How Viennese Hotels Hold On During the Pandemic

There’s a small queue in front of the Café Sacher. Even now, when tourism is facing one of its worst crises, people are lining up to try the renowned chocolate cake, the Sachertorte. Normally – that is, in pre-pandemic times – the bakery produces around 1,000 tortes per day. Some are sent to the far side of the world, some end up right here, in the Sacher’s parent café behind the Vienna State Opera.

Inside, people are sitting on red-cushioned benches, delicate plates with cake and whipped cream in front of them. While the café in the basement is well patronized, however, the hotel rooms on the upper floors are mostly empty, the hallways deserted.

At the beginning of 2020, Vienna’s hotel industry was expecting yet another banner year. In January, tourists booked more than 970,000 overnight stays, a year-on-year plus of 12%. Five-star hotels like the Sacher even reported 20% more guest nights. February was similarly successful.

© Hannes Buchinger

By mid-March, the coronavirus had arrived in Austria. “We are facing the biggest challenge since World War II,” declared Chancellor Sebastian Kurz live on TV. In April, guest numbers were down by 98% to 22,000. By April 4, shortly before the Easter holidays, the government imposed a nationwide lodging ban. Tourism, like all public life, came to a standstill.

When hotels were allowed to reopen on May 29, some business owners kept their houses shut or opened them only partly. There were simply not enough customers: For the month of June, Vienna’s hotels reported business at 14% of last year’s levels. Although numbers increased slightly in July and August, a quarter of the hotels stayed closed, according to the Viennese tourism board. Those that were open were struggling with low occupancy rates, the vacillating numbers mirroring the course of the pandemic. After restrictions were eased over the summer, rates peaked in August at about 35%. But by September, the second wave was already looming on the horizon, and they were down to 24% again.

The coronavirus affects the whole tourism industry, but urban destinations are particularly badly hit: “All of city tourism’s strengths at the moment have changed to the opposite and become obstacles,” says Florian Aubke, head of tourism and hospitality at Vienna’s University of Applied Sciences. The cultural and gastronomic offerings that make a city attractive have all been sharply reduced. “I was going to say, you can only enjoy those things with strict precautionary measures. But then again, under these circumstances you can’t really enjoy them at all.”

Countryside Bonanza

Other than rural destinations such as Styria or Carinthia, which are popular with domestic tourism, Vienna’s hotels rely heavily on international guests, who made up 82% of all hotel nights in 2019. “With Austrians, Vienna isn’t considered a particularly attractive tourism destination,” says Aubke. And in fact, there hasn’t been any particular effort to attract them. Tourists from all over the world have been flocking to Vienna, so hoteliers only had to “pick the low-hanging fruits,” as he puts it.

At the Sacher, more than 90% of the guests travel in from abroad, attracted by the legendary heritage that hosted celebrity guests from Queen Elizabeth to Justin Bieber. Age-old traditions and skillful marketing made it one of the most famous hotels in the world.

© Wien-Bild

The Sacher’s signature cake – a foundation of the success story – was invented in 1832, when Franz Sacher, then a young kitchen apprentice in Metternich’s court, had to whip up a dessert for an illustrious dinner on short notice. It was Franz’s son Edouard who founded the hotel in 1876, but it was Edouard’s wife, Anna, a hostess with both heart and business sense – who earned it the reputation it holds today.

“We are blessed with this history; it’s a huge asset and a great responsibility for the future,” said Sacher manager Matthias Winkler in an October interview. “Hopefully, it will go on for many years.” Since the pandemic hit Europe in March 2020, the Sacher – like all other hotels – lost the bulk of its guests. With about a fifth normally from the US, and many others from Asian and Arab countries, it is especially affected by the entry bans and constraints in international air traffic.

Luring Locals

An easing of restrictions in the summer months granted a brief beacon of hope, but tightened restrictions in autumn prompted the lay off of 140 employees in both Vienna and Salzburg. Manager Winkler described it as the “hardest moment” of his personal career. Still, not taking it would have threatened all jobs, as he told tourism journal Tophotel. “Making 25% of our normal revenue, we cannot finance 100% of our employees.”

To make up for these immense losses, hotels turned to nearer markets in Austria’s neighboring countries. Initiatives like the “Stay Safe” label hoped to ease the fears of potential tourists. Then, on September 14, Switzerland declared Vienna a risk zone, two days later, Germany followed.

With many foreign tourists banned from traveling, hotels came up with a range of ideas to appeal to local customers. The Sacher revived the concept of its Sacher Séparées – once a discreet opportunity to discuss prickly affairs – in the form of private, socially distanced meals served in the hotel’s vacant suites. A “Sacher-to-go” delivery service brought the hotel’s food to the doorstep of Viennese customers. During summer, they took part in the “Erlebe deine Hauptstadt” campaign (“Discover your capital”), offering Austrian citizens specifically tailored packages at reduced rates.

A second round is scheduled for the Christmas season, even though booking rates have fallen short of expectations, according to media reports. Tourism professor Aubke is not overly surprised. He believes that Vienna has been focusing too much on international guests in the past, neglecting the domestic market. In addition, local residents’ complaints about souvenir shops replacing essential stores and throngs of tourists pushing through Vienna’s city center went largely unheard. “Now that international visitors are staying away, the Viennese are supposed to jump in?” he asked. That doesn’t exactly come easily to the Viennese.

© Hotel Stefanie

Confusion & Uncertainty

Situated on an inconspicuous street in the 2nd district is Vienna’s oldest hostelrie, the family-run Hotel Stefanie. On July 8, amid the uncertainties of the spring lockdown, they marked their 420th anniversary. “We have tried to celebrate a little bit,” says Sabine Rahm-Lehner, laughing bravely. She is director of sales and marketing at the Schick Hotel Group, which runs the Hotel Stefanie, along with four other houses and three restaurants. “With our culinary offers, we have always been more focused on the Viennese crowd,” she says. Despite enhanced efforts to address those local guests, reduced seating capacities and opening hours make it difficult to generate substantial revenues.

Like the Sacher, the Hotel Stefanie was part of the “Erlebe deine Hauptstadt” campaign. Response, however, has been “rather sluggish,” says Rahm-Lehner. Unlike Aubke, however, she doesn’t feel Vienna’s hotels have neglected the domestic market. She points to cheap flights and rising international competition as reasons why natives are underrepresented. “We do have Austrian customers, and we also had some new ones trying the Stefanie, but it’s not really a complex calculation. There aren’t enough Austrians in Austria to replace the international tourists.”

After a relatively successful summer, in pandemic terms, three of the Schick Group’s five hotels reopened. A ray of hope, then confounded by new travel warnings.

“Everything can change overnight. That’s the frustrating thing, planning all these campaigns and, in the end, not much comes of it.” For now, only the Hotel Stefanie remains open. “Vienna’s oldest hotel,” she proclaims, “will stay open as long as possible.” Beyond culture, the hotel scene is also a major value and job creator. In 2019, overnight stays generated net revenue of more than €1 billion, and one out of nine jobs was in tourism. To save the industry, the government has implemented a number of support schemes – ranging from “Winter-Schani-gärten” (all-season outdoor areas), to a reduced sales tax on room rates.

After heated debates, the EU approved a a maximum of €3 million “overhead subsidies” for individual businesses which Austria wants to use in full. October 1 saw the launching of a new program for reduced working hours. Normally, businesses have to ask their employees to work between 30% and 80% of their usual hours in order to be eligible for the scheme. At the urging of the industry, hotel staff is allowed to work even less – there’s simply not enough to do.

Despite the support, the job center (AMS) in Vienna recorded more than 17,000 unemployed in the tourism sector in September – a year-on-year increase of more than 54%.

And experts believe that number will increase further. Dismissing employees is a tough decision, says Aubke, as they are a major asset in the industry. “However, if a rise in revenue is not foreseeable again next year, it’s almost careless for a manager not to take the decision.” Currently, business insiders forecast a recovery by 2023 at the earliest. Consequently, insolvencies will be inevitable: Some believe 20% of all hotels might not survive the crisis.

With the second lockdown beginning on November 3, there might be even more. Affected businesses – such as hotels, forced to close once again – are being refunded up to 80% of last November’s revenue. Working hours can fall to zero as long as the regulation continues.

(C) Grätzl Hotels

Lessons from the Crisis

“We are still looking for empty shops all over Vienna, as we are planning to incorporate further premises,” says Theresia Kohlmayr, co-founder of young Viennese lodging group Grätzl Hotels in the Karmeliterviertel. Born out of an architectural project tackling the issue of abandoned property, the company transforms vacant shops into individual hotel suites. Their office is just around the corner from one of their first projects, situated in a former tailor’s workshop.

Over the past years, they have created 26 suites throughout the city. “The advantage with our concept is the decentralization, the contactless check in, and that many things work online.” Even before the great digitalization that COVID-19 brought to the hotel industry, they provided Chat-Bots and Online-Concierge-Apps. Keys are picked up from a PIN-secured box next to the entrance.

As the name implies – Grätzl being a Viennese word for “quarter” – each of the hotels’ premises is rooted in its surrounding neighborhood. Typical hotel services like breakfast are outsourced to nearby businesses – the regional economy profits, while the hotel saves personnel and costly infrastructure. “We don’t have lobbies or breakfast rooms where people gather,” says Kohlmayr. Guests just grab a croissant at a local bakery or go to a café across the street. Appealing to a growing customer group that understands traveling as an experience and the desire to “feel like a local,” the concept proved even more successful during the pandemic.

True to their basic idea, the Grätzl Hotels have always offered special rates for the guests of in-house residents, and long-stay options for newcomers. Naturally, like most other city hotels, they also depend on international tourists. However, roughly 60% are from German-speaking countries, making the hotels less prone to global flight restrictions and travel warnings. “There were less-busy times, when only Austrians were out and about,” recalls Kohlmayr. “Still, in August we were quickly back to 60% occupancy rate.”

The pandemic will affect the overall understanding of travel destinations, believes tourism professor Aubke. He now speaks of “the visitor economy” instead of tourism. At the start, the Grätzl Hotels were quite a “niche product,” he says – acknowledged, but not fully taken seriously. “Now, they have displayed a certain resilience.” These are hotels that are integrated within the microcosmos of a neighborhood. The ongoing discussions about over-tourism and the many Viennese who haven’t missed the crowds have clarified that tourism should offer added value for both guests and locals.

While Aubke doubts that the pandemic will undermine the belief in constant touristic growth, he hopes that it will provide impulses for a rethinking process. His motto: “Never let a crisis go to waste.” Likewise, hoteliers try to make the best of this unprecedented situation. Despite gloomy forecasts for the winter season and a second, lighter lockdown underway, they don’t want to relinquish their vision just yet.

At Café Sacher, every piece of cake is served alongside a small leaflet, imprinted with a quote by Anna Sacher. The woman, who has maneuvered the hotel through turbulent times for nearly 50 years, used to say: “If your heart is weary, you need more sweets.”

It won’t save the industry, but a piece of cake might lift the gloom, at least for a short while.

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