How hotels are surviving amidst COVID-19

Facilities have lost more than $320m since March 2020 due to the effects of pandemic

Kampala, Uganda | JULIUS BUSINGE | Hotels in Uganda are operating in red since they resumed operations, but operators are optimistic that business will return to normalcy soon.

The COVID-19 outbreak in the country in March 2020, triggered government to institute a raft of measures including closure of airports and hotels to contain its spread.

While the facilities were allowed to resume business at the end of May 2020, running costs went up as a result of the newly instituted Standard Operating Procedures (SOPs) including social distancing, washing hands, using sanitizers and wearing of masks which had to be adhered to.

“We are still operating in red,” said Jean Byamugisha, the Executive Director of Uganda Hotel Owners Association (UHOA) on Feb.03.

“We are still operating at a fraction of the capacity and all projections indicate that we shall maybe start seeing some sort of stabilisation if all factors remain constant, in the second half of 2021,” she told The Independent.

New survival tactics

For that, Byamugisha, said a section of hoteliers are now charging clients in local currency instead of foreign currencies; cut charges on some of the services. They have also become more flexible in service offering.

She says, some hotels in the countryside which were charging as high as $150 per night, are now charging less than half of that amount in a bid to attract clients.

Furthermore, a section of hotels are partnering with Uganda Tourism Board and the Ministry of Tourism Wildlife and Antiquities to cash on the local tourism potentials.

UTB has in the past months since re-opening of the economy, been designing a new campaign – with a new tagline for Uganda –aimed at promoting domestic tourism. It will be unveiled soon. Lilly Ajarova, the chief executive officer for UTB said as restrictions were relaxed in the 3rd quarter of 2020, the tourism body has been working with various partners such as UNDP to create awareness about the opportunities for domestic travel and as result, they have seen increased activity by domestic travellers, especially in the last quarter of 2020.

Ajarova said, UTB, led by its Board of Directors, have had several engagements with the Ministry of Finance, Uganda Development Bank as well as European Union, which resulted into the creation of a pool of Shs61.8 billion in a mix of grant and soft loans for the tourism sector, including hotels.

James Kasavubu, the head of marketing at Imperial Royale Hotel, a subsidiary of the Imperial Group of Hotels, said good performance in hotels is based on accommodation business.  But COVID-19 has seen them go without any booking for some days or weeks in some of their facilities.

“This is a general trend in the whole world, because there are no travellers,” he told The Independent.

Kasavubu said events and conferences are the other sources of income for hotels, but since the COVID- 19 outbreak, the only meetings held in hotel facilities are usually medium size and supplemented with the online platforms such as Zoom.

On the other hand, Ibrahim Sekandi from Rizi Arch Hotels, with facilities in Kampala and Mbarara cities, told The Independent that they are now focusing on managing and cementing their relationship with bankers, utility companies and customers as they wait for the business environment to improve.

Dwindling numbers

The country’s hotels have since July – December 2020 had occupancy rates of less than 10% compared to 58.2% recorded during the pre-COVID-19 period.

Yet, hotel facilities need to operate on an average of 40% occupancy rate to break even, according to industry executives.

So far, the country’s hotel industry has lost approx.$320million (approx.Shs1.1tn) since March 2020 due to poor business caused by coronavirus lockdown measures within Uganda and beyond.

Globally, the World Trade Organisation (WTO) figures released on Jan.26, indicates that services trade (where hotels belong), in the third quarter of 2020 fell 24% compared to the same period in the previous year.

This represents only a small uptick from the 30% year-on-year decline registered in the second quarter, in marked contrast to the much stronger rebound in goods trade, the trade organisation says.

Preliminary data further suggest that, in November, services trade was still 16% below 2019 levels and that prospects for recovery remained poor since a second wave of COVID-19 infections necessitated new, stricter lockdown measures in many countries, with tightened restrictions on travel and related services extending into the first quarter of 2021.

The latest statistics confirm earlier expectations that services trade would be harder hit by the pandemic than goods trade, which was only down 5% year-on-year in the third quarter.

WTO says unlike goods,  services cannot be stockpiled, which means that despite pent-up demand, many of the revenue losses from cancelled flights, holidays abroad, restaurant meals, and cultural/recreational activities are  permanent.

Travel remains the most affected service sector, down 68% globally compared with the same period of 2019.

Available data also shows that spending by international travellers in the third quarter of 2020, was down 88% in Latin America and the Caribbean, 80% in both Asia and Africa, 78% in North America, and 55% in Europe.

The relaxation of travel restrictions in Europe during the summer months produced only a modest rebound in services trade in the third quarter, the organisation says.

Optimistic players

Kasavubu, however, says all is not lost. “We have hope definitely,” he said though sceptical that the new lockdowns in Europe and other markets could prolong recovery times of hotels going forward.

He said the facilities are currently keeping a manageable number of staff whilst keeping an eye on power, water bills and procurement processes hoping for the situation to get better.

Byamugisha said some members of UHOA are banking their hope on accessing credit from UDB.

She revealed that some 96 hoteliers under UHOA have applied for the loans, and 66 of them have passed the first stage of determining beneficiaries.

“If we are lucky we shall be getting it in the first quarter of this year or in the second quarter,” she said.  “It is very frustrating but for us who are working with UDB, we understand the processes…it is a new product and they have to make sure they are operating honestly, truthfully,” she explained.

Byamugisha revealed that UDB is in the final stages of reviewing their loan applications and that the feedback would be received by the end of this month.

However, UDB executives were not available for a comment by press time.

Byamugisha said they are optimistic that tourism will gain momentum soon citing low hotel rates.

“It may take longer than what we had originally predicted but in the meantime these facilities are open and are heavily discounted,” she said, adding, “we are slowly returning to normal and we need to continue with the vicious cycle of economic growth,” she said.

Similarly, Sekandi says he is hopeful that access to credit from Uganda Development Bank (UDB) could save their facilities to keep their business as a going concern.

He said the move by banks to respect Bank of Uganda’s directive on   restructuring loan facilities that hoteliers had earlier acquired prior to COVID-19 lockdown, was welcome and would add to the efforts being implemented to keep business running.

However, he said, such interventions are technically good but may not serve as tangible sources of clients to the hotels in the short term to enable them thrive like the pre-COVID-19 period.

Uganda’s hotel industry statistics

• 6,291 – Hotels in Uganda.
• 97,511 – Rooms
• 103,261 – Beds

Status in 2020

• 8 in 10 cancellations in reservations in the period March – June 2020
• Hotels have so far lost $320million since March in business
• Projected to lose USD half a billion dollars by December 2020
• 85% of all booked conferences have been cancelled in 2020

Employment Status

• 156,718 (57.2%) of all staff are on unpaid leave
• 94,512 (34.5%) of all staff have experienced pay cuts
• 20,059 (7.3%) are still on full pay
• 2,705 (1%) have been officially laid off

Occupancy rates

• Occupancy rates stood at 58.2% by December 2019
• 5.3% occupancy between March – June 2020
• Estimated 10-20% fluctuation occupancy between July– December 2020

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