Futurist Tommy McCubbin provides insights into how the hospitality industry is being impacted now, soon and later under COVID-19, with supporting comments for accountants and bookkeepers from ABN director, Peter Thorp.
A recession traditionally takes months to reveal itself, giving businesses ample warning to adapt and move with consideration. Most businesses can take a manageable hit and continue trading. COVID-19, in frightening comparison, gave no warning, taking businesses from one hundred to zero in a few days.
In this series, we look at the trends that will impact several business verticals now, soon and later, and how accountants and bookkeepers can help guide and provide value through the pandemic.
Across Australia, all cafes, pubs and restaurants have been closed or severely restricted in their operations, leaving the hospitality industry scrambling to find their feet, and stay afloat without a significant portion of their traditional revenue stream.
As for their trusted accountants and bookkeepers, guidance and service has never been more prudent, as all 130,000 hospitality businesses across the country start dealing with this ‘new normal’.
The immediate salvation is from the Government, which has been moving fast and some would say generously. The evolving stimulus is the largest in Australian economic history, so it’s critical you’re across how to maximise it for your clients.
This article is the first in a series that will help inspire an optimistic approach to guiding your clients through the pandemic and maximising opportunities that can be exploited;
This article is a follow up to the expansive MYOB Radar Report Volume III, released in 2019. With a depth of insight into key industries including hospitality, the Radar Report remains a useful resource for business advisors of all kinds.
READ: Radar Report Volume III
In this period of brutal uncertainty, you have limited, but clear directives you can give your clients. There are three key actions they can take (if they haven’t been forced to already).
Hundreds of Australian businesses have been forced to play this unthinkable hand. As difficult as it is, there can be a silver lining and an opportunity for your clients to take everything they have learned, and rethink a new, leaner, smarter vision.
As an advisor to hospitality business owners, accountants and bookkeepers will play a role in minimising the damage in the short term and help writing their ‘2.0’ plan with them.
For hospitality clients, shutting the doors on their usual foot traffic is not optional, but keeping the engine ticking over is something that, with support of the stimulus, is a good option for them.
As well as helping them maximise the benefits of wage subsidies, loan deferrals and rent relief, it can be a time to revisit operations and staffing, and look for the inefficiencies that had been put off prior to the pandemic.
Keep an eye on the horizon, and know that in several months time trading will be back, And, in 2021, a vaccine will almost certainly be available, at which point demand will return with gusto. It’s just as important to plan for that as it is to create stop-gap strategies for today.
There will be a lucky few that will have the capital and resource to innovate and grow, turning this disaster into a time of prosperity.
As the saying goes, ‘Never waste a crisis’, so now is the time for business owners to think laterally when it comes to identifying potential opportunities.
These opportunities may be temporary, or become a primary revenue generator for the business.
When restrictions loosen, and the spread of the virus is contained, we will enter a period where we are still on edge and see ‘waves’ of the virus make a comeback.
What can be guaranteed is we will be all practicing ‘hyper-hygiene’. For example: looking twice at everything before we come into contact with it.
Customers will expect plenty of space if and when in-venue dining is permitted, and visibly see cues of best-practice hygiene such as staff wearing gloves and masks, and ample handwash and sanitiser available.
Advisors to hospitality clients will want to be on the front foot with integrating this into their operations, and spending wisely in communicating their diligence to customers with signs such as ‘Zero-Touch Kitchen Service’, and so on.
“People will change their habits, and some of these habits will stick.”
— Susan Athey, economics of technology professor at Stanford Graduate School of Business.
Post-vaccine, we’ll have our consumer confidence back, and everything will mostly return to normal. A few trends we will see in the pandemic will remain long after the virus has gone.
While in isolation, businesses have been forced to create a digital shopfront. Now setup, this will remain, as people come to expect to find everything online. (This comes with a word of caution, as big tech — in this case mainly Facebook, Instagram and Google — will have a stronger hold on your client’s business than before.) Where possible, make sure the hospitality owns its customer and operational data and isn’t at the mercy of companies in Silicon Valley.
As we come out of this haze, and into 2021, all the isolation, and lack of physical contact will be pent up inside us all, there will be a Post-Vaccination Boom for hospitality businesses. Those operations that have been guided to survive — and, in cases, thrive — prosperity will make a much-needed comeback.
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Peter Thorp, Director, Australian Bookkeepers Network
The unwelcome byproduct of our Government’s plan to minimise the dire human health cost of the COVID-19 pandemic is the economic fallout inflicted on the small business landscape. Very few industries have suffered more than the hospitality industry.
The economic reality is that many of the businesses that were around to see in the 2020 New Year might not see Christmas; sad, but true.
The ultimate number of lost market participants will depend on the course the Government is able to chart for a return to normality. So, where do we as tax practitioners fit into this landscape? How can we retain clients and even grow clients against such a dire backdrop? How can we help clients whose businesses are possibly terminal?
We need to take a pragmatic approach here. Throwing endless free hours at all of our hospitality clients in the blind hope that they’ll all get through this will come at a high personal cost.
But, if we accept the fact that some client businesses won’t emerge from the other side of COVID-19 and the economic ructions and probably recession that ensues, then our course of action becomes more clear. For those clients that won’t make it, our job as practitioners is to minimise their losses and for those that believe they will emerge from the ashes then our job is to give them every opportunity to succeed.
Ultimately, it’s our client’s decision to ‘bat on’ or ‘call full time’. When that time comes it’s a decision best made by the client with the support of their trusted advisors (accountant, bookkeeper and other relevant advisors).
In the short term, your job is to help clients understand their cash burn rate and get it down to level that ensures survival for as long a period as possible.
Integral to this is helping your clients maximise their entitlements under relevant stimulus measures like the Cash Flow Boost and JobKeeper schemes; mitigating rent under the Mandatory Code of Conduct; understanding the state government support provisions including grants and concessional loans; and government-supported loans though the banking system.
It also means taking a critical look at all other overheads and supporting other short-term sources of revenue to mitigate cash burn.
As Kenny Rogers famously sang: “You gotta know when to hold ‘em and you gotta know when to fold ‘em”. Ultimately, your client will need to make that big decision given their financial position and their assessment of the pathway of a return to ‘normal’.
Your job is to be there and provide them with the necessary information to make the toughest decision of all. They may need to seek input of other professionals to minimise exposure and preserve personal assets.
For those clients that’ve been able to curtail cash burn -and have sufficient resources to have a fresh start reinvention should be the mantra.
The ‘new beginning’ should see less competition, available staff, available locations and pent up demand; all recipes for success. Don’t be blinkered into doing the same thing with the same staff in the same location (unless it was already perfection), the current down time is the perfect opportunity to reinvent a business.
“Begin with the end in mind,” was one of Stephen Covey’s ‘seven habits of highly effective people’ and is a great mantra in reinventing a business. Paint a picture of the perfect business then work backwards to the steps that make it a reality.
Your job is to work with clients and help build business plans, budgets, projections, improve systems and software in preparation for the fresh start.
If you’ve prepared well in this enforced wind-down period then your client should be poised waiting for the sign to hit the gas.
Your job is to ensure the client hits the ground running with the right systems, software, personnel and reporting devised in Phase 3.
And remember, your clients need you now more than ever.