Sign Up Now
Try QikRes© booking engine for change. See how easy it is our booking engine when designed with simplicity in mind. Join over satisfied members who have already discovered the benefits of Qikinn©.
The Tariff Challenges for Hotels
The whole world is now grappling with increased tariffs which have been imposed by the USA. How and what will this mean for Hotels? As countries struggle to cope with the imposition of new taxes on goods, the supply chain impact will have repercussions for every business. For the Hospitality industry, some of the expected impacts which we can foresee will be:
1.
Increased Cost of Imported Goods
Most hotels depend on a lot of imported goods, including Food, Furniture, Electronics, Fixtures, and Fittings. The cost of importing such items will increase the prices of such goods, which will, in turn, affect the operational costs for Hotels. Hence, this will result in decreased profits for the Hotels or inadvertently higher guest room rates.
2.
Slowdown in Travel
When prices of goods and supplies increase, this affects all businesses, and as a result, consumer spending decreases in the short term. With higher costs in airfares, transportation, accommodation, food, etc, it will have an impact on people travelling, and hence, hotel occupancies are affected.
3.
Delays in Construction & Renovation
With higher costs, asset managers will be examining all expenses and projects in progress or planned. Some projects may even end up being financially unfeasible, whilst ongoing projects may be phased out more gradually to accommodate the lack of funds and rising costs.
4.
Hotels Increasing Room Rates?
When Costs go up, it is only natural for Hotels to increase room rates. However, this is again limited to market demand and supply. Bearing in mind that most countries have built up a fairly sizeable room supply, this eventually also leads to increased competition and possible price war! This would be a similar situation when hotels were faced with SARS or Covid and had to reduce rates to get customers. Hence, increased costs need not necessarily mean increased room rates, but it could mean further losses with reduced occupancies, higher costs, etc.
Key Takeaways:
The Tariff Wars have created a new challenge for all businesses globally. This inadvertently leads to many situations which need to be managed carefully, depending on which market the business is focused on. However, the basic fundamentals in cost management, supply chain rationalization, reduced demand, etc., will all impact in the overall operations daily.
