COVID-19 and its impact on the hotel industry

The spread of the COVID-19 virus is causing difficult times, especially for tourism and the hotel industry. Not only the city hotel industry is affected by the pandemic due to the cancellation of trade fairs, but also the holiday hotels are experiencing a significant increase in cancellations and a drop in bookings. In this situation, quick price reductions are definitely not the right solution. Especially now, well-thought-out price strategies and well-founded decisions are extremely important. 

In Italy, the most affected country in Europe, the decline of occupancy in the hotel industry is definitely undeniable. However, the DACH market is also suffering from the indirect consequences of COVID-19 due to the cancellation of leading trade fairs and the business-travel restrictions.

Also, holiday hotels do not remain unaffected! Hotels and ski areas in Salzburg, Vorarlberg and Tirol closing on the 16th of March, cancellations of events, the collapse of the Asian travel markets or the cancellation of numerous flights. The detailed reasons don’t really matter in terms of the booking situation, the fact is: the hotel's occupancy and revenue are dropping!

Developments in Italy and Austria

Particularly since the region "South Tyrol" was classified as a risk area by the German Foreign Ministry, a new peak of cancellations has become apparent for Italy's number one winter tourism region. Many ski resorts were forced to close their lifts in advance, which lead to an overall early ending to the season for the surrounding hotel businesses.

With 10.03.2020 the Italian government took one step further and declared the whole country as "protection zone". Regulations such as the temporary closure of schools or kindergartens, the closing of restaurants, the cancellation of events or the appeal "to stay at home", resulted in drastic restrictions for the local population as well as for the economy. 

Also the Austrian government reacted with its own measures on Tuesday evening, since the 10th of March 2020 any border crossings from Italy without a medical certificate are being denied. According to Chancellor Sebastian Kurz, returns for Austrians have already been organized with the Foreign Ministry. However, all returned tourists will have to spend two weeks in a home quarantine as a precautionary measure. 

This currently leads to a shutdown of tourism in the travel destination Italy.

Implications for the hotel industry

The core problem for the entire hotel industry is the resulting drop or loss of demand, both for the current period and for the coming weeks and months. Some regions are affected more than others, but for all of them it is important to keep calm and not to dump prices pointlessly. After all, the rule is: even with low prices, customers will not travel to certain regions. Lowering prices will devalue existing demand even further. 

The online travel agent booking.com informed the majority of hotels that Covid-19 was a case of higher forces and therefore all cancellation policies from the customer are invalid. How accommodating every hotel reacts in terms of cancellation is ultimately up to each host individually. 

How should you, as a hotelier, ultimately behave? What cancellation policies should be followed and how accommodating should you be to your guests? Which price strategy is the best for your hotel in this situation, both short term and during the summer? In the following guide, our revenue management experts have summarized important tips on how to behave during the Corona crisis.