Answer to Question #237284 in Management for JAck Patz

Question

Lemon Tree, a premium chain of hotels across the country has suffered tremendous losses

during this pandemic and have hired you as a consultant in order to analyze the same

a. Can you explain Political, Economic and Social forces which have had an impact on the

business? (5 Marks)

b. Can you also help them apply the contingency approach of Modern approach in order to

face the pandemic effectively?

Answer 1

Political forces that affect lemon tree hotel line during this pandemic is the Nationwide lockdown and the insistence of the government for hotels not to overcrowd therefore they are only allowed to admit a certain number but not as before to maintain the social distancing rule.

Economic force that affects Lemon tree line of hotels at this time during pandemic is that due to low customer numbers ,the benefits of the business have dropped drastically and they have had to retrench some workers which in turn leads to slow services as the number of employees has reduced.

Social forces that have affected Lemon tree is the fear many people have of contracting the virus. Many people have stopped vising the hotel premises since hotels always have a lot of traffic of people coming from different places which people fear makes the hotels a hotspot for the contraction of the virus.

Coordinate your response

Consider setting up a dedicated team, reporting to senior management, to take responsibility for assessing and managing the potential impact of Covid-19 (and the steps put in place by relevant Governments and authorities to deal with it). Ensure that the team:

Has representatives from support functions including HR, IT, purchasing, procurement, security and legal and is split across different regions and time zones (where relevant).

Develops or implements a business continuity plan, taking into account relevant legal and regulatory obligations and the issues we set out below. 

Prioritises effectively and manages potentially conflicting imperatives.

Establishes and maintains clear internal and external protocols for regular and emergency communication with employees and other key stakeholders.

Monitors and responds to developments and takes advice, with appropriate senior management and/or legal oversight. 

Manage the impact on the workforce

Management of the lemon tree hotel line will need to comply with health and safety duties and broader duties of care and good faith owed to workers. Steps to consider, subject to local law requirements, include taking action to:

Monitor local Governmental and World Health Organisation advice and notify/remind staff of recommendations not to travel to particular areas and of measures to help prevent the spread of Covid-19.

Introduce policies prohibiting or limiting business travel, particularly to high-risk areas, and consider alternative communication solutions (eg video-conferencing).

Introduce policies on the self-isolation of staff (whether mandated by law, imposed by you or requested by individual staff members).

Establish procedures requiring staff to report if they feel unwell or are absent, and to report possible infection or exposure to the virus (including following private travel to high-risk areas) or concerns involving others they have been in contact with at work.

Provide staff with the right equipment for disinfecting hands and (if official advice recommends) protective masks, and with any additional health and safety training or support that they might need.

 

Manage contractual risks 

The hotel management will have to evaluate the potential implications for their customer and supply chain contracts. Review how Covid-19 will affect their ability to perform their contractual obligations (either directly or due to issues in their supply chain). Assess what rights they might have if their counterparty is unable to perform. Consider:

Event of Default – will a failure to fulfil obligations result in an Event of Default?

Force Majeure and frustration – will the effects of Covid-19, or any response to it, be caught by a Force Majeure provision or frustrate your contract? This may require you to consider whether Covid-19 has made it impossible or unlawful for either party to fulfil its contractual obligations.

Change in law/illegality – will any relevant Government response trigger change in law provisions or render performance illegal?

Material Adverse Change – will the effects of Covid-19, or any response to it, fall within a MAC clause?

Suspension of performance/termination – are either of these possible and/or likely and, if so, what are the consequences, both under the terms of the contract – for example, liquidated damages – and as a matter of law?

Notification obligations – are there notification obligations in relation to possible delays/suspension/termination/frustration?

Mitigation – are there express provisions requiring parties to mitigate their losses in relation to possible Force Majeure or other events, such as obligations to use “reasonable endeavours” and devise commercial workarounds? Even if there are no express contractual provisions a failure to mitigate may still affect the amount of damages that can be recovered.

Payments – can they be effected remotely?

Guarantees/indemnities/performance bonds/liquidated damages – is there a risk of these being called on if obligations are not performed? 

Manage financial arrangements

Borrower and lenders may need to review finance documentation and related arrangements to assess potential consequences and contingency measures. Considerations will include:

Representations/Repeating Representations – is the company able to make the specified representations at the required times?

Undertakings – can the company still comply with its undertakings? Does it benefit from any thresholds, grace periods or other reliefs.