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The hospitality industry won’t be back to 2018 levels until 2023…And here’s why.

I know. That sounds crazy. And I hope I am wrong, but it makes sense when you think about it.

As I am writing this, it is Saturday of Labor Day Weekend. I am in New Jersey, in a town called Sea Isle City. For those of you “in the know”, I am “down the shore.”

I live and work in Pennsylvania. We are just about to enter some phase of the COVID reopening plan (I lost track in July) that allows restaurants 25% capacity for indoor dining. That is just for eating; events of more than 25 people are not permitted. Who knows when that is going to change. Which means, for the foreseeable future, we don’t have much.

I got to thinking about the hospitality industry realistically expecting to be back to pre-Covid business levels. That lead me to write this article.

The answer to that question, I think, starts when we have a proven vaccine.

From what I am hearing, we are 3-6 months away from any vaccine. Let alone a proven one. Let’s just say we have one by December 2020, which would be great. But now we need to get it administered to the public, which, I would imagine, would take at least 6 months. So that puts us at June 2021. Getting 330 million people a vaccine is no simple task and I think 6 months is a reasonable expectation.

And those are aggressive and hopeful numbers. Realistically, I think a vaccine that people can trust and are willing to receive is going to arrive somewhere around May or June of 2021, which then puts all of us getting the vaccine by the end of 2021. But let’s think positively, shall we, and stick with June of 2021 that everyone is vaccinated from COVID-19.

The hospitality industry cannot just open back up again. With the aggressive vaccine model, we are 10 months away from people feeling like they are safe to gather and be close to one another in group settings.

10 months. Not weeks. Months.

A company in the hospitality sector will not just turn on the lights and be back at it. This industry is made up of a lot of different businesses. Airlines, hotels, restaurants, bars, theatres, florists, bands, music venues, set designers, producers, rigging, trucking. And I can go on with at least 25 more professions.

Just think about the last concert, corporate conference, musical, wedding, mitzvah, festival, that you went to. What did you do that was a part of that experience? Seriously, think about it.

I bet you forgot to think about the parking lot that you had to pay park in. 😊 It really runs that deep.

Every single one of those businesses are a part of the hospitality industry and every single one of those businesses has many, many components that make it operate.

Let me give you just one example. Let us take the last concert you went to. If you went to a stadium concert, the average stadium tour uses twenty tractor trailers to move all the equipment and band members from city to city. Twenty, 53-foot tractor trailers. And all that trucking company does is move concert tours across the country. The entire year. Guess what those trucks are doing right now? Nothing. And do you know what happens when diesel trucks sit idle for, I don’t know, 1 year? Go ask a mechanic…

The simple logistics of just “opening up” are going to be hard for so many of us.

But you know what worries me the most about why companies won’t be able to just turn on the lights and…“open up”?

Staff.

The staff at these companies are not going to wait around for 10 months. They need to provide for themselves and their family. They also need to be productive. They are going to move on and find work in other sectors. They are going to find something else to make ends meet and rightly so. Who wants to deal with all of this! The hospitality business is already stressful enough dealing with the general public. If this is your chance to try something else, people are going to be forced to take it.

While I haven’t talked to every single company in the hospitality business, I can make a bold statement and tell you that every single company in the hospitality business has had to cut staff. My company alone went from 27 full time employees and another 20 or so part-time employees to 7 in a matter of days. With no warning.

We laid off roughly FOURTY people. In 2 days. Not weeks. Not months. Days.

As an entrepreneur it was one of the worst feelings I have ever felt. Watching people take things from their office, walk down a dark hallway and leave on March 13th. A company that I spent 20 years building and was so proud of, fell apart overnight.

And it has been this way for 6 months.

At Synergetic, many of the people that were laid off have found other jobs or are going to seriously start looking for something. I can imagine other organizations are being faced with the same predicaments. Your team can only wait so long.

If we were able to completely turn back on tomorrow and have 100% of the business come back the following day, none of the businesses are going to have the capacity to handle that right now.

Companies have shrunk to such a small, essential staff, that just attempting to bring people back is going to take weeks. It will be a HR nightmare. Especially true because, for most of these companies, the HR team is now a C-Level executive and they are also doing the marketing, the sales, operations, etc.

I talked to a hotel General Manager that was answering the phone, working the front desk AND cleaning the rooms – plus doing security when they had to.

I get it. If we were to turn back on tomorrow, maybe we could get SOME of those employees back.

But we aren’t opening tomorrow, so that isn’t even an option. I just wanted to make a point.

When we start thinking about staff in June of 2021, the team you used to have, just won’t be there to bring back.

I am going to guess that 75% of every company in this sector will need to hire brand-new people in some sort of way. And probably not just a few brand-new people, A LOT of brand-new people. The people that made up a company back in January of 2020 are going to look a lot different in December of 2021.

Keep in mind, most of these companies have been growing for the past 15-20 years, with a solid core of really good staff. Promoting people from within, getting people to buy into the values and culture of the company, growing a team that can be trusted.

And now, they need to start over.

Think about how long it is going to take to train a new team in sales, business development, account managers, technicians and so on, on how YOU do things.

And that does not even factor in the damn mental toll. Good lord. Management is going to have a lot to deal with.

Staffing concerns are going to be the number one reason you see mergers. Not because they don’t have physical capacity, but because the human resources just won’t be there.

Add in the other factors that I talked about prior to staffing and you have one hell of a situation.

I am going to take a good guess that at least 20% of the companies that existed before Covid, simply will not be in business when things open up. They folded, were acquired or merged. So when the demand starts to come back, there are going to be customers that need to find new partners to work with.

In keeping with the aggressive vaccine forecast, let’s fast forward to June of 2021. We get a call for a mid-size audio visual event. When the call comes to start planning that event, it won’t be for tomorrow. There is always a lag from the contract being signed to the event happening. Prior to Covid, planning any kind of meaningful event took time, months, if not a year or more, to make sure everything was thought about and planned for accordingly.

When that call comes to start planning for that event, companies are going to need to start things moving.  But they are in a jam. They have fewer people to help project manage and not enough capital to hire new people. They have used damn near all their available capital to get by for the last 18 months! They will have to keep things lean and figure out how to make it all work.

That event is probably an outlier though. Because no company is going to plan something, at least of mid-size attendance level, until that vaccine is out and administered. Most events are just going to take their time and let others go first. And rightly so, nobody wants to be the first out of the gate on this sort of thing.

Now, let’s skip ahead to January 2022. The vaccine has been fully administered and people are feeling comfortable with the idea of having an event. People will certainly be busy planning the next in-person event, that’s for sure, but they won’t necessarily be having them having. Winter is not a big season for hosting events.

Again, events take time to produce and bringing all the partners involved, back together, is going be a hard task. As I said before, some of those partners will not exist, and the partners that do, need time to ramp up. That is going to leave 2022 as a year of “getting things back together”.

And because of that, I think customers will be comfortable planning the next BIG event for 2023.

2022 is going to be the year that things start to happen, but it will not be a banner year at all. It will be positive; it will feel good, things will be moving in the right direction, but 2023 is when we are going to feel like 2018.

And 2024 will feel more like 2019.

The hospitality industry has a way to go. It is going to be a very long road to recovery for all of us. We all need to figure out how to navigate through this forest with no map and be smart enough to make it to the other side.

I hope I am wrong because if I am wrong, then we get back to pre-Covid levels much sooner.

 

Jason Weldon

President/CEO

Synergetic