Most of Ireland's 830 hotels have tentatively reopened, and many will be wondering whether to stay open or not after September.
Some hoteliers face a real Hobson's choice - stay open and try to break-even for the rest of the year, with a risk of insolvency, or close, lose momentum, and run the risk of not reopening at all next year. This winter, and spring 2021, will be "make or break" for many.
One man ideally placed to advise on that conundrum is Weldon Mather, who joined Colliers International in Dublin this year, to head its hotel and leisure services. Mr Mather grew up in the family's hotel in County Kildare, and has more than 30 years experience in the business, including periods managing hotels here and abroad. He is a chartered global management accountant and a hotel asset manager, a specialisation that is growing, worldwide.
Mr Mather's advice to hotel owners in this period of survival is that they must forensically analyse their financials and understand their break-even point (BEP), to understand cost levels and to determine the levels of sales required, in every area of their business.
BEP is calculated by dividing the fixed costs of production (eg rates, insurance, interest payments) by the price per unit (eg room-rate or price of meal) minus the variable costs of production (eg costs of staff, food and beverages).
It's not as challenging as it sounds, he tells me. The key is knowing three inputs: your sales, your fixed costs and your variable costs.
But in many years of advising hotel owners such as Nama and institutions, he is often surprised at the lack of knowledge around these issues in hotels.
The formula, he says, is no secret either: sales minus variable costs equals contribution (what's left over to pay fixed costs). Then divide your fixed costs by the contribution margin, and you will know whether you are making a profit or loss.
Understanding the BEP allows the owner to decide, for example, how many rooms do we need to sell tonight? At what rate? Is it worth opening the restaurant or the spa?
Most hotels usually aim for a 35-40pc occupancy threshold, with many now hoping that Covid-19 cost reductions (due to lower operational costs and wage subsidies) will lower the break-even threshold.
According to Hotstats, in the US, the break-even occupancy for hotels is 37pc. Generally, the lower the quality rating of the hotel, the higher the room occupancy needs to be. Luxury hotel break-even occupancy is 34pc. A luxury hotel's profitability does not depend on room-occupancy rates as much as budget hotels. This is because they offer more food and beverage outlets, conference and event space and leisure facilities, which increase the profit margins.
Quick wins for hoteliers, now, include examining all payroll (hour by hour), departmental expenses, overheads and supplier contracts. Fixed costs can remain stubbornly high, even when a hotel is closed down, Mr Mather told me, for example, standing charges for electricity. However, because hotels were temporarily closed, he says, there is a rare opportunity now to identify a hotel's fixed costs. The objective now is to reduce both fixed and variable costs, since there are limited opportunities to increase sales.
With Dublin hotel occupancy currently estimated at below 20pc and with the sector largely reliant on non-existent tourists, hoteliers will be hoping for an early return to conference and events business and the return of local office workers to urban centres.