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Reflections on Covid19 and Javier Floristán's hospitality, Mafia CEO sits at the table

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In the month of September of the year 2000 I opened my first Mafia restaurant, this year after summer, we celebrate our 20 Anniversary. Some days ago, they proposed me from the board of directors, if he saw with good eyes to move the anniversary and everything that leads to 2021, but it didn't take me a moment to say no.

I am aware that surely this year will be one of the most difficult in the history of any company, but despite our uncertainties and frustration, it is time to remove that businessman and that warrior that we carry inside; "A soldier with shoes is just a soldier, but with boots he becomes a warrior ”as stated by Phil Knight the founder of Nike in his autobiography“ Never stop ”.

The goal right now is not profit, is be creative and apply cost containment measures that allow us to save and avoid “ant expenses”. Companions, It will be hard but we live in the most social country in the world. We go to war but we know the terrain and we will win. I am convinced that we will get ahead and much stronger than before. Always remember that "behind a problem there is always an opportunity". yes, we have to keep a cool head and put aside all the negatives as it is time to think clearly about how we are going to face the reopening.

This pause should serve to work and rethink the strategy and action plans that we are going to implement in the face of possible short-term scenarios., medium and long term.

Hospitality is one of the most important pillars of the Spanish economy, since it represents the 6,2 GDP. This year we were growing +3,8% in this sector and acts of consumption +6,6%, now -14%.

In Spain there are some 300.000 bars and restaurants. Most of us have to go into debt via bank financing, but also many of them will not be able to lift the blind after this tsunami. Although the forecast for hospitality is that, from October to December everything is normalized, we have a few complicated months ahead.

For our sector, same as for many others, there is going to be a "crisis of confidence", where the client will have a hard time spending as before and will modify some consumption models, enhancing delivery, take away and everything related to on-line and new forms of payment.

El delivery y take-away will be an alternative way, even for businesses that until now had not implemented it. Food delivery will continue to grow exponentially, but be careful with the take-away since the data that is handled is that it will be multiplied by 10.

The key word is going to be omnichannel and the possible implantation of intelligent prices where the client pays according to the service provided. Also for the coming years it will be very important to have an internal customer database. Surely, as our great friend and expert affirms Diego Coquillat, the digital market is now an embryo of what it will be in the future.

As for tourism and what can affect us, the data that is handled indicates that the international is going to drop a 70% during this year, and will not recover until 2021, so cities whose turnover depends largely on international tourism, they will notice much less the low influx of customers. It is also true that the national will not move so much from his reference city and his budget can be spent on local leisure., except those families that have run out of income.

The biggest risks that we find before the reopening are: on the one hand the stage at the national level, in which many companies will close and unemployment will grow again, already knowing the data of the 900.000 layoffs these days. And on the other hand, the sentiment in Spain towards consumption outside the home at the moment is not among the consumer's priorities, and this will remain cautious according to the survey recently carried out by NPD. Although we can extract something positive from this report, as it indicates that the Spanish miss the restoration the social component of consuming away from home and spending time with friends or eating with family.

The best of the scenarios being considered would be in the -4% and the worst in the -12%. Reference consulting firms believe that it will be around the -6%

We must remember that the growth scenario of the hospitality industry in recent years has always been very similar to GDP. But this year this trend will not continue, since hospitality is one of the most affected sectors. Keep in mind that, Besides, we will be closed for a while and sales after opening will be progressive.

Currently in the hospitality sector we have several open fronts, and above all uncertainties that we hope will be solved these days, such as the labor issue and the flexibility of the ERTES.

Another very relevant aspect, is the topic of rentals where you have to bet on the saying "if there is no sale there is no rent". We also have the uncertainty of the protocols and methods of action that will legislate us in the reopening with limited capacity and sanitary-hygienic protection measures.. And finally the forecast of definitive opening dates .

Nor should we forget how the confinement process will affect the diversity of catering businesses, as it is foreseeable that bars will not be considered equally, restaurants, nightclubs or bars, where in any of them, it will be impossible to comply with mandatory sanitary measures.

The sector is eager to know what scenario we are going to find and the methods of action that you will have to apply at the reopening: limited capacity, protective materials and hygienic sanitary measures, All this will have a great impact on the profitability of our premises for the coming months..

The bank maintains a position of great solvency at the moment and it will be crucial for the uprising of the economy in the second half of the year. He 50% of catering businesses could bear only about a month of fixed operating expenses without resorting to external financing.

Definitely, the financial sector, is the one that can help companies the most in this crisis, since it will become a liquidity crisis, once the sanitary passes.

Regarding the epidemic, I can only say that "the light is seen at the end of the tunnel", the data being recorded encourages optimism, always moderate.

All the past epidemics in the world usually last for a few 3 months. So coronavirus doesn't have to be an exception, forecasts point that in the 4 quarter of the year may be normalized according to experts. Come on and we must be optimistic.

What we will meet in the 2021 it's a much more indebted world but, although the state of emergency can last almost a year, everything will be put in its place.

The psychology of the consumer is very touched after the confinement as we are seeing in China, but we all hope that the tortilla will be turned around as soon as possible. Keep in mind that Spain wants to go to the cinema again, have a few beers with friends, eat at your favorite restaurant with your family etc.. leisure as I mentioned before, is what distinguishes us in Spain and I hope that we will return to that normality soon.

The impact of COVID-19 on the sector will be developed in 4 phases, although today there is uncertainty about the duration of each:

  1. Confinement: cessation of our activity except delivery
  2. Restricted opening: slow recovery from activity, ratings to 50% current capacity with restrictions gradually.
  3. Defendant in transition: open without restrictions but afraid of contagion, decreased tourism and limited demand.
  4. Structural change: change of consumption habits when returning to the activity as before and surely less demand because consumers have less disposable income, aspect that can also affect the average ticket.

According to experts, the sector's estimate will be substantially affected during the confinement and will recover throughout the year. Billing could be reduced by -40% during the 2020, with a loss of direct jobs of about a 25%.

To mitigate the impact of COVID-19, Hotelier surveys have been carried out and their results confirm that Support measures are needed to guarantee liquidity in the short term, maintain the employment and flexibility of ERTES and finally, boost demand that will be hurt after weeks of economic crisis and social upheaval. Measures to reactivate consumption will be vital. As well another aspect that the sector demands, is the suspension of rents on the days of confinement.

In addition to the measures already announced by the government that we all know focused on generating liquidity and protecting employment, several industry associations have proposed a package of additional measures to mitigate the impact on these aspects, in the short term and to reactivate demand. We hope that the government takes into account a large part of this package of necessary measures for the sector.

I say goodbye with a positive message, since in our sector the most important is that people have to continue feeding, and although the behavior of the Covid-19 may modify some habits of consumption behavior, Spain wants to go out and socialize and what better way than to go back to your favorite restaurant or bar where of course, We are waiting with open arms

Cheer up, there is one day left..

About the Author

Founder and CEO of The mafia sits at the table, Italian franchise restaurants near 40 establishments in Spain.

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