It is difficult to imagine a more brutal series of circumstances than those that have assailed the tourism and hospitality industry as a direct result of COVID-19 – being forced to close the doors, stand staff down, face restrictions on how you can operate, and essentially be helpless as you watch your business crumble.
|Lessons from the pandemic for tourism and hospitality businesses |
Around 90 per cent of tourism firms in Ho Chi Minh City had suspended operations due to the pandemic’s impact on their revenues. An estimated 20,000 tourism employees, or 70 per cent of the total, will remain off work without payment until the disease is contained.
COVID-19 has proven that there is no certainty in business and there are unknown factors or events that could affect your operations at any time when matters move beyond your control. Therefore, you need to focus on what you can control.
Forecasting and budgeting are excellent business processes to assist in identifying your cost drivers, and thus know how and where you should act to reduce costs quickly. Businesses with good budgeting and forecasting in place prior to the pandemic were able to respond faster and in a more focused manner.
The sudden absence of cash flow was an immediate effect of the shutdown. Businesses with stable cash flow in place generally had higher reserves available to draw on in the first place and were able to stem the bleeding much better. The ability to adapt is a key factor. Businesses that can
adapt by generating alternative sources of income or continuing to operate in a different manner will have a much better chance of survival.
There are multiple examples of firms who changed their normal mode of operations in response to the pandemic. How effective these alternatives were for those businesses is still an unknown, as there was no doubt both hits and misses, but it is certain that some businesses will not go back to their pre-pandemic ways.
Staff is a major cost for most tourism and hospitality businesses, so paying multiple people their full entitlements upon termination was going to result in a major cash flow shock and potentially unsustainable.
The lump sum payouts of annual and long service leave were not part of the normal business planning process. Whilst the accrued hours were recorded in the payroll system, the accounting management reports, or annual financial statements did not show a cash value liability.
Staff entitlements are a real cost to business and need to be managed from when the staff is first employed. Every business should record the future cost in their financial accounts and most importantly, maintain cash reserves for any accrued employee entitlements that is to be paid upon termination. This transparency also allows the business owner to ensure their employees take regular leave to manage the total amount of the liability for the business.
The human element became more apparent during these stressful times, and your staff will always look up to you for leadership. Be prepared to spend time on these relationships, and most importantly, do not forget to take care of yourself.