The hidden cost of the Coronavirus pandemic

In an Industry where employee recruitment is already a leading issue, the Tourism Industry has taken the biggest hit from the novel Coronavirus, with an estimated 50 to 75 million jobs to be lost in the Industry alone. Yet, savvy and more experienced businesses that do not lose sight of the long-term vision for the benefit of the short-term cash flow, know that laying off workers has significant costs, and rehiring and training new workers can be expensive.

Maintaining good employee morale means only laying off workers if it is absolutely financially necessary. The establishments and services that will recover will be the ones that will have taken this downfall in occupancy as an opportunity to finish all projects and renovations, who will have used this time to re-organise their businesses and eliminate inefficiencies, and who will have invested in training for their staff to be ready for when business returns. The impact on Human Resources from laying off employees and the cost of hiring and training, on top of customer complaints due to understaffing or lack of training, will ultimately cause the downfall of businesses when they reopen.



This current pandemic and its impacts are drastically different from any crisis any of us have experienced in our lifetimes. So, what makes it so different and what can we learn from the past?



When the Spanish Flu came along in 1918, the most severe pandemic in recent history, caused by an H1N1 virus, governments initially dismissed the severity of the crisis by saying that it was a normal influenza, and that as long as you took proper precautions, there was no cause for alarm. The virus ended up causing the deaths of an estimated 675,000 people in the US alone, and a minimum of 50 million people worldwide. Crowded conditions, the movement of troops during World War I, and the lack of vaccines and antibiotics all played significantly aggravating factors. Transparency from governments and international health organisation, and physical distancing are key until a vaccine is approved for global distribution.



It is still too early to estimate the total cost of this current outbreak, as the total length, reach, and governmental containment measures will all play a significant role in stumping the progression of this pandemic and its impact on the global economy. In terms of forecasted length, it can be useful to look at the pace of infection from past viruses, which also highlight why quick measures are key today.



SARS which first appeared in late 2002, disappeared within 2 years, with a total of 8098 reported cases worldwide, a close to 10% death rate and, most importantly, had a pace of infection of 130 days for 1000 people. MERS which appeared in 2012 and infected 2500 patients, displayed more serious symptoms and had a nearly 35% mortality rate, but took 2.5 years to reach 1000 patients. In contrast, this novel coronavirus (Sars-CoV-2) took just 48 days to infect 1000, with volatile death rates ranging from 1% to 4%, due to the lack of testing, and distribution of medical and safety capabilities and measures in certain countries.



How is the so-called Covid-19 different from the flu?



This virus is often compared to the flu, with today’s influenza estimated by the World Health Organisation (WHO) to infect 5 million people per year, with up to 650,000 fatalities. The difference is that the flu is seasonal with clear peaks and troughs, availability of vaccines and treatments, improved immunity from past infections, and is not contagious when asymptomatic. The biggest dangers with Covid-19 are that there is no immunity, no known treatment, no vaccine, and longer incubation periods during which the virus can be spread without symptoms for up to 24 days.



How will the global economy be affected?



Since the SARS outbreak in 2003, China has grown from the world’s sixth largest economy, contributing 4.31% of the global GDP, to the second biggest today, now contributing close to 20% of the global share of GDP. This has made China one of the main growth drivers worldwide, with the International Monetary Fund estimating that China alone accounted for 39% of global economic expansion in 2019. To quote HIS Markit’s latest report, “Therefore, any slowdown in the Chinese economy sends not ripples but waves across the globe.” A 2004 study estimated that the SARS outbreak in China cost the global economy around $40 billion, most of the loss caused by panic and not from the virus itself.



Even though they are all respiratory viruses, while this one is considerably less fatal, it is much more infectious, and we risk facing dramatic numbers. One hundred cases without shutdown grows at an exponential rate of 33% per day, the earlier social distancing measures are put in place, the easier it is to reach the peak and flatten the curve. Once we get past this, the economy will surge, with tremendous numbers of dislocated workers. To keep the economy from entering into a long-term recession, consumers need to be encouraged to spend by being re-assured that they are not at risk of losing their jobs, and with government subsidies to support businesses that are maintaining their teams. Covering the compensation of the unemployed will be vital in preserving people’s purchasing power, in order to minimise the impact on the economy and stimulate demand.



What we can hope for, is the rapid recovery of hotels as per what can be seen in China’s STR data, where occupancy doubled within the month after new cases stopped. After WHO issued a global alert on SARS, it took the Hospitality Industry six months to recover its occupancy levels, and ten months to recover the same REVPAR. Should we enter a global recession, the 2008 recession took a toll on hotel occupancy for 2.5 years in the US, and 3.5 years in Europe, with REVPAR impacted another half to full year, respectively.



Changes in the workplace that are to be expected, with more flexibility around remote working with refined online communication channels, and a reduction in the volume of work trips and meetings to bring down business expenses and carbon footprints. Sustainability concerns and awareness will grow in the customers’ mind, with an estimate of 50,000 lives saved this year in China from the reduction in air pollution alone. However, while awareness increases, immediate measures are taking away resources and restrictions from the current initiatives that exist to protect the environment, meaning that the long term impact could be negative.



There remains a dangerous under-estimation of infections due to faulty tests and inadequate quantities, as well as the disorganisation of the testing capacity and where it is directed. Moreover, foreigners in all countries should benefit from tests to protect the rest of the population. Vaccines are the key solution to end the cycle, with spatial distancing being the most effective solution to flatten the curve, and social solidarity encouraged for mental health and productivity. This virus is exposing some central vulnerabilities in medical and political systems worldwide while simultaneously spurring formidable acts of heroism, kindness and ingenuity. While medical and business reforms are immutable, the biggest question is, how will travel trends and behaviour be impacted in the long run.

Author: Helene Decamps | Chief Marketing Officer | Kingsmen Hospitality Services: hdecamps@kingsmenhospitality.com



KINGSMEN CORPORATION CO. LTD 760/280 Phattanakarn Soi 38, Suanluang, 10250 Bangkok, Thailand. Mobile: +66657609337, Email: info@kingsmenhospitality.com



Website: https://www.kingsmenhospitality.com; Facebook/Instagram: @kingsmenhospitality



LinkedIn: @company/kingsmen-hospitality; Twitter: @KingsmenTH



Series Editor: Christopher F. Bruton, Executive Director, Dataconsult Ltd, chris@dataconsult.co.th. Dataconsult’s Thailand Regional Forum provides seminars and extensive documentation to update business on future trends in Thailand and in the Mekong Region.