Profitability of selected hospitality businesses in the COVID-19 pandemic and post-pandemic years

Abstract

Background: In an attempt to determine the impact of the COVID-19 pandemic on the profitability of selected hospitality companies, the article assesses the profitability of three intentionally selected entities operating in the Silesian Voivodship: the Scout hotel, the Alhar hotel, and the Nad Wodospadem Guesthouse. The selection process took into account the diversity of entities, in terms of their type (hotel/guesthouse), location, offer, size. The assessment of profitability was preceded by a brief presentation of the nature of profitability, the specifics of the hospitality industry, including in the context of the course of the COVID-19 pandemic in Poland. The financial results of the indicated entities in the years 2019–2023 were analysed – comparing the results before the pandemic, with those of the pandemic and post-pandemic crisis years.
Research purpose: The research objective of this article is to assess the profitability of selected companies in the hospitality industry in an attempt to determine the impact of the COVID-19 pandemic crisis on their profitability.
Methods: The considerations presented in the article are based on an analysis of the literature on the subject and the financial data of three selected companies. A method of analysis was used, including literature analysis, financial analysis (preliminary and ratio analysis), deductive reasoning, descriptive method and graphical data presentation method.
Conclusions: The pandemic crisis in the hospitality industry has caused many losses, but it has also become a great opportunity to gain a competitive edge. Technology has undoubtedly accelerated. As a result of strictures and the need for contactless service, automatic check-in was increasingly introduced, various guest service applications were developed and robotic cleaning has become much more common. The lockdowns also gave rise to new business models: workation, quarantine hotels, long-term rental, or accommodation for medical and emergency workers. The industry suffered heavy losses, but by adapting quickly to the situation, being flexible and creative, many hotels survived the pandemic and recovered afterwards. This was also helped by an increase in customer interest in local tourism – the period ʽduringʼ and ʽafterʼ the pandemic was a particular period when a significant proportion of tourists chose to holiday at home rather than abroad. The study found that the financial performance of businesses during and after the coronavirus pandemic was influenced by factors such as the size of the business surveyed, the size and type of locality in which the hotel operated, and the previous stability or instability of the businessʼs financial situation. During the pandemic period, each of the surveyed entities made losses and were thus characterised by deficits. After a ‘rebound’ in the first post-pandemic year (2022), when the surveyed entities recorded relatively high profits – higher than before the pandemic – there was a decline in 2023 compared to 2022, and, in the case of the Alhar hotel and the Nad Wodospadem guesthouse, also compared to 2019. Only the Scout hotel made a net profit in 2023, which was almost 400% higher than in 2019 (it which was the only one of the surveyed entities to close 2019 with a net loss). The pandemic therefore did not exacerbate the hotelʼs financial problems. The net financial result was reflected in the level of profitability ratios: during the pandemic years, all the companies surveyed were unprofitable. The situation improved in the following years, with profitability for the Alhar hotel and the Nad Wodospadem guesthouse in 2022 being incomparably higher than in 2023. At the same time, profitability as measured by ROS, ROA and ROE for these two entities was lower than in 2019, which clearly shows the negative impact of the pandemic crisis. The situation was different for the largest Scout hotel, which is also located in a larger city. The profitability results for 2023 were not significantly different from the results for 2022, as was the case for the other two entities, while being incomparably better than in the year before the pandemic outbreak. It can therefore be concluded that the measures taken during the pandemic crisis, in particular the adaptability and flexibility of the offer, had a significant impact on the profitability of the hotel and overcame the pre-existing financial difficulties, aggravated by the pandemic in 2020–2021.