UK hoteliers face tough decisions as furlough nears end
UK hoteliers face tough decisions as furlough nears end
26 AUGUST 2020 8:23 AM

The U.K.’s furlough scheme will end on 31 October, and hoteliers are already speculating on what the future labor market might look like as key talent leaves the industry.

REPORT FROM THE UNITED KINGDOM—With the United Kingdom government’s furlough scheme for workers set to end on 31 October, employers in the hotel industry are planning for what happens after the program ends.

On 31 July, the government also enacted a scheme in which any furloughed workers brought back to full employment and retained to the end of January 2021 will earn the firm £1,000 ($1,306.35) per employee, subject to certain regulations.

The hotel industry knows such schemes, however helpful, will not be sufficient to save all current furloughed positions, with ownership firms such as Edwardian Hotels projecting it might see 1,000 job losses, according to The Times. LGH Hotels Management, which employs approximately 2,500 people, said its employees might be at risk, too, according to The Guardian.

In its half-year 2020 earnings report, InterContinental Hotels Group said it is considering making 10% of its corporate staff redundant.

Andrew Bailey, the governor of the Bank of England, said he was in favor of ending the furlough scheme, which began on 20 April and was extended in May. In an interview with the BBC, Bailey said it is important that policymakers help workers move forward and not keep them in unproductive jobs.

The government’s Chancellor of the Exchequer, Rishi Sunak, is under pressure from businesses to extend the Coronavirus Job Retention Scheme beyond this October.

According to the government’s latest statistics, as of 16 August, approximately 9.5 million people from 1.2 million companies have been signed up for the scheme at a cost of £35.4 billion ($46.2 billion).

Kate Nicholls, CEO of UKHospitality, said the assumption was when the industry first entered the scheme that it would protect all jobs, but that thinking has changed.

“There is a growing realization that the economic decline is so steep, the recovery slower, that the government switched its mindset and realized (the scheme) cannot save every job,” she said. “Unemployment is a price coming out of COVID. Furlough cannot be indefinite, and jobs will go as they cannot be artificially covered.”

Harsh realities
In a UKHospitality news release, Nicholls said that as of 16 August, some events would be allowed with a maximum of 30 people, with hints that the situation will be reviewed again soon with a view to extending events numbers from October if government-controlled pilot events prove to be workable.

“Those who are continually losing revenue, the full-service side of hotels, this is where we see the redundancies come through,” Nicholls told Hotel News Now. “All the big (hotel) groups are hinting about redundancies.”

The 80% of salary covered by the furlough scheme will drop to 70% in September and 60% in October, Nicholls said. In November, as the rules stand, the rate will be zero. Companies also will have to start pay national insurance contributions and other line items seen on salary payslips.

Mark Anderson, managing director, property and international, at Whitbread PLC, the owner of Premier Inn, said his firm has for several years taken what he called an “efficient line” in staffing numbers, but that the situation would unfortunately result in more streamlining.

“We run budget hotels, so we do not have extensive teams and facilities, and we spent many years making (our hotels) as efficient as possible,” Anderson said. “Our head count already is lean and efficient, which makes us have to have far fewer unpleasant conversations (with employees).”

He added that if demand remains low for an extensive period of time, more difficult decisions will have to be made.

“We start by looking internally at all our cost lines,” Anderson said, who added Whitbread’s focus on reaching scale in Germany means more jobs will be created there.

Chris Mumford, founder of business consultancy Cervus Leadership Consulting, said the furlough scheme is critical but finite.

“With the best will in the world, (the scheme) has just kicked the can down the road. Yes, in a good way, but until business comes back, hotels will not be able to support traditional payroll,” he said.

Mumford said additional complications come from the U.K.’s emphasis on foreign employees, many of whom have returned home during furlough, as well as rolling changes to quarantine regulations and to which countries they apply.

The age of furloughed employees is also a factor, Nicholls said.

“Fifty percent of our workforce is under 25, and they are now making tough life choices,” Nicholls said.

Unfortunately, the staff cuts companies are considering are the cost of doing business, Mumford said.

“There will be redundancies left and right,” Mumford said. “The big chains have already acted. Others will say, we made it through round one, will I make it through round two, with some owners likely to debate whether it makes sense even opening up at all.

“Domestic demand will not sustain the industry. That is a summer thing, and (guests) will become poorer,” he said.

Mumford added the effects of these staff cuts will be felt for some time.

“The industry will lose a lot of people,” he added.

Reinvention and creativity
Hotels will have to reinvent themselves, with ideas such as converting bedrooms into working space.

Nicholls said there will be urgency now to reinvent working practices to safeguard the extremely lucrative Christmas events and party season.

“(The fourth quarter) is a big earning period in city centers,” she said.

City centers also are losing business, such as restaurants, pubs, sandwich shops and cultural attractions, that generate footfall from hotel guests and others, she said.

“We’re working with government to get as much help as we can. Businesses are not out of the woods, and they need additional help beyond furlough,” she said.

The fear lurking in the background is that of a second COVID-19 spike, Nicholls said.

“Recovery in the hotel industry can bounce back quite quickly, unlike other sectors, but the government needs to continue to boost consumer confidence,” she said.

Mumford said creativity is needed with staff.

“Some have had hours reduced, others are working harder than ever, and in difficult circumstances. They need to be kept motivated,” he said.

He added that positivity comes from there still being noticeable pipelines and hotels opening.

“I see GMs being announced, the development guys still signing and getting beyond the line. This is the bright light,” he added.

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