When it comes to the pandemic, there are some good news and reasons to be hopeful. Several vaccines are either in their final development stage or about to get approved. Right on time for the end of the dreadful year of 2020. 2021 can only get better. Or can it?
We still have 5 weeks for 2020 to go, and no matter what happens until New Year’s Eve, this won’t be the end of the challenges. Challenges with the pandemic, and challenges with the economy. Production, distribution, and the re-opening of borders will take time. So will the recovery. And we are not talking about days or weeks. We are talking about months and years.
Why things might get worse
Markets tend to be optimistic, but corporations tend to be cruel – by perception. Despite the silver lining on the horizon, it is most likely that most companies will continue cutting costs, reducing payrolls, and doing whatever necessary not just to survive, but also to make-up for the lost revenue during the pandemic.
But not only that. Many companies see the current situation as an opportunity to push through decisions that may have not been possible without such a crisis.
Some of these decisions might be radical, and urgent. In fact, they might have been urgent for a while. Upgrades of IT systems. Reviews of procedures. Reorganizing teams and the abolishment of established structures. But there is also a downside to it, especially when it comes to the “reorganizing teams” part. People are and will continue losing jobs.
Same old or not?
Now don’t get me wrong. This is nothing new. Maximising revenues and minimising expenses is what every business does. That’s how you generate profits. This was the case before the pandemic. During the pandemic. And it will stay with us also after the pandemic. It’s simply how every business works.
So, while cutting expenses and especially payrolls is nothing new to us, the magnitude of the cuts in the current environment is immense. And many of these cuts are not just until this pandemic is over. Many of these lost jobs will disappear permanently.
I am working in hotels, and my industry is among the hardest hit by the pandemic. Many of my colleagues have lost their jobs. I personally had to cancel contracts with trusted contractors, shrink my teams to an absolute minimum level, and cut payrolls through unpaid leaves and other essential measures. It hurt. Almost everyone on my team was hand-picked by me since the opening of my hotel. But I had no choice. Still, some of my former colleagues are hoping to be able to return to their previous assignments once all this is over.
But this is where it gets tricky. Because when corporate number-crunchers tell you that things can be stream-lined, everyone is replaceable and that the balance sheets still don’t look good enough, then you might want to get creative in your response to minimize the damage.
Short-term requirements for a quick brush-up of the balance sheet might become costly in the long-run. As everybody “on the ground” knows well, some people are truly not replaceable, and with everything that’s happening we are loosing countless talents and professionals. Some of them possibly never to return to a business, that destroyed their dreams or didn’t get a grasp on the value that they brought to the workplace. Also, more than often, stream-lining procedures and getting “lean” can have just the opposite effect, creating processes that result in micro-management, bureaucracy, and slow response rates. In the hospitality sector in particular this can quickly lead to frustrations for the hotel teams and for hotel guests alike.
Things are not over for the service industry
The tough times are not over, and especially the service industry will continue to suffer. Hotels, bars, restaurants. People will vacation less abroad. Companies will continue keeping business travel at a minimum. Since so many people depleted their savings or borrowed money, they will eat out less and keep parties and events on the low.
As my readers know, I am managing a hotel. For the last 12 years in this industry I was never worried about my profession, and I never worried about my job (which includes finding a new one when I felt it was time to move on).
But this time it’s different. This is the first time that I am not confident in receiving the opportunity to extend my contract (which is due in May 2021). And it’s also the first time that I have doubts. In the case that it should not be renewed, finding an immediate new opportunity will be a serious challenge.
Many of my colleagues have already lost their jobs. Many of them are smarter and more experienced than I. It’s therefore only logical to assume that I might follow in their footsteps rather sooner than later.
One more reason to keep preaching financial independence, and the purpose of having multiple income streams. And practicing it.