At least 40 per cent of the staff of Transcorp Hilton Hotels will have to be disengaged if it is to survive the impact of the coronavirus pandemic on the global hospitality and tourism industry, its managing director/chief executive, Dupe Olusola, announced on Thursday.
In an online media conference in Abuja to present an update on its business, Ms Olusola said the management of the hotel cannot continue to sustain over 1,000 permanent and over 500 contract staff with over N1 billion losses recorded every month since the outbreak of the COVID-19 pandemic.
Although she said the management of the hotel started the year in January and February on an optimistic note, with about 40-47 per cent occupancy rate, it never anticipated the devastating impact of COVID-19 on the global business and the Nigerian economy.
She said between January and April, despite the breakout of the pandemic, which resulted in the partial lockdown imposed by the government, the management of the hotel managed to sustain the 100 per cent payment of the staff monthly salary in March and April. She also noted that the company had incurred a payroll cost of about N2 billion from January to August 2020.
However, between April and May, she said the management was faced with the dilemma of either shutting down the business completely and sacking all staff members, as patronage in the over 677 room-facility in Abuja, and 133 rooms in Calabar, dropped drastically to less than five per cent.
“Since May, we have seen significant decline in guest loyalty and poor patronage, which have seriously impacted room revenue earnings, with a lot of the outlets in the hotel forced to shut down.
“In March alone, when the pandemic set on, the hotel was down to about five per cent occupancy (34 rooms). All the meetings scheduled between now and December have been cancelled.
“We have continued to suffer a drastic decline in revenue of over N9 billion and a loss of over N4.9 billion. We recorded over N456 million loss, and N1.03 billion loss in April, while the losses have continued to average N1 billion every month since May,” Ms Olusola said.
Apart from a high salary bill of over N2 billion every month, she said the hotel management spends an additional N4.1 billion on other operational expenses, noting that the projection was that it would be a tall order at the end of the year for the hotel to continue to operate in a way it used to with such significant losses.
On the decision to ensure cost optimization, Ms Olusola said her management has been engaging with government agencies, including the Bureau of Public Enterprises, and the presidency to dialogue on some palliatives, including payroll support and tax rebates for the hotel and the staff.
She said that since the engagements have not yielded any result in terms of any support to the business, the management adopted some cost saving measures and innovative strategies to earn some revenue to cushion the impact of the pandemic.
Some of the innovations include re-negotiating its existing service contracts, resolution to run only three of the available nine elevators, cutting down on energy consumption, rationing of services, like alternating use of chillers and boilers between day and night.
She also said there have been engagements with the workers’ unions and all major stakeholders to make them understand why it would be difficult to sustain the current employee level.
Despite the lifting of the lockdown, Ms Olusola said the situation has not improved beyond 17 per cent occupancy rate, with persistent low room revenue and no international traveling guests coming into the hotel.
Although she said the global projection was for the hospitality industry to return to pre-COVID level by 2024, Ms Olusola said in view of the fact that the industry needs people to operate successfully, it might take a gradual process to achieve that target.
“COVID has really impacted the way business is done globally and the way the hospitality business is run generally. It’s a very trying time for the industry. We do not expect to do more than 30 percent occupancy this year and next.
“We are definitely going to let people go. We will need not more than 400 staff to keep the hotel running, or whatever the business can accommodate. At least 40 precent of the workforce are to be disengaged. We cannot continue as a business with below 20 percent occupancy and the current number of staff.
“Negotiations for disengagement is ongoing on what the payout terms will be, taking into consideration what will be of mutual benefit to all parties,” she said.
On plans to settle some of the hotel’s existing obligations and strengthen its balance sheet in the face of the pandemic, she said the management was considering raising N10 billion funds through rights issue.
She said the management is currently renegotiating with the Bank of Industry to get better terms on its existing loans, while all its expansion plans, including setting up new hotels on Lagos and Port Harcourt, have been suspended temporarily till the economy improves.
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