After the Corona virus crisis?ما بعد أزمة فيروس كورونا؟ قطاع فنادق الخمس نجوم في عمان دراسة تحليلية-2

World of Tourism – Analytical Study 2

After the Corona virus crisis? The five-star hotel sector in Amman is
an analytical study.
The tourism sector in the world in general and Jordan in particular is exposed to a direct external economic shock, caused by the outbreak of the Corona pandemic, which has no secret effects on many and the extent to which this vital sector has been affected during the current and upcoming stage, no doubt. Most tourism, including hotels, will face a critical stage in its permanence, continuity and ability to cover its expenses after the end of this crisis, God willing.
In Amman, the beloved capital of Jordan, there are about 18 five-star hotels, and these hotels were distributed in different regions and play a vital role in providing tourist logistics services, including regular tourism services, business and corporate services, conference tourism, medical tourism, weddings, food and drink services, and other various services, Most of these hotels are managed by international management and operating companies specializing in the field of management and operation according to international standards and specifications, and they have various brands that depend on the nature of the hotel, its facilities, the area of ​​the rooms and others.
These hotels as a whole in Amman achieved total revenues in 2019 about 135 million dinars, with an average operating profit rate of about 22%, and thus the state treasury provided about 22 million dinars as a general tax on sales in the same year, and works in these hotels as direct labor about 5,727 employees estimated The percentage of Jordanian employment is about 95%, and the occupancy rate in it in 2019 was about 59%, and the rate of renting to the room is about 94 dinars, and the proportion of food and drink revenue from the total revenue of these hotels is about 39%, and the break-even point for these hotels was about 70% – 80 % In 2019, and attracted these hotels in 2019, according to the statement T published by the Ministry of Tourism is about 1.
Beyond this pandemic, there is no doubt that these hotels will face, at the very least, three expected stages, which are as follows:
The first stage: which is the stage we are currently witnessing that can extend for a period of no less than four months starting from April to the end of July 2020, which will witness government measures Tightened by the government with regard to foreign tourism in all its forms and the opening of air traffic and border crossings.
The second stage: It is the stage that takes place between August and December 2020, and which is expected to witness a gradualization and mitigation of government measures.
The third stage: It is the stage of 2021, which is expected to return life to normal as it was before the crisis, at a rate of about 85%, God willing.
And based on what will the financial and operational performance of five-star hotels, particularly during the first and second phases, lead to? And how will these hotels face the big obligations that they have? In the light that these hotels mainly depend on foreign tourism of all kinds.
Through an analytical study of the published figures for the performance of these hotels and in light of a set of assumptions accompanying each stage of the first and second stages (writer’s estimates), which include:
1. The average occupancy rate during the first stage will not exceed 12%, and during the second stage it will not exceed 32%, and as an average A year for all months of 2020, including January and February, that is, before the start of this crisis, will not exceed 28%.
2. The room rental rate, as a result of increased competition and an attempt to increase occupancy rates, is expected to not exceed 80% of the rental rates achieved by hotels during 2019.
3. Maintaining the current employment, not laying off employees, and keeping employment rates as they are.
4. The difficulty of reducing and reducing most of the fixed operating expenses of hotels, of which the cost of salaries is about 65%.
5. Reducing the cost of energy, through the self-effort of hotels, to about 75% of the annual bill cost incurred by hotels in 2019.
In light of these assumptions and after recalculating the financial performance of the total of these hotels, it is expected that the revenues of all hotels combined will decrease to the limits of (52) million dinars, i.e. a decrease of about (62%) from the year 2019, and it is expected that these hotels will achieve a negative operational profit in total. With a decrease of about (115%) from 2019, which means that as a result of these hotels, they will experience a financial shock that directly affects the cash liquidity, and therefore it is expected that part of these hotels will not be able to cover its variable and fixed operating expenses, which will be paid in order to reduce costs. Searching for the shortest methods, the most important of which is the cost of salaries, and therefore Work to lay off a group of employees and thus increase unemployment rates in this sector.
So how is it possible to maintain, and at a minimum, the level of financial performance that contributes to enhancing the ability of these hotels to maintain their permanence and cover their operating expenses, after this crisis? To answer this question, the responsibility falls collectively on both the government and the owners of hotels and their operators, including:
1 The necessity of working to reduce the cost of operational hotels, especially the cost of energy, which includes the cost of electricity, fuel and water, and this is the responsibility of the government.
2. The necessity of finding tax measures, especially for sales tax, motivational and support during the first and second stages, gradually, and this is the responsibility of the government.
3. Because Amman hotels, including five-star hotels, are distinguished as business and corporate hotels and not tourist resorts, it is extremely important to strive to find appropriate tourism programs through the Ministry of Tourism and the Tourism Promotion Authority and include these hotels within its system, with the aim of promoting domestic tourism, which is The most important of them is conference tourism, albeit at the expense of other geographical regions.
4. Work to continue to apply the reduced instructions for the contribution of these hotels to social security contributions, thus contributing to reducing the cost of salaries and thus maintaining employment rates.
5. Activating the role of the unified offices of the group of hotels owned by one side and distributed in all regions of the Kingdom, especially with regard to the back offices in these hotels.
6. Effective management of hotel facilities and work to find operational solutions for them in a way that reduces part of the operational costs associated with them, and this is the responsibility of hotel operators.
7. Avoidance of all unnecessary expenses and postponing it to the third stage, if possible, including the costs of replacement and modernization, and the cost of some operational matters that coincide with the occupancy rates, and this is the responsibility of the owner and operator.
8. Reducing and reducing the cost of debt service for some hotels that previously borrowed, and here the banks have a vital role in supporting this sector by providing facilities and complying with the instructions issued in this regard.
9. Canceling or reducing the service allowance, even if that affects the employee’s income, for a temporary stage in order to ensure a reduction in the rental rates and ensure the permanence of employment, in addition to stopping the staff’s increases at this stage until matters return to normal.
In the end, God protected the homeland as a leader, people, government, and security services, and helped everyone overcome this ordeal.
Written by: Dr. Murad Al-Bawab.