How To Launch A Hospitality Business In An Economic Downturn - Hospitality Net

How To Launch A Hospitality Business In An Economic Downturn - Hospitality Net

How To Launch A Hospitality Business In An Economic Downturn - Hospitality Net

Posted: 23 Sep 2020 12:00 AM PDT

Financial turmoil: A perfect opportunity for start-ups


If you've been toying with the idea of starting a hospitality business, but have been put off by the economic downturn as a result of the ongoing COVID-19 pandemic, fret not. There's hope. In fact, despite the global uncertainty and the unstable financial and political climate, now might actually be one of the best times to launch your business.

Here's why:

  1. Volatile markets create chaos and give rise to new problems. This means consumers are looking for new and innovative solutions, which presents the ideal opportunity for start-ups aiming to make a name for themselves.
  2. Consumers and businesses are looking to save money. Most start-ups are nimble, eager and able to undercut their competitors, allowing them to win over new customers without too much effort.
  3. Startups are more resilient. In times of financial uncertainty, both giant corporations and small businesses suffer the consequences, and need to scale back or shut down to recuperate their losses. Start-ups, however, are much more resilient to financial instability as they have minimal overheads and aren't expecting to make significant profits in the short term in either case.
  4. The job-seekers' market is booming. Layoffs are an undeniable consequence of financial turmoil, leaving a lot of highly qualified people unemployed and looking for work. These individuals are willing to take a risk and accept flexible arrangements which will make it easier to find talented people to join your crew.
  5. Interest rates are lower and supplies are cheaper. From overhead costs like office space, supplies and salaries to interest rates, a lot of products and services are cheaper during a financial crisis - allowing you to save on your costs and maximize your investment.
  6. Investors are looking for new opportunities. When the economy is on the brink of collapse, many investors are looking to move their money out of the futile stock market and fund tangible businesses. If you can present a solid business case, chances are you'll have no trouble finding new investors.

Businesses born in a time of recession

While it may seem surprising, some of today's most innovative and most successful companies were born in times of recession. If history has taught us anything, it's that innovation, creativity and success flourish in times of chaos:

  • Airbnb was created when the world was in the middle of the 2007/08 financial crash. Struggling to pay their rent, two Californian friends - Brian Chesky and Joe Gebbia - had the simple idea of renting out an air mattress in their San Francisco living room. When the recession hit, they saw an opportunity to expand their business idea. Airbnb quickly took over the short-term living market and is now valued at £25 billion.
  • Groupon was created by young Chicago-based entrepreneur Andrew Mason during the 2007-08 financial crisis. His idea of offering users discounts on local businesses and scholarships not only helped companies promote their services, but also helped retailers cope with the significant hit to the industry. It quickly became a new form of online retail and the company is now valued at £2.5 billion.
  • Microsoft was founded during the mid-1970 oil crisis by two college drop-outs, Bill Gates and Paul Allen. Their simple idea of developing a user-friendly operating software for home and office computing revolutionized the world. Microsoft beat the odds in a bad economy and rose to become one of the world's most valuable companies, with an estimated net worth of £100 billion.

More examples of recession start-up success stories.

So you're convinced that now's a good time to get your business of the ground, but you're not quite sure how to get started. Here are a few things to keep in mind:

1. Find a fresh and innovative concept

Offer your customers something that they currently can't find on the marketplace. Do your research and find the gap in what your competitors are offering. If the idea already exists, give it a fresh twist. Position your hospitality concept as something new and original that will offer your customers a unique experience unlike anything they've seen before.

2. Offer competitive pricing

While undercutting your competitors isn't a solid long-term strategy, you'll want to make sure your pricing is competitive. Most startups benefit from low overhead costs and extra flexibility, so take advantage of this by sharing your cost savings with your customers. As the economy recovers (along with buyers' spending power), you can always increase your prices and offer new value-added services that your (now loyal) clientele would happily pay for.

3. Don't stress about the competition

If there was ever a perfect time to enter a competitive marketplace, now would be it. Both large and small hospitality businesses are struggling to survive, which levels the playing field for everyone. Do your research and try to understand where your competitors have gone wrong, and what improvements you could incorporate into your business model. By learning from their mistakes, you can better position your offering and cater to your target market's unmet needs.

4. Take advantage of vendor, supplier and venue discounts

In an unstable economic climate, a lot of vendors, partners and suppliers are looking to sell off their products and services at a much lower cost. This makes for the perfect opportunity to shop for your business and save on your equipment and supplies. The same goes for your venue. Whether you're planning on buying or leasing your premises, make sure to negotiate a fair price and try to lock down a long-term contract at a competitive rate.

5. Shop around for the lowest interest rates

In times of financial uncertainty, most banks and credit card companies will drop their interest rates to help encourage spending. For start-ups, that means loans are easier to come by and credit cards may come with higher limits. That said, in order to get approved for a loan, banks will want to see a solid business plan, with sales forecasts ranging from 3 to 5 years. Make sure your proposal is thorough and shows that you're thinking about the long-term.

6. Choose your location wisely

They often say that location is one of the most critical factors to success, so choose your location wisely. While cost, accessibility to potential customers, restrictive ordinances and proximity to other businesses all play a role - you'll also want to consider the short and long-term outlook for your neighborhood. Evaluate how the current climate has impacted local businesses and what the neighborhood might look like in 6 months, as well as in 2, 5 and 10 years' time.

7. Build an excellent team

As we all know, finding and retaining good employees is one of the biggest challenges hospitality businesses face. But given the industry's booming unemployment rate, now is a great time to find talent. Make sure that your new hires are a good fit for your business and that they share your vision for the future. Look for candidates with sufficient experience and a successful track-record, and make sure to run a background check. Once you've built your team, make sure to invest in training and retention programs to avoid losing time and money with high turnover rates.

8. Plan big, start small

In order to mitigate your risk, start out small and add to your business as you go along. Make a clear plan of how much investment you need for your one-time start-up costs (licenses, permits, equipment, property leases, legal fees, insurance, branding, inventory, etc.), as well as what you'll need to keep your business running for at least 12 months (rent, utilities, supplies, salaries, etc.). Then, test and launch your idea on a small scale; adapt and add to it as your business grows. But always keep your end goal in sight, so that you know what you're working towards as you go along.


While there are many benefits to starting a business during a financial slowdown, it won't necessarily be an easy task. But with careful planning, determination and smart, strategic decision-making, there's no reason why your vision can't succeed. Out of every crisis comes opportunity.

Want more? Read Dr. Carlos Martin-Rios' article on Service Innovation in times of economic downturn.

About EHL Group

EHL Group encompasses a portfolio of specialized business units that deliver hospitality management education and innovation worldwide. Headquartered in Lausanne, Switzerland, the Group includes:

EHL Ecole hôtelière de Lausanne is an ambassador for traditional Swiss hospitality and has been a pioneer in hospitality education since 1893 with over 25,000 alumni worldwide and over 120 nationalities. EHL is the world's first hospitality management school that provides undergraduate and graduate programs at its campuses in Lausanne, Singapore and Chur-Passugg, as well as online learning solutions. EHL is ranked n°1 by QS World University Rankings by subject and CEOWorld Magazine, and its gastronomic restaurant is the world's only educational establishment to hold a Michelin Star.

EHL Swiss School of Tourism and Hospitality has been one of the leading hospitality management colleges for hotel specialists for 50 years. The school delivers Swiss-accredited federal diplomas of vocational education and training and of higher education in its 19th century spa-hotel in Chur-Passugg, Graubünden, to Swiss and international students from 20 countries.

EHL Advisory Services is the largest Swiss hospitality advisory company specializing in service culture implementation, business consulting, as well as the development and quality assurance of learning centers. EHL Advisory Services has offices in Lausanne, Beijing, Shanghai and New Delhi and has delivered mandates in more than 60 countries over the past 40 years.

Commerce-as-a-Service Takes The B2B Venture Capital Lead -

Posted: 25 Sep 2020 05:03 AM PDT

This week was one of the strongest for B2B FinTech investments, as accounts payable (AP) automation and small business trade finance companies landed impressive funding rounds, with one SMB InsurTech startup reportedly gearing up for a $250 million investment in the near future. But it was an eCommerce-as-a-Service startup that secured the largest funding this week, coming in a $300 million, showcasing investors' appetite for companies looking to help other businesses with their digital migrations.


With $10.85 million in new funding, Brazil's Zoop will focus on accelerating its growth and the rollout of new digital banking, payments and credit solutions. The company operates a Banking-as-a-Service, mobile payments and financing platform that can be white-labeled for other third-party financial service providers, FinTechs, businesses and others to implement their own financial products and services. Movile led the investment round, a press release said.


Based in Amsterdam and the U.K., Finom has announced a $12 million investment round for its technology that offers mobile-first financial services for small and medium-sized businesses. The challenger bank said it will use the investment, which is an extension of a funding round announced in April, to fuel growth throughout Europe and to extend licensed activities, as well as develop new products. Investors at Target Global, Cogito Capital, Entree Capital, Avala Capital, Tal Capital, Adfirst Ventures, FJ Labs and Raisin founders participated in the investment, according to Nordic9 reports.

Marco Financial

Miami-based Marco Financial operates a B2B platform that helps small and medium-sized exporters based in Latin America to access working capital and trade finance. The company secured $26 million in new funding, according to a press release, with the investment coming from Struck Capital and Antler. The investment also included a credit facility underwritten by Arcadia Funds, LLC, the company noted, with the funds providing Marco Financial with momentum to address the $1.5 trillion trade gap, it said.


AP and B2B payments automation FinTech MineralTree announced a $50 million Series D investment round this week in conjunction with two acquisitions. Investors at Great Hill Partners, .406 Ventures and Eight Roads Ventures provided the investment, while MineralTree also revealed its takeover of Inspyrus and Regal Software, two businesses also operating in the AP automation arena. With a focus on mid-market companies, MineralTree said there has been rising demand for AP automation technologies amid pandemic-related volatility and remote working requirements. The company plans to use the latest investment to expand product capability, strike new partnerships and continue to scale as it looks to strengthen capabilities for MineralTree customers and bank partners.


Taking the lead this week is Mirakl, an eCommerce-as-a-Service startup targeting both B2B and B2C sellers looking to embrace the digital realm. In an announcement this week, Mirakl revealed an impressive $300 million investment round, propelling its valuation to $1.5 billion. Investors at Permira led the investment, while 83North, Bain Capital Ventures, Elaia Partners and Felix Capital also participated. Mirakl said it plans to deploy the investment to fuel its "new phase of hypergrowth," with plans to hire more than 300 engineers over the next three years, as well as scale its customer success and sales teams. "The world is going through a new economic revolution driven by tech innovation and increased online connectivity," said Mirakl in its announcement. "Traditional business models have stretched to their breaking point trying to compete for speed and scale."

Looking Ahead: Next Insurance

Small business InsurTech startup Next Insurance is reportedly in talks to secure $250 million in fresh funding led by CapitalG, the private equity firm of Alphabet. Next Insurance would land a $2.25 billion valuation if the funding occurs, reports in Bloomberg said, and would follow a previous $250 million investment from Munich Re Group announced last fall.



Banks, corporates and even regulators now recognize the imperative to modernize — not just digitize —the infrastructures and workflows that move money and data between businesses domestically and cross-border. Together with Visa, PYMNTS invites you to a month-long series of livestreamed programs on these issues as they reshape B2B payments. Masters of modernization share insights and answer questions during a mix of intimate fireside chats and vibrant virtual roundtables.


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