The Economic Effects of the COVID-19 Pandemic on the Hospitality Industry

Abstract:

Most Economists consider the time period of the COVID-19 pandemic the weakest the

economy has been since WWII. Many people and businesses were severely impacted

from this virus and the hospitality industry was certainly no exception. In this paper, I will

be examining how exactly the pandemic impacted the hospitality industry as a whole as

well as some strategies and policies used to mitigate these adverse economic effects. I

will compare parallels from the healthcare industry related to the catastrophic financial

challenges of the pandemic. In this paper, we will discuss the economic impact of

COVID-19 on the US healthcare and hospitality industries. The methods that will be

used to come to my conclusions will be based on previous research of various

academic sources regarding the effects of the hospitality and healthcare industries

during the pandemic. In the literature reviews, I will be going over the main idea of each

paper and how it correlates to the question being presented today as well as how these

lessons can be implemented for future uses in similar scenarios. The objective of this

review is to clearly define how these specific industries were affected from the

pandemic and how they were able to react to adverse effects pandemic.

Keywords: COVID-19; Hospitality Industry, Economy, Economic Effects

1. Introduction:
One of the most memorable experiences that the world lived through during the

Pandemic was lockdown. Chances are that your country went through one of several

lockdowns throughout the duration of the pandemic. Not only was this devastating

mentally and socially, it was catastrophical for the economy, especially in the hospitality

sector. This includes the restaurant industry, hotel industry and the tourism industry.

Many countries’ entire economies rely on the last two industries so the temporary

stoppage of these sectors resulted in devastating impacts. In this paper, I am going to

examine the extent of which the pandemic harmed the hospitality industry during the

pandemic. There is very conclusive evidence that it obviously caused huge economic

downfalls but there is also support that this obstacle made some countries rebound

stronger. It is important to see exactly what happened and how bad it was to predict and

possibly even prevent adverse effects from a similar future event. The data being used

will be from pre-existing works and will be presented and analyzed to support or refute

whether the pandemic negatively impacted the hospitality industry. The sources that will

be presented are “The Hospitality Industry in the Face of the COVID-19 Pandemic:

Current Topics and Research Methods.” by Davahli, Mohammad Reza, et al; Taking a

Break Is for Accomplishing a Longer Journey: Hospitality Industry in Macao under the

COVID-19 Pandemic.” Liu, Matthew Tingchi, et al; Government Commitment to Tourism

and Hospitality Sector during COVID-19 Pandemic.” Allaberganov, Azizbek, et al;

“Tourism and Hospitality Industry during COVID-19: An Economic Perspective.”

Mohamed, Muharis, et al and; “COVID-19: hotel industry response to the pandemic

evolution and to the public sector economic measures” Anguera-Torrel, Oriol, et al.

2. How the Pandemic Affected the Industry as a Whole

 When we think back to the peak of the pandemic, one thing that was universal

around the world was travel bans. As expected, the entire hospitality industry suffered

worldwide. This is seen in the form of record low revenues and job layoffs. We are going

to go into detail on the short-term and long-term effects of the Covid-19 pandemic on

this industry as seen in various sources previously mentioned.

To begin, we will be focusing on the effects of the pandemic on specifically the

hotel industry but then expands into hospitality as a whole. The authors of these studies

start off by acknowledging the devastating impact on the U.S. hotel industry. As of June

3, 2020, six out of ten hotel rooms were empty across the country, and almost half of

the hotel industry employees were not working. By August 2020, the situation had

improved slightly, with five out of ten rooms empty and about half of the employees back

to work. They continue to examine the current research on the hospitality industry in the

face of the COVID-19 pandemic by reviewing literature to identify and classify research

that focuses on the hospitality industry. The primary purpose of the systematic review

was to identify, summarize, and analyze the findings of all relevant individual studies

that are addressing the effects pertaining to the industry. They found that the pandemic

has had a significant impact on all aspects of the hospitality industry, from travel and

tourism to hotel operations and employment. The paper concludes with the fact that the

hospitality industry is facing a number of challenges in the wake of the pandemic.

However, they also believe that the industry is resilient and will eventually recover. The

authors call for further research on the hospitality industry in the time of COVID-19 to

help the industry adapt to the new normal (Davahli, Mohammad Reza, et al).
 Another one of these sources that provides information on the effects of the

pandemic is “Tourism and Hospitality Industry during COVID-19: An Economic

Perspective.” These authors go over the devastating impact on the global tourism and

hospitality industry as a whole. It mostly started when governments around the world

implemented a number of measures to reduce inter-person transmission of the virus,

including lockdowns, social distancing, travel restrictions, and stay-at-home orders.

These measures have forced many hospitality businesses to close temporarily or

permanently, and have led to a dramatic decline in demand for travel and tourism. For

example, it is mentioned how the U.S. Travel Alliance and Oxford Economics projected

that the COVID-19 pandemic would lead to a decrease in direct travel expenditure of up

to $519 billion in 2020, reflecting a reduction of $1.2 trillion in economic production. As

stated in the paper, it was nine times more financially impactful than the 9/11 terrorist

attacks. These statistics illustrate the destructive impact of the pandemic on the travel

and tourism market and the number of challenges it faced, including a sharp decline in

demand, Increased operating costs, labor shortages and supply chain disruptions

(Mohamed, Muharis, et al).

 - Figure 1: International Tourism Receipts (Source: UNWTO, 2020)

Both of these papers attest to the damage of the hospitality industry, foreign and

abroad during the Covid pandemic. We will now go into exactly some of the methods

used to mitigate the effects of this phenomenon as well as lessons learned to help

prevent future damage.

 3. What Measures were Taken to Mitigate Adverse Effects

While this entire industry was hurt badly from these catastrophic events, these

businesses didn’t just take it lying down. There were plenty of policies and measures

put in place to alleviate the economic immense stress of the pandemic. From individual

company decisions to nationwide policy, many things were done to lessen the blow in

any way possible to keep business running and possibly even profitable. Now we will

see specific instances that took place.

Looking specifically at a popular city-state’s (SAR specifically) response to the

pandemic, Macao fared well in the midst of the pandemic. As per sources, Macao

successfully managed the adverse effects of the pandemic. The Chinese and Macao

governments, their hospitality industry, and other stakeholders have worked together to

respond to the pandemic ,while Macao’s residents received government support to help

them through this economic disaster. This aid came in the form of consumer

e-vouchers, increases in the amount of professional tax refund, exemption from

property taxes and electricity bills, raising the deduction limit for income tax, temporarily

exempting tourism tax, granting a one-time allowance for qualified employees and

businesses, and offering loans and guarantees for bank loans for qualified SMEs (Small

or medium-sized enterprise). In addition to all of these policies, the researchers found

that having a crisis warning system was crucial for businesses to survive the pandemic.

They recommend that SMEs adopt a comprehensive crisis warning system that

considers both financial and non-financial factors (Ferris et al., 2007; Maniero & Gibson,

2003). SMEs should also provide training for managers on crisis stress management

and resolving conflicts in the workplace (Kurschus et al. 2015). SMEs that are dynamic
and innovative and are willing to learn from crisis events are more likely to recover

quickly (Boin, 2008; Eillott, 2009; Elliott & MacPherson, 2010; Saunders et al., 2014). As

it can be seen, the Macau government has implemented a number of policies to support

businesses and residents during the pandemic while businesses own policies also

helped (Liu, Matthew Tingchi, et al).

The hospitality industry of Macao certainly managed the pandemic well but this

wasn’t the only case of a country and its businesses using policy to relieve themselves

of pandemic trauma. Studies for the country of Uzbekistan show similar action of using

policies and strategies as protection. Uzbekistan, like other tourism destinations around

the world, was hit hard by the economic impact of COVID-19. In response, the

government of Uzbekistan implemented a number of policies to support the tourism and

hospitality sector. These policies included: A decree aimed at restoring the tourism and

hospitality sector with strict observance of sanitation and safety protocols; A program

called "Uzbekistan Safe travel GUARANTEED" that provided $3,000 to anyone who got

Covid-19 while traveling in the country; a stability package that includes broad tax

breaks and holidays for the economy, with the deepest breaks going to SMEs in the

tourism, hospitality, catering, and education industries; strict border regulations and

movement of tourists, with the country divided into red, yellow, and green zones based

on the number of COVID-19 infections (Regions with the green and yellow tags were

allowed to receive tourists, while red zones were off-limits)(Uzbekistan, 2021). In

addition to those policies the government of Uzbekistan also recognized the importance

of marketing the destination image and branding to attract tourists which helped

maintain their tourism industry (Lam and Ryan, 2020). Together, these policies and
practices have helped to mitigate the economic impact of the pandemic on their tourism

and hospitality sector. By working together, the government and the tourism and

hospitality sector helped to ensure the recovery of this country’s economy

(Allaberganov, Azizbek, et al).

Two completely separate countries did

an extremely good job of fighting off the

pandemic and preserving their precious

hospitality industries. By using the power

of policy and strategy, these countries

employed creative tactics to entice

consumers to boost their economy keeping

their respective communities safe. These

specific measures that were taken were

proven to be effective in a situation where

tourism was discouraged.

-Figure 2: Resilience, Dynamic Learning and Strategic Renewal for SMEs 2023

4. Conclusion

Considering all of the results of the studies being presented, there is one clear

takeaway to be made. The Covid-19 pandemic severely harmed the global hospitality

industry. Through the analysis of different texts on the matter of the pandemic as its

relates to the hospitality industry, we were able to see the precise damage that occurred

as well as how the sector faced these challenges.

 The First section sets up the adversities themselves as they relate to the global

hospitality industry like the sharp decline in demand, Increased operating costs, labor

shortages and supply chain disruptions (Mohamed, Muharis, et al). Not only this but the

loss in consumer base and revenues made it hard for these businesses to even remain

open (Davahli, Mohammad Reza, et al). The second section then expands on the

retaliation of governments and businesses on the siege that the pandemic waged. From

domestic policy changes to simple crisis management plans, some countries were able

to very successfully combat these negative effects while bettering their hospitality

industry for future endeavors (Liu, Matthew Tingchi, et al). Seeing the beginning and

then end of the pandemic and how this particular industry reacted will provide great

future insight on preventing terrible effects that were seen during 2020-2022.

Though there may be some more questions concerning this topic like whether

these strategies were only situational based on the country or if the revenue losses

during that time for many businesses was solely due to the pandemic, the knowledge

gained from this paper is still valid. In general, in seeing how these solutions

counteracted these problems, it can easily be said that what was done was successful

and can definitely be implemented in the future. The Covid-19 pandemic had a

catastrophic impact on the hospitality industry but it was able to ultimately overcome

and better itself for the future.

 5. Bibliography:

1.Article Citation: Davahli, Mohammad Reza, et al. “The Hospitality Industry in

the Face of the COVID-19 Pandemic: Current Topics and Research Methods.”
MDPI, 9 Oct. 2020, www.mdpi.com/1660-4601/17/20/7366.
Database URL: https://www.mdpi.com/1660-4601/17/20/7366
Keywords: COVID-19 pandemic; hospitality industry; impact; tourism;
……………systematic review

2. Article Citation: Liu, Matthew Tingchi, et al. “Taking a Break Is for

Accomplishing a Longer Journey: Hospitality Industry in Macao under the
COVID-19 Pandemic.” International Journal of Contemporary Hospitality
Management, 4 Feb. 2021,
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Database URL:
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/html
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3. Article Citation: Allaberganov, Azizbek, et al. “Government Commitment to

Tourism and Hospitality Sector during COVID-19 Pandemic.” Tourism Critiques:
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Database URL:
https://www.emerald.com/insight/content/doi/10.1108/TRC-02-2021-0004/full/ht
ml
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4. Article Citation: Mohamed, Muharis, et al. “Tourism and Hospitality Industry

during COVID-19: An Economic Perspective.” iRASD Journal of Economics, 12
Dec. 2020, journals.internationalrasd.org/index.php/joe/article/view/150.
Database URL:
https://journals.internationalrasd.org/index.php/joe/article/view/150
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 5. Article Citation: Alves, Jose C, et al. “Crisis Management for Small Business
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