COVID-19 epidemic has struck a severe blow to the hotel sector

The COVID-19 epidemic has had a negative influence on almost all economic sectors, but the restrictive measures introduced to deal with it have brought the hotel sector to its knees. Easter and Labour Day holidays are normally one of the seasonal peaks for Slovenian tourism, but this year hotels and other tourist accommodation establishments have been desolated. Due to the governmental Decree on the temporary prohibition of the sale of goods and services to consumers in the Republic of Slovenia, on 17 March 2020 Slovenian hotels had to close their doors overnight. Some hotels and other tourist complexes are using the period of closure to perform maintenance, while one of the main tasks facing all hotel sector companies during this period is to preserve as many jobs as possible and to stabilise operations. Despite the closure, two hotels have been operating during the COVID-19 epidemic: one in Velenje and one in Postojna; however, they have not been open to their usual guests but instead served only as facilities for the 14-day quarantine of Slovenian citizens returning from abroad.

Although on 15 May 2020, the COVID-19 epidemic was cancelled in Slovenia, it is still unclear when exactly the hotels will be allowed to reopen. Considering that from 18 May 2020 tourist accommodation establishments with up to 30 rooms have been able to open their doors for guests again, it is expected that hotels will be allowed to operate again from 1 June.

How can hotels benefit from the state intervention measures?

Enacted with the intention of retaining as many employees as possible, hotel companies like those in other sectors took advantage of the benefits available under the first two “anti-corona” legislation packages. Employees in hotel companies were mostly temporarily laid off due to the employer being unable to provide work; the hotel companies were then able to benefit from the intervention measure of partial reimbursement of the salary compensation and exemption from social contribution payments for the temporarily laid-off employees; however, such reimbursement cannot exceed the amount of an average salary for 2019 in the Republic of Slovenia (EUR 1,753.84 gross), calculated per month and reduced by the amount of the insurance contributions.

Those employees who were needed for the normal operation of the hotel companies during the closure either worked from home or continued to work in their usual place of work and respected prescribed safety and health measures. For employees working while the COVID-19 epidemic measures were in place, the hotel companies were able to benefit from the exemption from the social contribution payments for pension and disability insurance. Both these intervention measures are applicable from 13 March 2020 to 31 May 2020. Due to the epidemic, hotel companies were also forced to terminate all student work and other temporary seasonal work. A point of concern also results from the recent analysis prepared by the Association of Slovenian Hoteliers (Združenje hotelirjev Slovenije) which shows almost one third of regular employees in the Slovenian hotel sector will probably lose their job due to the negative effects of COVID-19 epidemic.

In addition to the intervention measures aimed at employees, the intervention legislation also makes it possible for hotel companies to request a 12-month moratorium on all loan agreement payment obligations due after 12 March 2020, when the epidemic was declared in Slovenia. The request for a moratorium needs to be filed with a bank within 6 months of the state of epidemic in Slovenia being cancelled (15 November 2020). The hotel companies can also benefit from the intervention state guarantee scheme for the loans that were or will be concluded in the period from 12 March 2020 to 31 December 2020 for financing the main business activity, new or ongoing investments or working capital, but, of course, only if they fulfil the conditions prescribed by the intervention legislation.

Despite the benefits available from the above-mentioned state intervention measures, the hotel sector expects to receive the most state aid for its recovery under so-called third “anti-corona” legislation package – i.e. the Act on Intervention Measures to Mitigate and Eliminate the Consequences of the COVID-19 Epidemic on Citizens (Zakon o interventnih ukrepih za omilitev in odpravo posledic epidemije COVID-19, »ZIUOOPE«), the proposal for which was published on 21 May 2020 and is expected to be adopted before 1 June 2020. These measures should help to preserve jobs in the tourism sector and allow smaller tourism service providers to survive.

In the ZIUOOPE proposal, the following two measures for the tourism sector are expected to be adopted:

• Extension of the intervention measure of partial reimbursement of the salary compensation and exemption from social contribution payments for the temporarily laid-off employees for an additional month (i.e. until 30 June 2020) in order to make it easier for tourism companies and other tourism service providers to relaunch gradually;
• Touristic vouchers for the increase of domestic consumption, whereby each person of majority age with permanent residence in Slovenia should receive a voucher in the amount of EUR 200 and each underage person a voucher in the amount of EUR 50. It will be possible to use these tourist vouchers to pay for accommodation with or without breakfast by those service providers registered in the Registry of the Objects for Accommodation maintained by the Agency of the Republic of Slovenia for Public Legal Records and Related Services (AJPES). After the voucher(s) have been used, the respective service provider will receive the amount equal to the used voucher(s) from the Financial Administration of the Republic of Slovenia (FURS). In addition to the measures intended for the tourism sector, Slovenian hoteliers will also be able to benefit from the general measures in the ZIUOOPE proposal envisaged for the whole economic sector:
• Partial co-financing of part-time work will be available to those Slovenian employers unable to provide 90% of work to at least 10 % of employees. The work of those full time employees who will be (based on the ZIUOOPE provisions) ordered by the employer to work part time from 20 to 36 hours per week will be subsidised, whereby the employer will receive a subsidy in the amount of EUR 448.52 to EUR 112.13 for each employee working on a part-time basis. The measure will apply from 1 June to 31 December 2020. In this respect, it is worth remembering that employers from the tourism sector will not be allowed to benefit from this measure while they benefit from the intervention measure of partial reimbursement of the salary compensation for temporarily laid-off employees;
• Provision of sufficient liquidity funds for the survival of companies by loans given through public funds to micro, small and medium-sized companies;
• State aid in the form of grants and reimbursable grants to ensure the smooth operation and liquidity of companies, for the co-financing of operational costs of enterprises in the tourism and hospitality sector and for the digital transition of the companies.

As the proposal of the ZIUOOPE has not been adopted yet, the above-mentioned measures may be adopted in a slightly amended form. Bearing in mind the importance of the Slovenian hotel and tourism sector in the GDP and the current dissatisfaction of tourism sector representatives with the proposed measures, other and additional measures such as reduction of the tax rate for touristic services or an exemption from partial or full payment of rent may also be considered.

What awaits hotels when reopening?

Those hotels that will reopen for guests after the operating restrictions are cancelled are already intensively preparing for a new way of operation. The National Institute of Public Health (NIJZ) has already published recommendations for operating hotels and other tourist accommodation establishments in changed circumstances based on which the majority of hotels is currently preparing instructions on how employees and guests should behave on the hotel premises (e.g. disinfection of hands, working in gloves in certain working places, use of protective masks, cashless payments etc.). At the same time, the hotels must carry out certain material measures before reopening such as fitting transparent bulkheads on receptions, bar counters and information counters as well as ensuring tables are properly distributed in bars, restaurants and dining rooms.

In view of the current situation, the Tourism and Hospitality Chamber of Slovenia also highlights that despite the expected reopening of hotels, the loss of turnover will be enormous this year and the recovery slow. At this point it is also impossible to predict the occupancy rate of hotels over the summer since it depends on a number of external factors, such as when hotels reopen, how fast the number of reservations will grow, when the borders between states will be opened again etc. Given the high operation costs, expected low occupancy rate and the volatile circumstances, a proportion of Slovenian hotels might also remain closed after the restrictions on hotels are lifted.

There are still many open questions about the future of the hotel sector; however, in our view, hoteliers are reasonably looking to the (medium-term) future with optimism. People have an irresistible need to travel, to explore new horizons and to enjoy themselves. Maybe now even more than before the COVID-19 epidemic.