How did Hilton and United Airlines survive through the pandemic? | Teen Ink

How did Hilton and United Airlines survive through the pandemic?

November 22, 2022
By stevensun1027 BRONZE, Culver, Indiana
stevensun1027 BRONZE, Culver, Indiana
1 article 0 photos 0 comments

In the past three years, people have made tons of changes to deal with the global epidemic. When it comes to the epidemic, what do you think is the most affected thing? I would say the economic system. The first explosion of Covid-19 in the United States started in March 2020. People had not realized the hazard of this sudden virus until many people were infected and died. Therefore, from 2020 to 2022, the world has been extensively affected by the explosion of the covid pandemic, and correspondingly changes in society, social relationships, cash flow to businesses, and the economic system during this time. In response to preventing the spread of Covid-19, some of the countries policies, such as the grounded quarantine policy in China, cause a reduction in traveling to protect the population’s health and business operation, which punches harshly on the market of tourism-related organizations and has affected the stock price dramatically over the last two to three years. When mentioning tourism-related organizations, habitats, transportation such as cruise lines and airlines, and landscape visiting come out first, but the pandemic reduces income resources from these organizations. Hotels and airlines are common and familiar things that we used before the pandemic. Once the pandemic reduces the contact with these businesses, responding to those companies is affected. In the following paragraphs, two of the common companies, Hilton Double-Tree, and United Airlines will be used as examples to explain.

Based on data shared from the United States TSA official website checkpoint travel numbers from 2019 to 2022, before March of 2020, the total travel number at TSA checkpoints was around 2.5 million, and after the explosion of Covid-19 in the United States, taking March 15, 2020, as an example, the total travel number at TSA checkpoints was less than 100,000.[1] Until the end of 2020, it took almost a year to recover the passenger number to half of the passenger volume from the pre-pandemic period. Only until the third quarter of 2021, did the number get close to 2 million. Even now, the travel number hasn’t recovered. Thus as the major airline in the United States, United Airlines had a huge revenue decline at the early stage of the pandemic. 

In the third quarter of 2020, United Airlines announced to the public that the company had a $1.8 billion loss, which was a 78% revenue loss compared to the same period in 2019.[2] The company struggled to survive in an extreme business environment. They realized the pandemic would be a long-term situation they have to deal with, the previous business model didn’t work. Although congress delivered the rescue package for the airline industry, every airline has its own problems they were struggling with. United Airlines started layoffs and downsizing its team, and found other ways to amass cash to cope with the downturn. It took hundreds of planes out of circulation and positioned itself mainly serving the few passengers who still would like to fly during the pandemic. [2] Meanwhile, the brief compromises and adjustments will also buy more time for its major international travel and business travel to return slowly.

Another thing people will think about while they are traveling is where to live, it’s unavoidable that businessmen and travelers will need to book a hotel to stay in once they get off the plane. While the number of travel passengers was reducing, the hotel industry, like Hilton, in the United States was working hard to compete with other hotels and had to do its best to ensure the safety of its travelers and employees. As CEO of Hilton Chris Nassetta had to make decisions under great pressure, they had to change the procedure of customer service to secure the health of both employees and hotel guests.[3] Since there are a few travelers, the hotels had been hit hard by the pandemic, they were no longer able to maintain the whole size of hotels, Hilton had to close thousands of hotels around the globe and ensured when the time came they would be able to resume business quickly. In the beginning, Hilton had to manage the tons of cancellations without hurting its reputation, and as time went on, Hilton also needed to find a better way to build travelers' confidence to travel during a pandemic.[4] More importantly, Hilton not only started to pay more attention to health and cleanliness, but when the vaccine was available, they also encouraged all employees to get fully vaccinated. They did everything they could to comfort travelers and make them feel safer choosing them.

It is easy to understand that since the Covid-19 pandemic affected people heavily and people had to stay in more and reduced unnecessary traveling, it brought a negative impact on almost everyone, but most people didn’t know how much impact the pandemic caused companies like Hilton and United Airlines. Early in 2020, the stock price of Hilton was 89.57 in January, and it dropped to 29.51 after the US got hit by the pandemic. And by the end of 2021, the stock price only raised to half of the previous price. Even now, Hilton’s stock price is hovering around 40.[5] It lost almost half of the company, not to mention as a company usually hosts around 200 million travelers annually when it’s the same high peak period that its occupancy was around 80%, but it’s only 10% during the pandemic.[7] It even needed to close thousand of hotels for the first time since it was founded in 1919. 

The same as Hilton’s half-dropped stock price, the stock price for United Airlines shared the same situation. United’s average stock price was 86.8254 in 2019, but the average stock price in 2020 was only 42.6544, and it was barely raised to 49.4319 in 2021. It took United Airline almost 6 years from 2014 to 2019 to increase the average stock price from 46.5148 to 86.8254.[8] With the highly strict international travel policies for different countries and areas, like China, only a limited amount of international flights were approved to land in its airports and if the plane carried more than 5 positive passengers, the next week’s flights would be banned,[9] and all flight attendants were requested for a quarantine. All procedures that were adopted to protect the employees and passengers increased the cost for United Airlines. To cover the increased cost, United had to adjust the price of flight tickets, especially the international flights, and passengers would postpone or cancel their travel because of the sky-high price of the tickets, which would continue the vicious cycle and it could also be one of the reasons why the stock price dropped. 

If you are not familiar with the stock market, it showed more obviously from their financial statements in the last few years. Based on the finance reports provided by yahoo finance, the total revenues for Hilton were: $9,452,000 for 2019, $4,307,000 for 2020, $5,788,000 for 2021. [10] Apparently, the first year of Covid-19 hit Hilton the most, the annual total revenue dropped tremendously, and it was cut by around 54%. Since Hilton shut down thousands of hotels during the pandemic, that helped to reduce the annual cost of revenues: $7,017,000 for 2019, $3,724,000 for 2020, and $4,133,000 for 2021. [10] Since 2020 when Covid-19 was first explored in the United States, Hilton has adopted more careful procedures to comfort travelers choosing their hotels and its employees, such as buying disinfection devices, hand sanitizer, medical masks, and gloves, these extra protections might be one of the additional major expense. Meanwhile, the annual operating expenses were maintained at a similar level: $859,000 for 2019, $702,000 for 2020, $638,000 for 2021. [10] In that case, the gross profit would reduce rapidly. In 2020, the gross profit was only $583,000, [10] which was only a quarter of 2019’s gross profit.

Compared to Hilton’s main customer target, United Airlines, which relied on international passengers heavily, was brutally hit by the pandemic and it even pinned its hopes on federal grants. The annual total revenues for United Airlines were: $43,259,000 for 2019, $15, 355,000 for 2020, $24,634,000 for 2021. Its annual cost of revenues were: $30,786,000 for 2019, $20,385,000 for 2020, $23,913,000 for 2021.[11] Similar to Hilton, the total revenue during the first breakout of the pandemic was also around half of the previous year, but its cost of revenue was higher than the total revenue in 2020. Apparently, United Airlines’ income statements were worse than Hilton’s and it lost almost half of its profit in 2019. Though Hilton’s gross profit dropped to only 25% before the pandemic, it at least still made profits. 

Even up till now, Hilton and United Airlines haven’t been fully bounced back to the same income statements as they used to be, they have survived through the toughest period. You might think that companies of their size must have strong revenue and cash flow to go through any hard times for them. But the fact is both Hilton and United Airlines were keeping adjusting their strategy and plans to deal with every situation that happened during the pandemic, they saw opportunities through challenges and they grabbed them.

In just one year after the pandemic was explored in the United State, Hilton made a series of actions to lead the hotel industry to survive through the big hit. Hilton used to be in the business of serving people, you can always receive a warm welcome from the reception and friendly employees will stand just next to you to provide any help you need. But this time customers needed the opposite, they would like to keep a social distance from other people and avoid any unnecessary contact. Thus, Hilton updated its Hilton Honors app. It allows guests to operate everything, from check-in to check-out, by simply clicking on their mobile device. Moreover, Hilton also provided high-tech guest rooms that allow guests to control every aspect of the room from their mobile devices. This technology was launched in 2015, but it was accelerated rapidly by the pandemic. By March of 2021, 80% of Hilton’s hotels in 45 countries were able to use digital keys to open more than 111 million doors. [12] 

Furthermore, Hilton reduced guests' contact with employees, but it didn’t lose the customer service quality. Hilton no longer hid the cleaning process and kept it transparently to guests about what their cleaning standards are and they will wear masks and gloves while cleaning. They also partnered with Reckitt who produced Lysol and Dettol, respected guests' preferences, and used guests' selected room materials or cleaning services. [4] Hilton ensured guests could have a comfortable stay at Hilton as they stayed at home. 

The same as United Airlines, it stopped flying to some of the small cities, like Lensing and Kalamazoo in Michigan, Columbia in Missouri, and College station in Texas. [13] It planned around the pandemic and finally switched from survival mode to rebuilding and stronger itself. During the pandemic, it even received from a passenger that it is “a leading contender for best US airline to fly”. The outbreak of Covid-19 in early 2020 messed around everyone’s plan, including United Airlines. It followed strictly the rules and policies published by CDC, including but not limited to: the seat blocking policy, social distancing measures from the check-in area, touchless check-in, mobile device, consistent reminder food face-covering rules, health declaration before boarding, recent flight records and test results, and contact tracing. [14] You can tell United Airlines took passengers' health very seriously, it even requested all employees to get vaccinated and 97% of employees were vaccinated. For around 600 employees who refused to get vaccinated, United Airlines had to terminate their employment. [15] It was a hard decision, but it had to put public health and employees safety on the priority list.  

On the other side, since there were fewer passengers traveling during the pandemic, United Airlines grabbed every opportunity it could have to make the best use of its airplanes. It shifted to being a thriving freight company to make up for the loss of its revenue. United Airlines received one fund from congress and was expecting the second round, but it also kept trying to find other funding resources to go through a generally stagnant economy during the Covid pandemic. In the beginning, United Airlines tried to rely on cargo delivery to fill the income gap, but then it found out that since ports were closed, there was a strong demand for air cargo services. [16]In the first year of the pandemic, United Airlines flew over 14,000 air cargo flights, [17] of which were the same volumes of cargo as its normal levels. Now its cargo revenues have doubled more than before the pandemic, and the annual total has been more than $2 billion.  Even though United Airlines' passenger volume hasn’t risen back to pre-pandemic, it is still able to maintain a more stable revenue. 

Now, United Airlines and Hilton are also preparing for the post-pandemic. [18] Since our life has been back to normal and travelers finally have chances to make their paused travel plans come true. The traveling money saved during the pandemic would eventually be spent to enjoy life and meet their friends at their destinations. United Airlines brought back their well-rested jet and airplanes, and Hilton also increased hotel prices since the demand would be pent up. [19] With the exploding increase of customers, it’s only a matter of time before they could create a new record of income statements soon. 

From all the above, the main reasons why Hilton and United Airlines are able to be successful during the pandemic and even create more value for the company. Both United Airlines and Hilton focused on the safe and being renovative. 

To secure the safety and health of employees and customers, both companies partnered with cleaning companies, like CloroX, and built a cleaning specialty team to make passengers feel comfortable flying or staying in with them. They were not only doing them silently, they showed the whole process to everyone, like an invitation to ask customers to monitor their service. Especially for United Airlines, also provided contactless check-in and kept a social distance between seats. Since it’s unavoidable that each flight will have flight attendants, all employees were fully vaccinated. 

On the other hand, Hilton upgraded its contactless service and Hilton Honor App. [20] Travelers no longer need to have any physical contact with employees, they can control and manage everything they want through their mobile devices. When the positive case number kept increasing every day, travelers would be glad to avoid any contact with strangers. 

Check-in through mobile devices has been adopted a long time before, it’s not that hard for United Airlines to adjust boarding procedures during the pandemic, so it focused more on looking for new opportunities to make up for the revenue gap, it made the best calculation to increase its air cargo business and creating more revenue for the company. 

When companies had huge challenges like the Covid-19 pandemic, it will eliminate some businesses and only those who are able to make changes rapidly and adjust themselves flexibility could survive and be stronger. 

Acknowledgment 

For the success of this project, I hope to send my gratitude to everyone who has helped me during the process. I couldn’t have done this project without their help. First, I would like to express my special thanks to Prof. Alan Anderson who taught me economic-related knowledge and methods to complete the paper. I am so glad to have him as my responsible and reliable tutor. Secondly, I would like to appreciate my mentors Ms. Anlynn and Ms. Joy who always supported me to finish the project and encouraged me to effectively communicate with the professor. Finally, I would also like to thank my parents and friends who helped me a lot in finalizing this project within the limited time frame.


Work Cited

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Chokshi, N. (2021, June 3). How United Airlines Is Trying to Plan Around a Pandemic. The New York Times. nytimes.com/2020/10/15/business/united-airlines-coronavirus.html 

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Grano, M. (2021, April 26). Social Spotlight: Hilton’s pandemic strategy proves the business value of social. Sprout Social. sproutsocial.com/insights/social-spotlight-hilton/ 

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United Airlines Holdings, Inc. (UAL). (2022). Yahoo Finance. finance.yahoo.com/quote/UAL/history?period1=1577836800&period2=1660435200&interval=1mo&filter=history&frequency=1mo&includeAdjustedClose=true 


Hastwell, C. (2021). Rebuilding Tourism and Hospitality: Hilton’s Playbook for Recovering After a Crisis. Great Place to Work®. greatplacetowork.com/resources/blog/rebuilding-tourism-and-hospitality-hilton-s-playbook-for-recovering-after-a-crisis 
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I flew on United again during the pandemic and found it to be a leading contender for best US airline to fly in 2021 — here’s why. (2021, March 6). Business Insider. businessinsider.com/flying-on-united-airlines-in-2021-during-pandemic-photos-2021-3?international=true&r=US&IR=T#the-gate-area-for-my-flight-featured-many-of-the-same-measures-as-check-in-including-a-banner-reminding-passengers-to-wear-face-coverings-and-social-distance-as-well-as-highlighting-uniteds-partnership-with-clorox-and-the-cleveland-clinic-13 

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