Hilton and Marriott hotel chain manager: hotels are already closing in Riga, bankruptcies in Lithuania in winter

– First of all, what is the current situation in terms of the hotel sector in Lithuania and in the world? Are the hotels of the Hilton, Marriott and MOXY chains managed by your company in Lithuania currently receiving guests?

– The hotels that we manage in Europe are mainly focused on the business guest, which is why the travel insurance of international companies around the world has a great impact on the occupancy of our hotels.

Compared to the months of 2019, this year the occupancy of hotels in Vilnius decreased by 62.9 percent in July, 64.8 percent in August and 71.7 percent in September. On average, this is around 67 percent. decline during the same period.

We have guests in managed hotels in Lithuania, most of them are Lithuanian, but there are also many guests from neighboring countries. The so-called “Baltic bubble” also made a significant contribution to foreign guests visiting hotels during the summer.

We fear that as travel bans (isolation, international company decisions to refrain from travel) and events tighten, we will face even lower employment rates.

The so-called “Baltic bubble burst” had a significant impact on hotel occupancy in Vilnius and Riga. Hotel closures are already underway in Riga, as the country has introduced extremely strict restrictions on inbound tourism. The demand for business hotels is significantly lower than that for spa hotels located in the country’s resorts. Even the state medical vacation initiative helps tourist hotels more than business hotels.

– What challenges do you face today as hotel managers, in addition to the significant drop in the number of guests? Are they all related to the spread of the coronavirus?

– My top priority as a manager is to protect our employees and guests. For this reason, we have introduced new hygiene standards and additional protective measures for guests and staff in all hotels.

The most worrying thing is that we are managing new hotels, most of which opened in 2019, so we are having difficulties in approving requests for financial assistance measures. Given certain criteria set by the European Commission, which apply to the evaluation of requests in all the countries in which we operate, it is understood that at the beginning of 2020, when we were forced to close, the hotels did not accumulate working capital and the capital was negative in most cases. This situation discriminates against new and young companies, especially in the tourism sector, where working capital loans are essential in the long term, knowing that the hotel market will not return to normal for at least two years.

Another challenge is the ever-changing travel bans and requirements for hotels and restaurants in every country where we operate. We prepare marketing and pricing strategies that need to be changed overnight due to certain decisions. In this sense, as a management company, we have a greater advantage because we respond faster than large international companies, which sometimes take more than a week to make a decision.

Organizational change in hotels is also a great challenge. We must guarantee an uninterrupted hotel service 24 hours a day. per day, 7 days a week. As employment increases, we must proportionally accept people, train them and integrate them into jobs and, as employment decreases, reorganize all activities and seek other solutions to retain workers. The development of new hotels also faces negative attitudes from financial institutions and extremely strict demands in the tourism industry. Some requirements become a difficult obstacle to overcome for most new development projects.

Indirectly, we can name that all the identified challenges are related to the economic situation of the country due to the COVID-19 virus. Not only do financial institutions respond to business inquiries, but tourism workers also face difficulties communicating with them for personal reasons.

Protecting the interests of hotel owners and investors is critical, which is why we were one of the first to introduce cost cuts and other measures to the market. In order to maximize efficiency, the effectiveness of the measures taken is monitored daily. There are a number of possible scenarios for hotels, what to do and what to do next if the market situation deteriorates. These plans are activated very quickly – the financial and legal specialists working in our company constantly update the projections of cash flow and working capital, taking into account the most relevant legal updates related to the business areas affected by COVID-19 in each country.

– During the pandemic, one of the hotels managed by his company, MOXY Kaunas Center, was opened in Kaunas, but plans to open the hotel under construction by DoubleTree by Hilton in Vilnius have recently been announced. Have you heard of more postponements and openings of such works?

– We cannot comment in hotels that we do not control the situation, but only considering and comparing the periods, Moxy Kaunas Center Hotel was already completely ready to open its doors at the beginning of the pandemic, but it was at that moment that the world stopped. As a result, most hotels just had to close their doors, well, and we just didn’t need to open them temporarily. However, when the situation in Lithuania improved, we opened our doors on August 3. and we are satisfied with the performance of the hotel. We are very happy that our hotel bar is very popular not only among hotel guests, but also attracts more and more Kaunas residents.

In Romania, we developed the MOXY Bucharest Old Town project ourselves, and when the pandemic broke out, it was still in full swing, but as the situation in the country improved, we opened our doors on July 20. We are also currently developing the 5-star Marmarosch Autograph by Marriott collection hotel in Romania at full speed, which will open in the first half of 2021, so we cannot base our example on stopping construction.

However, in close collaboration with the Hilton and Marriott hotel opening teams, we have heard repeatedly that many openings have been delayed or that construction has simply been suspended due to the market situation. So we think a lot depends on the construction stage of the hotel and whether the funding has already been received, whether the hotel is still at the design level and there is still a long way to go before receiving the funding. We also know some examples of hotel owners facing financing difficulties, as banks are extremely critical of new projects, especially due to the economic situation and the situation of the tourism market.

– How do you think the hotel sector will change after the pandemic? What new standards will we have?

– Since our future guest will have different requirements for accommodation services, we have already implemented a program for a safe stay in hotels, the implementation of which will change many of the usual standards of hotels.

Globally, and according to Tripadvisor travel behavior research, guests will be much more careful and hotels will need to ensure that people feel safe, which will be a key criterion when choosing a place to stay, for so communication about security measures is critical.

In an effort to reduce the number of contacts, room keys will be transferred to apps on smartphones and additional measures will be taken to minimize contact. Innovation will play a key role in minimizing contact between guests and employees.

There should be no more positions in hotels that are responsible for extremely tight areas and everyone should learn to work in as diverse a job as possible. Hygiene standards should be the biggest change in all hotel units.

Hotel development must change the materials used in the interior and equipment: surfaces must be extremely convenient and quick to clean, more attention must be paid to ventilation and air quality, innovations that will maximize your experience and reduce impact travel on the human body, will ensure better rest, fresher air, individual lighting, etc.

– In your opinion, can we expect a wave of hotel closures and bankruptcies in Lithuania when winter comes?

– We think so, especially hotels that do not have a spa or that are located outside of the resort locations.

The prolonged impact of the pandemic and declining employment rates have dramatically reduced the working capital accumulated by all tourism businesses. Many expected a fairly rapid market recovery and that this period would last less than half a year. High hopes were placed that with the onset of autumn tourism will begin to recover, business and events will return, but we see different trends and perspectives. For the moment, based on the number of reservations, we assume that extremely difficult autumns and winters await us, so working capital for hotels is extremely necessary and state support would be an indispensable aid for survival.

The indebtedness of financial institutions should also be facilitated to organizations affected by COVID-19.

– What would be your forecasts for the hotel sector? When could it recover?

– Intercontinental business travel and income levels in 2019. The level should return in 2023. We do not expect everyone to travel when the borders are opened and the situation in the country improves. Companies are convinced that a lot of work can be done remotely and meetings can be moved to a virtual space, so many companies will seize the opportunity to save on travel expenses.

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Delfi recalls that Apex Alliance Hotel Management company offers hotel management services in Lithuania. In Lithuania, it owns the Courtyard by Marriott Vilnius City Center Hotel, built and owned by Hanner, owned by Arvydas Avulis, Hilton Garden Inn Vilnius City Center, owned by EIKA, and Moxy Kaunas Center, owned by TALA ”. Other hotels of these chains in Romania and Latvia belong to the Apex group itself.

Hotels currently managed by Apex Alliance: Hilton Garden Inn Bucharest Old Town, Courtyard by Marriott Vilnius City Center, Hilton Garden Inn Vilnius City Center, Hilton Garden Inn Bucharest Airport, Hilton Garden Inn Riga Old City, MOXY Bucharest OldTown, MOXY Kaunas Center.