Problems With the Hospitality Industry by COVID-19 Proposal

Business Needs

The COVID-19 outbreak has brought the entire world to a standstill in a matter of mere months. The pandemic is unprecedented in terms of scale and profoundness of impact on various sectors of economy. Those of them that rely on travel and gatherings of people such as tourism and entertainment have arguably been hurt the most. American Hotel & Lodging Association (AHLA) (2020) shares pessimistic facts and figures regarding the reality and prospects of running a hospitality business in the United States amidst the pandemic. The following information is instrumental to understanding our client’s case, LaGuardia Airport Marriott hotel located in Queens, New York. Across the country, two out of three (65%) hotels have fewer than 50% rooms occupied. Financially, it is well below the profit level at which hotels can break even and pay off debt. Since the historical low travel rate in April, some hotels have seen more guests. Yet, they are still at risk of shutting down or function at low capacity due to their inability to hire back staff.

While the aforementioned facts applied to all American hotels, it should be noted that our client is in a more nuanced position. Major American cities have become the breeding ground for the pandemic, which is especially true for the nation’s largest city, New York City. NYC has seen 245,000 cases since the start of the pandemic. What is worse, every tenth death from the coronavirus takes place in New York: the national death count of 201,000 vs the NYC death count of 23,780. It is not surprising that leisure and business travelers avoid New York out of fear of infection. American Hotel & Lodging Association reports that urban hotels have taken the hardest hit compared to suburban and countryside facilities. Their average occupancy rate is even lower, at 38%. The hotel industry in major cities is collapsing because it has long relied on groups of people travelling for business or recreation.

Another fact to keep in mind is the hotel class. Krishnan et al. use data to prove that economy class hotels will fare better during the pandemic, even though it might not seem feasible at first. Covid-2019 lowered the purchasing power of many travelers, which is why they are more likely to turn to more affordable options. Among such categories of guests, Krishnan et al. name truck drivers and extended-stay guests. Besides, to cover all costs, luxury hotels need a 1.5 times higher occupancy than economy ones that can still do well with a modest number of guests. Marriott positions itself as “a luxury hospitality brand”; it is a recognized name with a good reputation. Yet, during this pandemic, Marriott might have to work harder to mitigate losses and remain attractive to customers.

Proposed Products

Summing up all these facts, LaGuardia Airport Marriott hotel is in a vulnerable position. Surviving the pandemic requires introducing new disease prevention strategies, which includes new products. Surely, investing in installment and bearing all other expenses may come off as counterintuitive during a financially challenging time like this. However, the reality is that even if the most optimistic scenarios come true, the Covid-19 is still here to stay. McKinsey’s Krishnan et al. write that at present, there are nine scenarios of how the outbreak may unravel globally and in the United States. After interviewing industry leaders, McKinsey experts have come to the conclusion that two out of nine scenarios are the most viable. The more conservative one, A1, projects that the pandemic will linger into the next year, and US GDP will continue to suffer until 2023 (Krishnan et al.). A3 offers a more optimistic perspective, estimating that US GDP will recover in 2021 (Krishnan et al.).

Regardless of which scenario will take place, LaGuardia Airport Marriott needs to be prepared. This report proposes three products that have an excellent potential of helping the hotel to gain a competitive advantage in the time of adversity. The first is Face Analyst, a fast, precise, and intuitive device that serves two purposes: measuring guests’ and the staff’s temperature and checking whether they wear masks. The second is DesinfecTunnel, a tunnel that kills viruses, bacteria, and fungi. Like airport scanners, such tunnels require a person to enter them and stand still with arms stretched out. The disinfectant used in the device is harmless to humans, does not leave any smell or stains clothes. Lastly, high-performance ventilation systems are of great use against the spread of the virus.

Organizational Strategies: Infrastructure, Communication, and Technical Skills

Covid-2019 has already had a profound impact on many aspects of the hospitality industry. According to Hutchins, one such aspect is hotel design and construction that needs to take into account the reality of the pandemic. The author observes that today, hotel owners and developers have to put a greater emphasis on the health-related features of their property. Hutchins points out that it is luxury hotels such as Marriot that might have to make greater changes. In particular, she explains that luxury brands prioritize aesthetics and make design decisions according, for instance, by covering entire floor areas with carpets. Unfortunately, many materials that look pleasing to the eye are prone to collecting viruses and bacteria. Hutchins envisions stainless steel, porcelain, solid surfaces, glass commonly encountered in health facilities to be adopted by the hospitality industry.

However, it is not strictly the materials and design that matter. In fact, the entire infrastructure is in dire need for a change. The products proposed in this report follow a guest’s or staff member’s journey and offer solutions for each step their take. Access to the hotel is now to be granted only after passing through the DisinfecTunnel. Spending time in shared places requires that guests and members have a healthy body temperature and wear a mask, which is taken care of by Face Analyst. Lastly, what makes staying in the individual room safer for every guest is the high-performance ventilation system.

Without doubt, enforcing all these measures is impossible without having comprehensive policies and procedures at the hotel. Indeed, having a shared vision spares a great deal of trouble and miscommunication. While LaGuardia Airport Marriott hotel should tailor policies to meet its own needs, it has to also take into account worldwide and national guidelines. The World Health Organization (WHO) provides clear and straightforward recommendations for hospitality businesses. In accordance with them, first and foremost, our client needs to have an action plan. It should contain steps and deliverables to handle Covid-19 cases and mitigate the impact among guests. The WHO prescribes hospitality businesses to build a Crisis Team that would supervise staff members and ensure compliance with the use of the new products. Lastly, the hotel could benefit from a logbook where it would take note of all measures and actions taken to address the pandemic.

Communication is the glue that will hold all the parts of the plan together. Being able to communicate efficiently is especially important during crises as people tend to be easily overcome by emotions and act irrationally. It is not improbable that some guests might be put off by the new products and rules around them. Marples describes denial as a common phenomenon during the Covid-19 pandemic. Psychologists ascribe it to natural psychological defense mechanisms in humans. The World Health Organization recommends to resolve ambiguity and confusion by clearly setting expectations for guests and staff members. The key points can be conveyed in a meeting or a conversation. An acceptable alternative, if not an addition, is leaflets, posters, and fliers.

However, communication is not only about the ground rules, but it is also about reporting. The World Health Organization puts an emphasis on guests’ and members’ initiative in communicating information about incidents so that the hotel can make decisions quickly. There needs to be a system in place that allows all the stakeholders to quickly exchange reports and take action. It might be especially critical given the introduction of new products. For instance, if the Face Analyst detects a guest or a staff member with fever or violating health and safety rules, managers need to get a hold of the situation as soon as possible.

For all its advantages, the introduction of the new products is likely to require more technical and maintenance services. The World Health Organization states that more attention should be given to the condition of filters and the quality of indoor air. Since high-performance ventilation systems are part of this proposal, they need specific technical skills from the repair/ maintenance staff. The disinfection tunnel and Face Analyst also take time to get used to, even though the devices and software are user-friendly and intuitive. Therefore, staff are likely to need training and dedicate some time to reading technical information about the new products.

Supply Chain Strategies

The Covid-19 pandemic has exposed the vulnerability of supply chains. When discussing hotel design and infrastructure in the time of pandemic, Hutchins highlights the possibility of shortages. The author suggests a proactive approach in which hotels contact contractors and suppliers early to avoid deficits. Hutchins predicts an influx of new work for US contractors because of the increased demand. In this case, suppliers do have the upper hand on the market, dictating which businesses receive their products and services first.

Ng develops the conversation further, pointing out that the pandemic has caused a shift in hotel procurement. In particular, hospitality businesses are now more connected to suppliers. Everyone has to collaborate to mobilize resources and support structures. All the products proposed in the present report can be supplied locally, without burdening the struggling international logistics system. Additionally, if the devices need repair, there is no need to order new parts from afar. Taking these facts into consideration, a close, local network of suppliers during the pandemic will allow for uninterrupted supply.

Ng proposes a holistic approach to supply management in which critical situations are approached in a comprehensive manner. As seen in Image 1, supplier management is broken down into categories each of which can potentially be a growth area: (1) social, ethical & environmental, (2) operational, (3) strategic, (4) financial, and (5) continuity. The new procurement model applies to supply management in general, so the recommendations there are not exactly nuanced. It can be tailored to fit the LaGuardia Airport Marriott case. Right now, continuity, finance, and social, ethical, and environmental aspects pose the biggest risks to the hotel’s supply chain operations. As recommended by Ng, tackling the continuity issues requires rejecting the linear supply chain model and adopting the distributed, digital one. It is during the time like this that LaGuardia Airport Marriott needs to manage finances by reducing waste and materials intensity. Lastly, ethical labor practices, health, and safety are to prevail.

While all the aforementioned advice is valid, it provides only vague recommendations. The issue that our client has at hand is purchasing the new products without compromising its financial standing. Therefore, it is critical to discuss purchasing and price decisions. Broughton, a chief financial planner, says that during the Covid-19 outbreak, businesses’ budgets have been shifting wildly. According to Broughton, cutting losses and preparing for a long-term struggle may mean switching to zero-based budgeting. This expense-management approach requires justifying each line item on the budget. Conversely, more conventional budgeting strategies imply an adjustment to the last year’s expenses and cutting off top-line budget figures with a flat percentage derived from economic forecasts.

Zero-based budgeting might appear to be a time-consuming activity and an additional burden for a business. However, as reported by Broughton, other companies have so far benefited from this non-traditional approach. For instance, one of the world’s largest clothes and accessories retailers, Guess, cut operating costs by $60 million and brought capital expenditures down to $6 million. It is difficult to predict what LaGuardia Airport Marriott Hotel profits would amount to, were it adopt the zero-based budgeting. Still, it makes sense given that this year, it has to put new items on its budget – high-performance ventilation systems, disinfection tunnels, and Face Analyst software. Besides, an additional benefit is that while some cuts will be temporary, the overall efficient model may yield long-term benefits.

Last but not least is raw materials quality assurance, which is also critical to supply strategies. Again, the guidelines set by the World Health Organization may help navigate this aspect better. The institution insists on the enforcement of good manufacturing practices, purification of raw materials, and quality assurance of the end product. The new products proposed in this report are delivered and installed in their final form. Therefore, LaGuardia Airport Marriott Hotel does not have to worry about handling raw materials on site. However, it would still be a good idea to inquire suppliers about how they handle raw material quality assurance.

Logistics Management/Supply Chain Management

Inbound logistics is a term that refers to the network that transfers goods or materials to a company. This type of logistics encompasses all the operations needed for transportation, storage, and delivering goods. The type of goods or materials involved in inbound logistics depends on the type of industry that a business is in. Manufacturing businesses typically deal with raw materials while others may need finished products to deliver services to their clients. In the hotel industry, inbound logistics include food and beverage, cleaning and laundry service, security, and others. It is important to define exactly how inbound logistics will change with the introduction of the new products. Below is a list of some considerations to make:

1. Disinfect Tunnel requires a steady supply of the disinfectant that is water-based. The chemical is turned into a thin mist by the device and covers a person’s entire body to kill viruses, bacteria, and fungi. Surely, the occupancy of LaGuardia might not be exactly high. Based on the facts mentioned previously, it could be anywhere between 38% and 50%. However, since many guests and staff members leave and reenter the hotel, they need disinfection each time. The costs of inbound logistics in this case is still spared since Disinfect Tunnel has to be installed only once;
2. Face Analyst does not need a steady supply of raw materials or finished goods. The device requires a one-time installation, after which the hotel has to only invest in maintenance and technical repair. In this case, the only workload added to inbound logistics would be finding a technical specialist to take care of the software and hardware in the event of failure;
3. High-performance ventilation systems are installed once and only require some maintenance and technical service. Just like in the previous case, the hotel will need to have a specialist on call in the event of failure.

Inbound logistics are inherently associated with risks because of the complexity of supply chains. Urciuoli et al. enlist the most common risks of supply chain management across the world (200). The list includes quality levels and defects, time zones, long-range logistics, accountability and compliance, and delays (Urciuoli et al. 201). Fortunately for LaGuardia Airport Hotel Marriott, the majority of these risks can be mitigated because the new products are sourced locally. Therefore, the hotel will not have to face the difference in time zones and language barriers.

The same goes for accountability and compliance: when ordering finished goods from abroad, it is often difficult to enforce quality standards. In turn, local standards may be subpar to what the US companies are expecting. All the products proposed in this report are manufactured in the United States and comply with the national laws. It appears that the only risk that LaGuardia Airport Hotel Marriott will have to address is delays. What may help in this situation is being proactive and purposeful about inbound logistics. Emergency stocks will tide the hotel over in case the suppliers struggle to deliver in time. Apart from that, it is important to follow the news and keep up with the situation. If the Covid-19 outbreak dynamics worsen, LaGuardia Airport Hotel Marriott should consider stocking even more aggressively.

Undoubtedly, a major threat to the integrity and efficiency of inbound logistics is changing legislation caused by the Covid-19 pandemic. Earlier this year, it was expected that up to 53% of US manufacturers will experience disruption in their operations (Cleeland). Out of 12 million people working in manufacturing, a significant share was projected to be either furloughed or gone on sick leave (Cleeland). Some of these negative changes are associated with the accumulating losses that these factories are facing; others – with legislation that forces them to shut down production. As of September, 2020, the situation has shown some improvement with the industry revitalizing after the hard hit. Unless there is going to be a second wave, factories will continue working and receiving stimulus from the government.

Information Technology

LaGuardia Airport Hotel Marriott could benefit from new technology developed to address Covid-19 threats. There needs to be a solution that would integrate all products and keep track of all changes. As mentioned before, it is a recommendation by the World Health Organization to start a logbook to gain detailed insights and put together a full picture of what is happening. A suitable idea would be to introduce an Infectious Disease app, a platform for all staff members to share confirmed or suspected cases of Covid-19. Managers would be immediately alerted and can set out on a multi-step plan to tackle the problem at hand.

Face Analyst is a product that fits in the information technology category. The AI-based (artificial intelligence system) recognizes masked and unmasked faces, apart from taking body temperature. All this information together with videos and images could be stored for later analysis. For instance, if a case is confirmed, Face Analyst footage can help identify who this person has interacted with. All the contacted people would be notified and encouraged to test and receive appropriate treatment.

Indeed, reporting, communicating, and taking control constitute an approach that will give LaGuardia Airport Hotel Marriott a competitive edge. In addition to software solutions mentioned above, an emphasis could be put on making use of ERP (enterprise resource planning) systems. ERP is developed for process automation, complex system management, internal controls, and more rigorous reporting. It is likely that LaGuardia Airport Hotel Marriott has at least some employees working from home. Consolidating their work processes is difficult without ERP because otherwise they disjointedly interact with different software. On top of that, ERP can help increase security and enforce safety standards. Since some processes such as checking masks and taking body temperature are automated, they require a protection against cyberattacks and data breaches.

Aside from ERP, CRM (customer relationship management) tools could prove extremely helpful in this stressful time. Because of the collapse of the hospitality industry and low occupancy rates, every client matters and needs to be retained. CRM solutions will help with building a common database of clients. Besides, customer relationship management facilitates targeting the right audiences whose interaction with web materials will turn into action and purchases.

Conclusion

The Covid-19 outbreak is an unprecedented disaster that keeps hurting many major industries. The US hospitality industry took one of the hardest hits and suffers from low occupancy rates and losses persisting into an indefinite period of time. Even though LaGuardia Airport Hotel Marriott is financially strained, it might still benefit from budgeting for new products such as Face Analyst, disinfection tunnels, and high-performance ventilation systems. The products will fit into the hotel infrastructure that now needs to take into account the realities of the pandemic. Their introduction will require zero-based budgeting, a new procurement model to improve supply chain management, and mitigating the risks of inbound logistics. What will hold all these different aspects together is communication with both guests and staff members. Another unifying element is technology such as enterprise resource planning and customer relationship management systems.

Works Cited

American Hotel & Lodging Association. State of the Industry. 2020, Web.

Broughton, Kristin. “Companies Turn to Zero-Based Budgeting to Cut Costs During the Pandemic.”The Wall Street Journal, 2020, Web.

Cleeland, Nancy. U.S. Factories Closing Due to Coronavirus Concerns but Some Must Keep Producing. 2020, Web.

Hutchins, Shelley D. How COVID-19 is Transforming Hotel Design, Construction. 2020, Web.

Krishnan, Vik, et al. Hospitality and COVID-19: How Long until ‘No Vacancy’ for US Hotels? 2020, Web.

Marples, Meghan. “Pandemic Denial: Why Some People Can’t Accept Covid-19’s Realities.”CNN, 2020, Web.

Ng, Jeremy. Key Considerations for Hotel Procurement Post Covid-19. 2020, Web.

NYC Health. Covid-2019: Data. 2020, Web.

Urciuoli, Luca, and Juha Hintsa. “Improving Supply Chain Risk Management – Can Additional Data Help?” International Journal of Logistics Systems and Management vol. 30, no. 2, 2018, pp. 195-224.

World Health Organization. Operational Considerations for COVID-19 Management in the Accommodation Sector.2020, Web.

World Health Organization. Quality and Standards and their Role in Responding to COVID-19.2020, Web.