Italy’s hotels eye eventual rebound from coronavirus
Italy’s hotels eye eventual rebound from coronavirus
12 MARCH 2020 8:34 AM

The coronavirus in Italy has left hotels empty as tourists and groups stay home while hoteliers focus on the safety of their employees and guests.

REPORT FROM ITALY—Coronavirus is having a dramatic effect on the Italian hotel industry, as government containment efforts have essentially shut down the entire country, with all public gatherings banned and most employees working from home.

Antonello de’ Medici, area managing director, Venice, at Marriott International, told Hotel News Now that the priority is taking care of associates and what guests there are.

“Global travel is affected, and Italy is under the spotlight … particular in the northern part.
We are carefully handling the current situation,” he said.

The provinces of Lombardy, which contains Milan; and Veneto, which contains Venice, are the two areas of the country feeling the most pressure from the virus’s effects.

François Droulers is president of tourism association Confindustria Turismo Venezia and founder of DHotels, whose portfolio includes a DoubleTree in the Venice area. He said he expects the current regulations to be in effect for at least a month, and the government is considering the closure of all activities in at least Lombardy and Veneto.

“Venice is like the 16th century,” he said, referring to the lack of tourists and life.

“Venice saw less than 10% occupancy in the last week of February and the first week in March, and now it is close to zero,” Droulers said.

The outlook for Venice paints a grim picture across all segments, Droulers said.

“The problem is there for everyone,” he said. “The (European Union) can subsidize businesses, but in Veneto we have 60 million (room) nights a year, and half have gone. (At about) $120 per day (each) for accommodation, food, transport, that is a huge amount of money we are going to lose.”

He added that he expects 80% of hotels, restaurants and bars—even large retailers—will soon close on a temporary basis and apply for crisis assistance.

There are three hotel-operations procedures currently in action, he said.

“Most staff have gone on holiday. Staff here enjoy roughly 40 days off a year, including vacation, national days and what we call ‘permessi.’ Eighty percent of staff have been sent home,” Droulers said, the Italian word “permessi” referring to time off for employees working longer or additional shifts.

Hoteliers—and others—are applying for government subsidies, he said.

“Wages will probably be given for an amount of days, but that is not yet clear,” he said. “Thirty days? I would think at least 60, but, and this is the third stage, if the situation does not change after that, then we will all close for a longer period, and no doubt there will have to be (redundancies).”

According to STR, the parent company of Hotel News Now, through February, Italy’s hotels have recorded a 15.5% year-to-date drop in occupancy to 52.2%, while Milan fared even worse, with a 21.5% drop to 58%. Rome hotels recorded an occupancy decline of 13.7% to 49.7%.

STR data also showed that average daily rate was up for all three markets over the same time period, with Italy showing a 2.7% increase to €114.47 ($129.92), Milan a 5.3% increase to €160.65 ($183.34) and Rome a 2.1% increase to €115.93 ($131.58). Revenue per available room dropped for all three, with Italy posting a 13.2% drop to €59.79 ($67.86), Milan a 17.4% drop to €93.15 ($105.73), and Rome an 11.9% drop to €57.59 ($65.36).

Hurry up summer
Droulers said the hope is that the warmer months of summer bring relief.

“We will lose 40% to 50% revenue per year, and normality will probably not come back for 12 months,” he added.

Marco Malacrida, STR’s area director, Italy, agreed the tourism landscape is surreal.

“There are no cars around. It is unbelievable,” he said. “There is no noise, and we are falling down to 0% occupancy, closing down. There is zero cash flow. But in six months we will recover, and we will not be the only country. We are the first to face reality, but there will be a major recession globally, that is for sure.”

Droulers said before flight routes were closed down, 59 flights arrived or left daily to China, but that number for the rest of Europe was approximately 800.

“There is the probability the virus will spread to Europe. We stopped the China flights in January, but they came in from elsewhere anyway,” Droulers said.

Travel from Italy’s most important market, the U.S., will dry up for at least the rest of 2020, he said.

“This year, the U.S. will not come to Europe. Because of coronavirus and for the coronavirus that will arrive in the U.S., as well as the elections,” Droulers said.

Tourism from Europe to the U.S. also took a further hit on Wednesday when President Donald Trump issued an executive order banning travel from Europe to the U.S. for 30 days, which will begin Friday.

He added that while independent and conference travel will rebound fairly swiftly once the threat has passed, groups will take a lot longer.

“Group holidays, the big tours, will take at least three to four months to get back, especially from Asia, (those travelers having) to obtain new visas and flights and then start planning again,” he said.

He added that business rates will need to be waived temporarily.

“These are taxes not on visitors but on square footage, so in my view, they should be waived,” he said. “The hospitality lobby currently is very much together with other lobbies—retail, shops, restaurants, ports—in applying for grants and waivers to sustain activities. Hotels and retail need cash, and there has been no cash for three weeks.”

Opportunity out of darkness
Malacrida said hoteliers need to provide advice and incentives to get guests to book again, and to reward those that do as acknowledgement that they are booking in Italy.

“In all cases of communication crisis marketing, you have to lead it,” he said. “You cannot ignore it and think all is well, and this has to be done without alarming, which the media is doing plenty of.”

Both Malacrida and Droulers noted that, while for many this is a real crisis involving human loss, for most it seems there is not a fatal threat.

“Behavior will change. There will be more domestic and regional travel, something that the climate change (debate) also has pushed,” Droulers said.

He added that if there is an opportunity here it is “that it will clean up the market, see the end of weaker operators.”

“The big problem in Italy is that three weeks ago we thought coronavirus was a political issue to gain power for their activities,” Droulers said. “Now we (don’t have) enough hospital rooms to accommodate everyone, and this is something the whole community in Europe, and soon the U.S., will face or is facing.”

He added emergency beds have been placed in Italian trade-fair pavilions to increase care facilities for the sick.

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