision of the hotel when they work or contribute indirectly for the company are known as the external stakeholders. Internal stakeholders of a hotel comprises of owners, investors, and employees while external stakeholders are the suppliers, creditors and customers of the hotel. Firstly, the owners or investors of the hotel as the internal stakeholders are being challenged suddenly with the ongoing COVID-19 and the SOPs announced by the government. The unforeseen losses of the businesses in hotel sector happened in a blink of an eye which made forecasting for profits in the future harder than expected. Besides, the owners and investors are no longer reliant on the income from the hotel business as losses replaced with profits which has caused these hotels in owing bigger debts to financial institutions (GrantThornton, 2020). On the other hand, external stakeholders such as suppliers are very much the same affected. These suppliers or creditors might have lost their jobs temporarily or permanently with the sudden halt of hotel business. For example, food suppliers will encounter with surplus of food in their own business when hotels are no longer able to operate. Hence, both the internal and external stakeholders are affected when one of the stakeholders are missing out in the business.