Speaking personally, the moment that the true impact of the Covid crisis on the hospitality sector hit home to me was listening to an analyst on the car radio describe the lockdown closures as “like throwing a grenade into bloodbath”. The imagery alone was enough to send a shiver down my spine.
I realised the pressure that industry leaders must have been facing when all eyes turned to them seeking guidance on how to chart a course through the choppy waters so we asked some Industry Leaders to advise us on their thinking when the pandemic hit and the moves they’ve made since then to shore up and adapt their businesses.
Case Study 1: Paul Nisbett, Finance Director, Valor Hospitality Europe Limited
Paul advised that the first thing they did was take stock of their own circumstances, focusing on their cash burn during the lockdown and seeing what steps they could take to reduce it. They set up a team to negotiate with all their contractors about deferring works / maintenance and extending credit terms wherever possible. They also looked into the cash flow of unsecure creditors before making payments.
After first focusing on their outgoings Paul told us that their next steps were to plan ahead to ensure their investors new the scale of the challenge presented to them.
“Then we built 4 scenarios’ of forecast (based on different variances from SAR’s rebound) to discuss with the investors and once discussed and adjusted, we engaged with the lenders, to seek covenant wavers and interest payment holidays”
Paul advised that following industry engagement with the government, the schemes designed to assist have proved invaluable, advising that they have taken advantage of the VAT Deferral scheme, the PAYE deferral scheme, the Business rates holiday and the Furlough Scheme. Paul advised that initially 90% of their staff were furloughed before the flexi-furlough allowed a number to return. Presently a third remain on furlough and will do so until circumstances change. Finally, they sought a CBILS (Coronavirus Business Interruption Loan Scheme) Loan where they could to keep things ticking over while the pandemic was at its worst.
“My direct team focused on the restructuring of the finance function, increased automation and systems enhancements as we knew we would not be able to afford to keep as many staff as pre Covid and the work level would be significantly reduced. This was a project we had been focused from late 2019 but this got accelerated due to trading dynamics.”
Going forward Paul informed me that the they have adapted their hotels to be Covid safe and were focusing their attentions on the areas where they can operate but conceded that until there is a change in circumstances, areas relating to meetings, events and leisure clubs were going to be “extremely challenging”.
Case Study 2: Chief Financial Officer, London based multi-site hospitality business
The CFO told me that the first action they took was to make their company “a much leaner business now, and more efficient, which we have needed to be”. This involved initially making a round of redundancies a couple of days before the first Lockdown in March. They also furloughed 95% of the team during lockdown and have gradually brought them back as the situation has improved. By acting decisively and becoming a more streamlined unit they are in a better position to go forward.
“We will be taking everyone off Furlough now and won’t use the new winter subsidy. We are looking to take advantage of sites as they become available, and have a couple of new openings coming up”
Like my first contributor, the CFO has also identified their outgoings as a key area of the business they can control while other factors remain outside of control. Something that has changed the business for the better and will not change once things are back to some semblance of normal.
“Our main focus has been managing cash flow. We have done this by speaking regularly to our suppliers, not burying our head in the sand, and doing what we can to hold on to cash. We have stripped out all non-essential costs and have a much stricter authorisation process in place.”
When I asked both of our contributors if they expected that the worst was over the response was clear. That they are both confident in the changes they have been forced to make for the benefit of their businesses, but they are cautiously optimistic for the future.
Date Published: 8th October 2020