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18.03.2020
As we have written about previously, few industries have been as badly impacted by the COVID-19 crisis as the hotel industry. The US hotel industry is estimated to have lost over $23bn in revenue since the middle of February, while hotel occupancy for 2020 is projected to be just 38%, compared to an average of 66% over the past three years.
Understandably, the main priority for potential guests is hygiene and safety, so it comes as no surprise that hotel managers are planning major changes to how they run their operations. These may include social distancing in the pool, individually-wrapped breakfasts instead of a communal buffet, and possibly most alarming (or enticing, depending on your viewpoint), happy hour drinks served by cart to your room.
Whilst some of these changes may be temporary, one thing that does look certain to change permanently is the level and frequency of cleaning that takes place throughout the hotel. Rather than high-speed internet and Egyptian cotton sheets, hotel owners are now looking to emphasise their capabilities in a formerly unrecognized and unspectacular capability: hygiene. As the saying goes, cleanliness is next to godliness, and hotel operators will be praying that it works.
Whether this new focus on cleaning and sanitisation will help the hotel industry recover to previous occupancy levels is unclear. Regardless, it is likely to be good news for suppliers of cleaning products and services, and we believe one company that stands to benefit from this shift is Ecolab. Several hotel groups, including Marriott and Wyndham, specifically mentioned Ecolab in their recently-announced plans for safely reopening hotels, as did McDonald’s in its 59-page guide for its franchisees as they look to welcome customers back into their restaurants.
Headquartered in Minnesota and listed on the New York Stock Exchange, Ecolab provides water, hygiene and energy technologies to many of the world’s largest businesses across a broad range of industries. Whether it be serving leisure industries such as hotels and restaurants, or food & beverage, healthcare, or technology customers, Ecolab provides clean and safe environments for consumers and employees alike. The company’s overarching mission is to save its customers water, energy and labour, and as such it ranks highly for its sustainability credentials.
Despite being over four times larger than its nearest competitor, Ecolab has on average only 10% market share across its $130bn addressable end-markets. This reflects the highly local and fragmented nature of the industry, and represents a significant long-term opportunity for the company. Ecolab’s size and scale allow it to invest far more in R&D than its peers, which means it can deliver higher performing everyday cleaning and hygiene products, as well as solve complex problems in partnership with its customers. For example, Ecolab recently worked with Archer Daniels Midland (ADM), the global food processor, to optimise water usage within its plants. The result was a saving of 2.3 billion gallons of water, and a saving of $28m annually for ADM.
Ecolab has an outstanding track record of growing revenues, earnings and cash flows, which it uses to reinvest in its business, make tactical acquisitions to expand into new technologies or regions, and to pay a modest but growing dividend. Given the improving outlook for demand in its key industries, as well as the ongoing opportunity to take market share as highlighted above, we see Ecolab as well-positioned to deliver superior shareholder returns whilst helping to create a cleaner, healthier and more sustainable world.
Should you have any questions about anything raised in this article, please don’t hesitate to contact us via email, or on 0207 337 0777.
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