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The case for temporarily closing hotel and restaurant operations

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OPINION by Bill Barnett

As the final days of disruptive 2020 come screeching to an erratic end, hotel, and restaurant owners are peering into an unpredictable year ahead. Here in Thailand over the past week, the tourism industry has been shaken to its core over an uptick in Covid-19 cases and backroom speculation over fears of another round of lockdowns. (Restrictions, but not full lockdowns, have already been applied by a number of provincial governors, including in parts of Bangkok, Rayong, Nonthaburi and Pattaya)

With domestic tourism being the only operating segment at present, the market reality is that the lag in vaccinations could take 9 to 12 months in 2021. We are now facing a situation that it’s highly unlikely a significant reopening of international travel will effectively gain traction until 2022. What’s more worrisome for hotels that have been trying to survive low-levels of occupancy over the past 6 months is that the combination of anti-travel sentiment and volatile restrictions could see a worsening of trading conditions next year for an extended period.

No need to put on rose-colored glasses for tourism businesses here and the most relevant concern is how to survive, stay afloat, and manage cash flow. While every situation is different, there is a case for some enterprises to temporarily close and hibernate next year until borders are broadly open again. Did I hear a groan? Yes, reality bites. But the key messaging here is there is no point planning long term if you can’t fund up mounting losses for much of 2021.

Hotels and restaurant owners in particular now need to assess the situation on the ground. If you have been losing money over the past six months, can you continue to fund cash flow next year, month after month? The traditional tourism season in Thailand has shifted, and domestic holidays and weekends are the only real opportunities to claw back revenue.

Looking at hotels, big-box types versus smaller properties with decentralised systems are entirely different when looking at the viability of closures. Take into account fixed and variable costs and try to come to grips with break-even scenarios and cash resources. If you are in the red, are you prepared to fund up another 12 months of losses?

Moving into the New Year, the expected drop in travel in January onward is looming so it’s critical to do the numbers and decide what strategy is best for the businesses. If bank financing is in place, it’s time to start talking to lenders and if needed secure additional funding.

In 2020 Thailand’s hotel and tourism industry has stood tall and optimistic. I share the long-term optimism but the prospect that next year could swing downward more is a clear and present danger. Given hotels and restaurants are service-related, the ethics of retaining jobs is critical and has to be a primary focus, but if the operating losses result in later permanent closure, owners have not done anyone a favor by swimming against the current.

Let’s be clear, I am no in any way advocating the entire industry to temporarily close and retire to a dark room for zoom conferences and endless Netflix episodes. But the message here is if you are losing money now, and likely to be unable to fund a longer period of losses, take action now. In a passionate foray like hospitality, it’s imperative not to let a false sense of pride or fight take over reason and business sense.

My end of year messaging is just that, be prepared for worse days to come. It’s painful to write but if you plan, strategise and understand there is light at the end of the tunnel but you have to get to the end of the tunnel first, that is what matters. Look at your options in 2021 and I look forward to seeing all of you on the other side.

 

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37 Comments

37 Comments

  1. Avatar

    Fabien Boissonade

    Thursday, December 31, 2020 at 10:39 am

    Common sense, at last.
    Thanks.

  2. Avatar

    Kelly Cherkowski

    Thursday, December 31, 2020 at 12:11 pm

    Valuable experience & words of wisdom – thank you Bill for sharing your knowledge. Plan accordingly to live another difficult year with optimum in the latter parts or 2021 and 2022

  3. Avatar

    Issan John

    Thursday, December 31, 2020 at 1:44 pm

    The “end of year mesaging” sounds very clearly as if having milked the cheap labour market for years to make substantial profits, now’s the time to dump the staff, stop paying them the paltry salaries they can barely survive on without tips, and leave them to fend for themselves.

    Sadly, no real surprises but hopefully some will show rather more loyalty and responsibility to those who’ve made their profits for them.

    • Avatar

      Andres

      Thursday, December 31, 2020 at 3:18 pm

      Can you please take a break IJ, rest, relax, do something except just posting anti-everything comments. Don’t be just a ‘pest’ on this site. Have a happy 2021.

  4. Avatar

    Brian

    Thursday, December 31, 2020 at 1:50 pm

    It’s almost entirely self-inflicted damage by doom cultists. Nothing especially severe is going on with regard to health, if it is seen in the context of the seasonal illnesses that happen every year. Politicians and the media have simply agreed to beat the drum of fear and deliberately impoverish people. Already rich people are undoubtedly taking advantage of fire sale prices. They certainly are enjoying the way their smaller competitors are prevented from operating. It’s an incredible, shocking crime, and they don’t even bother to hide it. Listen to Klaus Schwab, and he’ll tell you outright that the plan is to use COVID-19 as an excuse to ram through sweeping unwanted changes to society and the economy.

    • Avatar

      Issan John

      Thursday, December 31, 2020 at 4:21 pm

      How “severe” would you like it to be?

      It’s around 30 time more “severe” than any other “seasonal illnesses that happen every year”, and that’s despite the precautions and restrictions, and not counting the deaths caused by postponed or cancelled tests or treatment for other issues.

      And who says Klaus Schwab’s proposed changes are “unwanted” since they’re widely supported by many elected and respected politicians and leaders, however unlikely they are to happen?

      • Avatar

        ipfunnyjohns

        Thursday, December 31, 2020 at 7:47 pm

        61 deaths in Thailand. You call that dangerous?

        • Avatar

          Issan John

          Friday, January 1, 2021 at 11:26 am

          I call it 61 too many but successful.

      • Avatar

        preesy chepuce

        Thursday, December 31, 2020 at 7:55 pm

        Please give it a rest, nobody’s interested… happy new year!

      • Avatar

        ipfunnyjohns

        Thursday, December 31, 2020 at 8:43 pm

        I would like it to kill at least 1000 Thai people in 1 year…. Even that wouldn’t be very severe but it would at least be good start to make a rational case to simply wear a mask… even then 1000 is pretty darn low. Wheres all the dead people. We were shown videos in feb of people dropping dead in china.

        Hey how come you never question the cycle threshold never being reported……

        • Avatar

          Issan John

          Friday, January 1, 2021 at 11:32 am

          As I explained previously about the “cycle threshold”, for the same reason that if a plane’s reported taking off or landing routinely I never question the angle.

  5. Avatar

    Bigsleazypappa

    Thursday, December 31, 2020 at 4:06 pm

    I see the DOOM & GLOOM merchants are out again OMG we know things are going to take some time to get back to normal but let’s look on the bright side guys!!!! We’re all getting older and time is ticking for example Iv just turned 70 years old retired and just waiting on selling my house in the UK then off to Thailand I go to see my beautiful 19 year old girlfriend. What’s so wrong with that??? Happy times around the corner guys let’s be positive!!! Happy new year and let’s hope 2021 will be better all round

    • Avatar

      Loutarzoon

      Thursday, December 31, 2020 at 4:34 pm

      After 70 y can apply for the name of Lord Sponsor, hope y can sexercise till 90 in great health.

    • Avatar

      Rasputin

      Thursday, December 31, 2020 at 5:56 pm

      Great choice of name you’ve chosen, ideal for a wind up merchant LOL

  6. Avatar

    Bigsleazypappa

    Thursday, December 31, 2020 at 6:30 pm

    I’m in great shape my friend I have the fitness of a 40 year old and ready for action!! My friends call me Chuck Norris ??

    • Avatar

      Rasputin

      Friday, January 1, 2021 at 2:21 am

      Well, good luck and wishing you a happy new year

    • Avatar

      Diego

      Friday, January 1, 2021 at 6:39 am

      Wow, so valuable opinion from the high of a 30 years experience.
      5 minutes reading “hey buddies, you’re fucked up, have two choices: death or suicide”.
      A good wish for the new year.
      Now I book my hotel for next week, if they haven’t followed yet Mr. Expert’s advice. Happy new year!

  7. Avatar

    Johnny Dee

    Thursday, December 31, 2020 at 6:56 pm

    Fantastic MR Big sleazy you’re DA MAN happy new year guys may 2021 be better all round ?

  8. Avatar

    Johnny Dee

    Thursday, December 31, 2020 at 7:04 pm

    You are a dirty old man bigsleazypappa but fair play to you for enjoying life unlike some miserable old people!!

  9. Avatar

    ipfunnyjohns

    Thursday, December 31, 2020 at 7:45 pm

    61 deaths in 2020 from covid. Many more die from food born illnesses. What has gotten into these people. What a covidiot.

    This sounds like a media attempt to close small businesses so the big guys do not need to compete and can raise prices, increase margins.

    If you’re going to close the pad thai stand, its only fair to close every 711, tops, etc.

    Let’s really nip this fake virus in the bud.

  10. Avatar

    London Al

    Thursday, December 31, 2020 at 10:19 pm

    I think this is overly pessimistic, the notion that all Thais have to be vaccinated before tourists are allowed in seems way too extreme, if the tourists are vaccinated and tested then they won’t give the virus to the Thai people and are therefore safe to enter and spend money.

    Of course only allowing vaccinated people in does rather limit the number of tourists in the short to medium term, but it will certainly be a significant improvement on 2020 and will ease cash flow problems to an extent, I’m quite certain the airlines and hotel chains will be lobbying hard for this, it’s not great but it’s a start which will be good for confidence.

  11. Avatar

    Cassandra

    Thursday, December 31, 2020 at 10:35 pm

    Although that might be a good business segment insight, one needs to understand the bigger picture to develop the right strategies. So called Zoonosis – infectious diseases jumping from an animal to a human – are happening more and more (COVID-19 is a Zoonosis) because human beings are more and more manipulating nature and are really “getting into any corner” (more close contacts with animals). This is not the last pandemic, but just one of many to come. Not to talk about all the disasters which are ahead of us related to phenomena such as the elimination of ten thousands of species and climate warming. Human beings have been manipulating earth in a couple of decades as it never has been manipulated all the million years before. But our capability to adapt to all the effects of these causes created is very limited (see the 2g COVID-19 viruses that disrupt our life in just one year (2g is the weight of all the COVID-19 viruses globally)). The party is over. The story with the “tunnel” is just a story, a believe or hope of people which did not thought things deeply enough. Tourism is one of the first industries that will ground – or has partially already grounded – on our way to extinction. Short term there is only one strategy: Deinvest in tourism and shift to other industries. Long term, think deeply about the avoidance of pain and survival. Money won’t help, you will need skills.

  12. Avatar

    just curious

    Thursday, December 31, 2020 at 11:36 pm

    doesn’t anyone at all find it a bit odd that 40-50 or more people are killed every day on the highways here, and at least a couple hundred more maimed, and nobody cares, other than the odd ‘tut tut!!!’ editorial at major holiday times when the death/injury toll takes a bump – but 60 people die in a YEAR!!!!!! from a ‘disease’ very clearly less harmful than the seasonal flu for almost everyone – and we’re going to shut the whole country down and cause massive economic damage to millions of people”?!?!?!?!?!?!? – seriously???? Has everyone lost their minds?????

    • Avatar

      g

      Friday, January 1, 2021 at 1:02 pm

      lol

  13. Avatar

    Toby Andrews

    Thursday, December 31, 2020 at 11:37 pm

    Over thirty countries in the world allows travellers in without having to endure the overpriced quarantine Thailand demands.
    They take the risk and make tourist money, it is about time Thailand does.

    • Avatar

      Panda

      Friday, January 1, 2021 at 10:16 am

      I understand you can be frustrated Toby, however, I doubt you are qualified to give such advice.
      Thailand is fairly safe, thanks to the measures in place and the cooperation of Thai people.
      If you cannot afford the quarantine, go spend your time in Ukraine and save us the space.
      Since the travel restrictions, the beaches are clean, the streets are safe and we don’t need to coop with a large number of idiots talking junk and behaving like nutcases recently released from a specialized mental care house.
      Thai people don’t die of starvation and adapt. Meaning the country goes great without the money from cheap, disrespectful, selfish, stupid tourist.
      I hope it stays that way and never goes back to what it was before the pandemic.
      Mass tourism is a pest. Covid is a vaccine to it.
      Happy new year to all.

      • Avatar

        Dreamon

        Friday, January 1, 2021 at 6:08 pm

        Even stupidity it’s a disease, cure yourself, find a good doctor.

      • Avatar

        Peter

        Friday, January 1, 2021 at 7:46 pm

        100% correct, I couldn’t have put it better

      • Avatar

        Mike Frenchie

        Friday, January 1, 2021 at 8:45 pm

        Country goes great? This is blatant stupidity… Million of people skip a meal out of two and see their car, house repossessed… But yeah, old guy living on an European pension are happy!

        • Avatar

          Peter

          Friday, January 1, 2021 at 10:02 pm

          Only those who have been living beyond their means, fur coat and no knickers was a common expression for such people. BTW a european state pension doesn’t provide for much of a life in Thailand these days.

      • Avatar

        Toby Andrews

        Tuesday, January 5, 2021 at 10:36 am

        Oh I have this same reply before, apparently I have to be qualified to give an opinion.
        This Panda fellow states Thailand is safe thanks to the measures in place.
        Er, are you qualified to write that?
        He writes “mass tourism is a pest.” are you qualified to write that? If not go and get some qualifications before you write more rubbish.

    • Avatar

      Issan John

      Friday, January 1, 2021 at 11:40 am

      Enjoy your holiday in Afghanistan, Toby, but rwmember that on your return to Cambodia you’ll have 14 days of “overpriced quarantine” there instead.

      • Avatar

        Andrew

        Tuesday, January 5, 2021 at 2:03 am

        Cheaper than in Thailand. Visit Cambodian Embassy in Thailand website for all the details.

    • Avatar

      Ben

      Saturday, January 2, 2021 at 7:12 am

      Tourism businesses should plan for the worst and hope for the best. Sound advice.

      But minimizing COVID and Thailand’s efforts and suggesting they change course is not sound advice.

      Let’s throw out some facts.

      -UK population = 67M and Thailand has 70M
      -UK COVID deaths = 73,512 and counting and Thailand has 63

      Most Thai’s would consider 74K plus deaths doom and gloom. Is anyone going to claim what’s happening in the UK to be insignificant? If Thailand adopted UK policies they’d likely have a lot higher death rate than the UK is experiencing now. Thailand people live in multigenerational households and their health care system is not as good as the UK. Without vaccinations, treatments and better testing it’s too early for Thailand to open up unless they want to be like the UK or worse with a few more tourists on board.

      Thailand will open up when the benefit to open up is greater than the cost. Probably when most of the west is vaccinated and Thailand is well into it. They will not base it on Toby’s judgement which is driven by the need for cheap sun, booze and girls. For the many Farangs that feel like Toby you’re making the case for why some Thai’s feel you’re not very smart. This attitude smacks of entitlement and you have none of that in the land of smiles. You’re not any more special than anyone else that is a visitor and spends money.

      In America if Thai’s expats suggested all Americans should wear masks, social distance and be safe they would be told to go back where they came from and stay out of our business. Are you understanding how Thai’s feel about your bad advice?

  14. Avatar

    Bigsleazypappa

    Friday, January 1, 2021 at 3:43 am

    My friend Rasputin I wish you and you’re family good health for the new year

  15. Avatar

    J West

    Friday, January 1, 2021 at 2:57 pm

    Let the adults into the conversation, tourism is dead, the prostitution industry is dead, it’s not coming back….now what? Here’s a suggestion. Instead of the “entertainers” etc falling into poverty, being driven from village to village servicing drunken rice party parties, and other sordid demeaning acts in Covid-rife borderland casinos, let government and business show some leadership. It’s time to build a new deal for Thai citizens based on dignity.

    Suggestion: Develop a national vocation program that interns thousands of low income Thai into skills development of every kind. Build schools for Thai kids to learn and be sheltered from the Covid economic tsunami. The students will sign two year attendance contracts and be fed and housed in dormitories purpose built to keep young men and women out of the sex industry.

    A repayment plan from future wages can be along the lines of a employer/ employee contribution program that in turn funds new programs. A program like this would be much cheaper in the long run that the catastrophic costs of a large percentage of a major industry underwritten by the proceeds of a criminal enterprise and the debauchery of international low life.

  16. Avatar

    gigi

    Friday, January 8, 2021 at 1:42 pm

    How much do you like to chat here, you who live on income, in a tropical island … Come to cold Europe with all the inconveniences that the virus has brought here. Speak well, international schools, and we know how much they cost, I like Singapore, or, no, I prefer Bali and so on !!! Feel lucky to have what you have, which for many is and will always remain a dream

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Bill Barnett has over 30 years of experience in the Asian hospitality and property markets. He is considered to be a leading authority on real estate trends across Asia, and has sat at almost every seat around the hospitality and real estate table. Bill promotes industry insight through regular conference speaking engagements and is continually gathering market intelligence. Over the past few years he has released four books on Asian property topics.

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