The Covid-19 pandemic forced to close tourism for almost three, causing an unprecedented hole in the accounts of hotel chains. However, because they were better prepared financially than in the great recession of 2008, some of these companies still maintain their prospects for expansion. According to Banca March data, 57% of hotel companies continue with growth plans that they thought to develop before the coronavirus crisis.
In the report 'The financial challenges of the hotel sector in the context of Covid-19', which includes surveys of 100 companies in the sector, the investment bank concludes that "the level of indebtedness in relation to the generation capacity of the company has decreased in recent years. " In this way, the sector can face "with greater solvency the impact of the current crisis and promote a faster and less dramatic recovery than the previous one. "
Currently, in the middle of the summer season, most of the hotels present in Spain are in the reactivation phase, although It will not be until 2022 when they recover the level of income that they observed in 2019. In order to comply with this script, it is vitally important that they obtain liquidity, maintain solvency levels and return debt ratios to pre-crisis levels.
The vast majority of surveyed companies make recovery dependent on the expansion of the Temporary Employment Regulation (ERTE) Files, which, for the moment, will be in force until September 30. The Minister of Labor and Social Economy, Yolanda Díaz, spoke this week on the matter and assured "not to be afraid" to extend them for as long as "necessary".
Banca March also considers it essential to strengthen the role of this industry, which employs 2.6 million people in Spain and represents 14% of the national GDP. It is the same request that the tourism sector as a whole has been making, which claims 30,000 million euros of the 140,000 million that Spain will receive from the reconstruction fund approved by the European Union (EU).
Whether or not the government complies with these demands, it is certain that the Covid crisis will increase the degree of hotel concentration. Actually, 65% of the capacity is in the hands of 250 chains, while the remaining 35% belongs to independent operators.
Despite the financial muscle of much of the sector, it will be inevitable that the crisis brings some companies to the edge of the precipice due to insolvency problems. Therefore, in the short and medium term, these companies will consider explore alternative funding sources that can give them greater stability and robustness. And when it is not even possible to save the business, corporate operations will be considered, such as the incorporation of a branded operator, divestments of non-strategic assets or the integration of financial or industrial partners.
RECOVERY AT DIFFERENT SPEEDS
If Banca March is confident in the recovery of the hotel sector by 2022, Cushman & Wakefield ask for a little more caution. His partner and co-director of the Hospitality area in Spain, Albert Grau, considers that "the rate of recovery can be very different between different destinations" within the national territory.
The peninsula, which is less dependent on international tourism, "can cope better with the season", while in urban and island areas "it may be that many establishments remain closed until September or even the end of the year due to lack of demand."
In the Barometer of the Hotel Sector in Spain, prepared jointly by STR and Cushman & Wakefield, it is exposed as occupancy fell 55% in the first half. But the figures are not homogeneous, with a drop of 58% in Barcelona or 46% in Madrid, although the greatest decrease was observed in the Balearic Islands, which has reached 65.6%.
These figures are in line with the data from the National Statistics Institute (INE) on the hotel overnight stays, which sank 95.1% year-on-year in June due to alarm state restrictions. Specifically, they barely exceeded 1.8 million, compared to 37.1 million registered in the same month of 2019.
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