There is always the potential of going too far with layoffs during an economic downturn. But coronavirus has upended the travel industry with so much uncertainty that Hilton's sizable layoffs reflect a narrowed corporate focus on near-term health, survival, and reopening.
Coronavirus continues to take a toll on headcounts at the world’s largest hotel companies.
Hilton will lay off 2,100 corporate roles — or about 22 percent of its corporate workforce — around the world, the company announced this week. The company also said it would extend previously announced furloughs, reduced hours, and pay cuts by 90 days.
“Never in Hilton’s 101-year history has our industry faced a global crisis that brings travel to a virtual standstill,” Hilton CEO Christopher Nassetta said in a statement. “Hospitality will always be a business of people serving people, which is why I am devastated that to protect our business, we have been forced to take actions that directly impact our team members.”
Employees impacted by the announcement are expected to receive severance pay, access to Hilton alumni resources, an expedited recruitment process when travel resumes, and extended access to team member travel and loyalty programs.
Those steps position the company well to bring workers back as the travel industry recovers further down the line, said Sean Hennessey, a professor at New York University’s Jonathan M. Tisch Center of Hospitality.
“The primary emphasis right now for hotel companies like Hilton is getting their hotels back up and running and trying as best they can to incorporate virus protection measures, new cleaning measures, and all the rest,” Hennessey added. “A lot of the other aspects of the corporate enterprise are not really needed or at least as important in the corporate mission, at least in the near-term.”
Hilton’s corporate layoffs come on the heels of strong May employment numbers, where leisure and hospitality jobs accounted for 1.2 million of the 2.5 million jobs added for the month. Hilton’s job cuts may seem out of step from the labor strength seen last month, but most analysts expect the travel industry has a long way to go before it is once again performing at 2019 levels.
“When you think of the range of activities that take place at the corporate level, there are certainly a lot of people that wouldn’t be busy in their traditional job roles right now,” Hennessey said. “Hilton is doing the right thing in recognizing that.”
Travel spending in the U.S. alone is expected to drop 45 percent in 2020, according to a Tourism Economics report released Wednesday. Domestic travel by U.S. residents is expected to fall by 30 percent in 2020. It will take four years for U.S. hotels to return to 2019 revenue per room performance levels, according to CBRE.
Major hotel companies like Marriott, Hyatt, and Wyndham have all announced corporate layoffs and furloughs amid the coronavirus crisis but haven’t been as public with the percentage impact to their overall workforce.
There is no denying the global travel industry’s uncertainty — especially in the near-term — is also coupled with growth and development opportunities showing signs of a slowdown, said Ryan Meliker, the president of Lodging Analytics Research & Consulting.
“With that backdrop, layoffs may be a prudent move,” he added. “But there is no doubt that cutting with a hatchet rather than scalpel can do more harm than good. It remains to be seen how much precision will go into Hilton’s layoffs, and time will tell.”
Hilton declined to speak further on the layoff announcement.
“Our company’s spirit has always been grounded in a culture that supports our Team Members and delivers hospitality for our Guests,” Nassetta said in his statement. “We will keep that spirit alive, and when the world begins to travel again, we will be ready to welcome them back.”
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Photo credit: Hilton plans to lay off about 22 percent of its corporate staff due to coronavirus-related impacts on travel. Altercari / Wikimedia