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How Will Hotels and Restaurants Fare after the Coronavirus?

How Will Hotels and Restaurants Fare after the Coronavirus?

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By Dr. Marie Gould Harper, Dean, School of Business, American Public University, with Dr. Sheri Hernandez, Ed. D., Program Director, Hospitality Management

If I had the opportunity to present an award to an industry that I believed had made some positive strives to rebound quickly from the coronavirus pandemic, it would be the restaurant and fast food industry.

My idea is based on where I live, which has a population that loves to dine out. As time went on during the pandemic, I saw our two local industries, restaurants and fast-food shops, offer discounts and provide menu options for the lockdown.

Start a hospitality management degree at American Public University.

Some businesses encouraged ordering online and gave customers the choice of having their meals delivered or picked up in person. As a result, local businesses were able to stay open and employees had work. So I posed some questions about the hospitality industry to our Program Director of Hospitality, Dr. Sheri Hernandez.

Dr. Harper: What are your thoughts on the federal government’s proposal about banks/financial institutions offering loans to small businesses to keep them afloat during this crisis?

Dr. Hernandez: As the world tries to keep up with an ever-changing situation, offering loans to small businesses is an important aspect of survival and recovery for many small businesses. Most restaurants operate on a very slim [profit] margin and do not have stockpiles of cash to fall back on to cover mortgages, rent, or utilities, let alone labor costs when there is little to no revenue coming in. Additionally, many small hometown restaurants value the family culture they have developed and the well-being of their employees weighs heavily on their owners’ minds.

Even as they are facing potential shutdowns, small local restaurants around me are rallying the community, coordinating distribution of homemade masks, and just making sure those in their community are fed, whether or not they can pay for a takeout meal. I am disappointed in the way the Paycheck Protection Program loans have been distributed, with many true small businesses who need the loans to remain afloat get passed over only to see huge corporations get millions in funding.

Dr. Harper: Some businesses switched to takeout and online orders once the dining area was closed down. Should businesses build up these options for when the coronavirus pandemic is overcome? How will it improve business? Do you think customers will continue to take meals out so they can have family time? Will dine-in bounce back?

Dr. Hernandez: It is too early to tell what the restaurant industry will look like once we conquer the dangers of the pandemic and return to life as normal. There will likely be a surge in dining out, much as the world saw a surge in church attendance post-9/11. But as time marches on, the novelty of dining out will not be as elusive, and I believe restaurants that survive will enjoy a surge that will eventually level out.

A lot depends on how long the shutdown orders last as to whether or not takeout and delivery will remain a major part of most restaurants’ business. If it does, operations will need to adjust in order to be able to fulfill to-go orders as well as provide the service dining-in guests should experience.

Many independent restaurant kitchens and menus are designed around dining room capacity, meaning the kitchen staff is able to cook meals to serve those in the dining room efficiently. If the takeout order volume continues to increase exponentially, restaurants will have to make adjustments to operations in order to serve dining room and takeout guests while still providing quality meals and exceptional service. The kitchen capacity may simply not be there to support the additional takeout volume during meal service in some smaller restaurants.

The restaurant industry fulfills two basic needs: biological needs and social needs. This is otherwise known as serving the eating market versus the dining market.

Right now, restaurants that typically target the dining market — that is, provide sustenance as well as a social experience — are finding some success by serving the eating market and fulfilling basic biological needs. For instance, many high-end restaurants in my area have been finding success by not only offering their typical gourmet individual dishes to go. But they have also gotten creative and added family meals to their menu, offering up a full meal that will feed a family of four.

The restaurants that are operating for takeout and delivery should be aware of what is working and what is not, and keep their minds open to potential new business opportunities or menu items. A pizza company has been stressing their high-heat pizza ovens and the fact that their pizzas are not touched after cooking. Those companies that are adapting and operating under strict hygiene guidelines may have a better opportunity to reopen and be successful, once people start leaving their homes.

I have seen many small local restaurants continue to operate through takeout and delivery and even offer up new menu items, such as larger meals for families and things like smoked ribs not typically offered on their menu. These restaurants are struggling, but also building a sense of community and rallying around our small town and the people that live here.

Restaurants and caterers are donating meals to hospital employees and first responders. They are setting out tip jars to distribute to their employees who are out of work.

I think this will make some small establishments even stronger in these small towns when they remain open for takeout. They are maintaining a very strong social media presence, which is smart because neighbors are commenting to others what they got for dinner and kind of “socializing” through the comments and sharing menu links.

The market will look different in the future, however. The National Restaurant Association (NRA) has stated that during the month of March, the restaurant industry lost more than three million jobs and approximately $25 million in sales. Some industry analysts are projecting that 75 percent of the independent restaurants that have closed their doors during the pandemic will not survive.

Those that do survive may operate differently and will likely enjoy a quick surge in business as people gather together in restaurants and bars. But as of this moment, the struggle is real and the future is uncertain. Many restaurants rely on sales of alcoholic beverages to generate profits; not being able to serve drinks that tend to have a higher profit margin than food sales further hurts their bottom line.

Dr. Harper: What are some creative ways that hotels can survive during the coronavirus crisis? What should they be doing? 

Dr. Hernandez: Hotels have obviously seen a huge drop in guests and revenue. One thing that is notable is the way many hotels have stepped up their humanitarian efforts, offering rooms to healthcare workers on the front lines tending to COVID-19 patients in nearby hospitals. Many of them are working exceptionally long hours and are fearful of returning home between shifts and infecting their families.

Showing this concern for the public could be an asset for a hotel company’s image. Some states have deemed hotels as essential businesses and they remain open, while other states have ordered them to shut down or are under shelter-in-place orders.

The American Hotel and Lodging Association notes the necessary furloughs and layoffs have been devastating. Based on current estimates, about 3.9 million hotel jobs have been eliminated or will be eliminated in the next few weeks, resulting in hotel workers losing more than $2.4 billion in earnings every week.

Following the terrorist attacks in 2001, the hotel industry lost about 400,000 jobs by March of 2002 – six months later. Some projections estimate 2.8 to 3.4 million hotel jobs will be lost by January 2021, if the occupancy rates do not recover.

Dr. Harper: What are your thoughts about the hospitality industry in general during this coronavirus crisis? What are the learning lessons and strategies hospitality leaders should consider for the future?

Dr. Hernandez: Industry associations such as the NRA and the American Hotel & Lodging Association (AHLA) are rallying behind their members and pressing for additional legislation and resources to help their member organizations survive. The NRA set up a Restaurant Employee Relief Fund to make grants available to employees that have been impacted financially by closures related to the coronavirus pandemic. The AHLA continues to lobby for their members while providing FAQs and resources to help their member organizations recover and survive from the coronavirus pandemic

Dr. Harper: Do you see any potential emerging lines of business as a result of the coronavirus outbreak?

Dr. Hernandez: I believe society will have a greater awareness of sanitation and food safety in general as well as in restaurants. In a class I teach on practical food safety and awareness, we discuss some red flags in terms of restaurant preparation and handling. Students become more aware of watching how servers and food preparation employees handle their food, glasses, platters, and so forth, and they become aware of the hygiene of those serving our food.

Some friends have commented to me about how, when they are watching television, they are now ultra-aware of how many hand-to-hand or surface-to-hand contacts there really are in a restaurant setting. While there will still be large groups of people who will choose to stay away from public places, I believe there will be a surge in business after this coronavirus pandemic as people flock to bars and restaurants as long as they are able to return to their own jobs and have the money to spend.

Some people are more than ready to socialize and meet up with friends they haven’t seen in a while. Restaurants will have to be very careful with sanitation and cleanliness, not only because guests will be more aware of how pathogens like the coronavirus can be spread, but in order to avoid any sort of an outbreak – virus or foodborne illness – in the future.

Dr. Harper: What do these events mean for your field/program? 

Dr. Hernandez: People in the service industry want to serve others and take care of them safely. It is a characteristic that you either have or don’t have. People in the service industry are a proud bunch; they are adaptable and are not afraid of hard work.

The restaurant industry is always changing. On any given shift, the employees and management have to adapt quickly to the different needs and desires of their guests.

The service industry will continue to adapt to the changing needs and demands of society. There will be a focus on food safety and the well-being of guests. Educational programs will continue to focus on developing smart soft skills and being adaptable to exceed the expectations of guests.

There will be a continued focus on finding operational efficiencies and being adaptable, all the while promoting the highest levels of health and hygiene. We can only hope our favorite small businesses will be able to survive these devastating losses. If you can support your local restaurants by purchasing a gift card or takeout, please do.

Even though takeout and delivery are filling some social needs in a way — not having to cook is just a reprieve for many people — I believe people will return to restaurants and socializing in bars. Virtual happy hours may offer some semblance of socializing while staying safe at home, but human nature needs physical interaction. While some restaurants will not survive after this coronavirus pandemic, many will even if they are significantly changed or re-born with new owners or as a new concept.

Dr. Harper: I, too, believe that once the coronavirus lockdown is over, families will go back to dining out.

Dr. Hernandez: However, I believe these businesses have been successful in tapping into a new market — a market where people value family time in the privacy of their homes. I think there is room for all options and people will begin to integrate their choices by how they want to spend their time. Decisions will be based on what is occurring at that specific time.

Kudos to the leadership of the restaurants and fast food companies. I saw the shift occur in chain establishments as well as some local small businesses. What is important is that these organizations have the opportunity to offer a new service to their patrons while keeping their workers employed.

About the Authors

Dr. Marie Gould Harper is the Dean of the School of Business at American Public University. She holds an undergraduate degree in psychology from Wellesley College, a master’s degree in instructional systems from Pennsylvania State University and a doctorate in business from Capella University. She is a progressive coach, facilitator, writer, strategist, and human resources/organizational development professional with more than 30 years of leadership, project management, and administrative experience. Dr. Gould Harper has worked in both corporate and academic environments.

Dr. Gould Harper is an innovative thinker and influential leader, manifesting people skills, a systematic approach to problems, organizational vision, and the ability to inspire followers. She is committed to continuous improvement in organizational effectiveness and human capital development, customer service, and the development of future leaders.

Dr. Sheri Hernandez is the Hospitality Management program director for American Public University’s School of Business. She has extensive knowledge of restaurant operations, food safety, purchasing and training. Dr. Hernandez combines her skills as a restaurant manager with her career experience in financial commodity risk management, consulting, and purchasing to enable her to educate her students with a customer-focused, yet financially sound approach to hospitality management.

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