I am writing this from our own perspective as a family business owning and operating 6 hotels in Scotland under a global franchise with IHG – Holiday Inn Glasgow Theatreland, Holiday Inn Expresses; Glasgow Theatreland, Edinburgh Royal Mile, Edinburgh Airport, Perth and Dunfermline.
“Our journey started a little earlier than many when I arrived in Marseille at an IHG European Owners meeting on Monday 9 March. I knew the coronavirus was becoming a concern and I’d even considered cancelling my trip. But nothing prepared me for hearing first-hand an emotional Italian owner’s devastating experience. No guests and zero income with no ability to pay their staff or anyone else. It’s something I will never forget, a bit like “where you were on 9/11?”. Then hearing IHG had shut down over 200 hotels in China, WOW I realised this was going to be bad.
I was meant to travel from Marseille to London for meetings later that week. However, given what I’d heard, I flew straight back to Glasgow to brief our senior team and GM’s. I think that was one of my hardest trips home as I tried to figure out how to break the news, how to be factual, honest and unemotional. Everyone’s reaction was very different and that’s what makes us human. We all start the journey at a different time, we all accept change at a different speed, and we always need to try to remember that. (It will be the same as we eventually come out of this.)
In some ways, we were lucky to have a couple of weeks before lockdown to pull together some sort of plan and make sure our focus was on keeping as many people in jobs as we could, especially to get the business back up and running once this was over. We knew it’d be a few months of disruption BUT we remained focussed on coming out the other side and ensuring we had a business to give our great teams back their jobs.
I don’t think I slept much that week, or for the rest of the month. From 9th to 31st March I made 1,712 outgoing calls from my mobile phone. Who to? To be honest, I can’t remember but it was probably anyone who would listen to me about helping our industry! If I couldn’t speak to them, I emailed or texted them. To think one of the best loved industries was being torn apart was very difficult to get my head around. This was like 9/11, SARS, the Ash Cloud, the Snow and a Tsunami all rolled into one perfect storm.
I know hospitality has historically been of little interest to politicians and local government. However, when they saw the sheer scale of the job losses, I think even they were shocked when they realised the number of jobs and supply chains our industry supports.
Ours is a complicated business that people outside the industry just don’t understand. In Scotland, I think the trade bodies did an amazing job of working together to try to help all their members. They ensured the message to Government was consistent from all sides and wouldn’t be lost in a lot of unnecessary noise and detail we operators can get into.
Personally, and like most owners, we were looking into a big black hole with no idea where the bottom was (we still don’t!) To try to get ahead of the curve, we took the difficult decisions to lay off staff with under 2 years’ service and put the rest of our teams on consultation. We took these steps a full week before the word ‘furlough’ became part of the country’s vocabulary. For me, the UK Government were late coming out with this offer, however when it happened, it did allow us to furlough everyone – even those we’d initially let go. Ironically, I’m sure some of the draconian measures taken by people like Richard Branson, Gordon Ramsay and Tim Martin at Wetherspoon’s actually gave the UK workforce a better furlough % offer than any other European country.
It is very difficult coming in and out of a recession to change people’s mindset on how good or bad the situation is, and this happened at a speed many could not imagine. Shutting a hotel when the onsite hotel team are confirming it is full of bookings is difficult for everyone involved. And to be honest I already knew from my European counterparts that most guests who had booked would fail to turn up.
We also needed backup security staff to go into our closed hotels as we knew looting could become an issue and if any of our team became ill, we needed others to slot in. I think the Police have done an amazing job as our “in-hotel teams” confirm they have never felt safer in Glasgow or Edinburgh.
I am very lucky to have a small senior team who got behind everything, so we ran the fixed costs numbers quickly to go to the bank. This was maybe a bit early as neither the brand nor Booking.com had started their money back guarantee with our money for prepaid, non-transferable reservations. We even had the pleasure of picking up the credit card fee for the debit and credit, costing us more money. I’m not saying it isn’t the right thing to do BUT it blew a £750k + hole in our cashflows. If only the UK had copied Italy and France where the Government rushed in legislation for a voucher scheme to allow guests to move bookings, the cash WOULDN’T have been lost from the hotel industry.
Losing the property rates bill for a year was a godsend as that released about £1m from our fixed costs. We own rather than rent the properties, so we managed to get a capital repayment holiday. As we’d just refinanced, this has now been added to the next 19 years of our capital repayment schedule. To be honest though I have no idea how some of the large operators who lease or have big ground rents will make these payments with no income?
Hotel owners are traditionally asset rich and cash poor. They don’t have large sums of money sitting in a bank account for a ‘rainy day’. They employ a lot of people and are continuously re-investing in their properties, just like anyone owning a large house. It needs constant maintenance and there are large capital and interest mortgage payments to make. (We are in fact in the middle of a refurbishment in one of our Glasgow hotels and were trying to get it ready for what we hoped would be a busy summer!)
In terms of funding the business through this crisis, initially the options were a commercial loan or overdraft then latterly government funded loans. RBS, with whom my family have banked with since 1972, have been great but rightly keep reminding us these are loans we do need to pay back. I refuse to write down what this has cost us BUT I can’t stop my head running the calculation especially around 3am each morning (any tips on how to stop this would be most welcome)
But let’s be honest, this is affecting everyone in our industry. It doesn’t matter if you’re the coffee shop owner with 3 staff or the hotel company that employs 000s, if you have no income, you have no ability to make the payroll, fixed costs, rent and certainly not loan repayments!
We’ve also learned a lot about Insurance companies too – they’ve done an amazing job in avoiding pay-outs. One must question why do we actually pay insurance? Whilst I believe the government should be putting pressure on these companies, I also don’t believe infecting another industry is the answer as long as the government continues to support us, but NOT solely with loans the majority can’t ever repay.
And that’s it in a nutshell for this industry, ‘how will we ever pay it all back?’ Personally, I think I’ll be working till I’m 90 BUT quite honestly having spent 6 weeks at home I will happily work till I drop. I really miss the people and that is something everyone in hospitality will be struggling with, because it is a people business.
Moving forward we still need answers on aspects of furlough. We also need more support coming out of this. The deferred VAT that needs paid in Q1:21 might be too much of an ask and we may need that deferred again. I think the restaurants and bars along with staycations at hotels in the country and seaside will come out of this much quicker than city centre hotels. I try to tell myself otherwise, hoping there will be lots of people who want a party in the city, eat out, go to the movies and get their lives back to ‘normal”’quickly.
If the government just ends furlough then we go back to pre-furlough days and mass redundancies. With a forecast of less than 40% hotel occupancy till the end of the year and business not expected to be ‘normal’ until the summer of 2021 we can’t just keep on adding to the mounting debt as there will be little point as many will just bust. We probably need another year’s property rates holiday and a continuation of furlough for those in travel and tourism. Otherwise, there was no point in introducing furlough to keep people in jobs. in the first place.
As I look back and try to reflect on what we did well and maybe not so well I remind myself; we make the decision based on the facts we have at the precise time and I haven’t spoken to any business owner that isn’t and wasn’t trying to do the best for their staff because, without them, we won’t have a hospitality industry to re-open.”