Corporate Social Responsibility and COVID-19: Doing Good and Doing Well

Abstract

Since the first case was reported in December 2019, COVID-19 has dramatically disrupted the globe, severely impacting physical and mental health worldwide as well as creating one of the worst economic crises since World War II. Among other industries, the hospitality industry was one of the most severely impacted by the pandemic. Due to the unprecedented economic downturn caused by the nationwide lockdowns and social distancing measures, millions of hospitality employees lost their jobs, and the value of stocks in the hotel, restaurant, casino, airline, and cruise industries plunged sharply. However, despite the severe and challenging economic circumstances, numerous hospitality companies spontaneously initiated a variety of corporate social responsibility (CSR) efforts to help cope with the spread of the COVID-19 pandemic, such as donations to communities and support for employees. Therefore, the objective of this case study is to explore various CSR practices that hospitality companies employed to support their people and communities. The current case study provides unique contributions not only to hospitality literature but also to CSR literature in a timely manner, considering the pandemic as a pivotal point in human history when hospitality companies can provide such beneficial impact to society. This study additionally presents vital insights to hospitality executives in charge of CSR initiatives.

Keywords

corporate social responsibility COVID-19 pandemic triple bottom line hospitality and tourism industry

Introduction

Since the first case of the novel coronavirus disease 2019 (COVID-19 hereafter) was confirmed in mid-December 2019, COVID-19 has had devastating impacts across the world. The total number of confirmed cases has reached over 1.7 million people, and total deaths topped 108,902 in 190 global regions as of April 10, 2020 (Johns Hopkins University & Medicine Coronavirus Resource Center, 2020; Yang et al., 2020; see Figure 1). As a result, on March 11, 2020, the World Health Organization (WHO) declared COVID-19 a pandemic (World Health Organization, 2020). To curb the spread of the disease, most countries around the world imposed travel restrictions, adopted airport closures, suspended all incoming and outgoing flights, and created nationwide lockdowns. According to Pew Research, more than 90% of the total worldwide population of 7.2 billion lived in countries or territories that were the subject of travel restrictions amid the COVID-19 outbreak in 2020 (Connor, 2020).

Figure 1.

Daily confirmed news cases (5-day moving average): Outbreak evolution for the current 10 most affected countries.

Consequently, the hospitality industry was one of the first and worst hit by the unprecedented nationwide lockdowns that caused economic fallout. As shown in Figure 2, the hospitality and leisure industry lost 459,000 jobs in March 2020, which is the highest loss among all industries (U.S. Bureau of Labor Statistics, 2020). Economists even argue that the job losses caused by the pandemic were much worse than the ones in the Great Depression (Fuchs, 2020). As of April 8, 2020, nearly 8 out of 10 hotel rooms were empty across the country per Smith Travel Research (STR), and hotels in the U.S. lost more than $10 billion in room revenue according to the American Hotel & Lodging Association in 2020, leading to a sharp slump in stocks. In March 2020, MGM Resorts International stock value went down 69%, Marriott International Inc. went down 46%, and Hilton Worldwide Holdings Inc. went down 40% (Vigna, 2020). The restaurant industry also lost more than $25 billion in sales and three million jobs since March 1, 2020. Cruise lines similarly struggled to get their ships to port, as it caused some of the earliest and most high-profile spreaders of COVID-19 (McCartney, 2020; National Restaurant Association, 2020). The casino industry was no exception. The ongoing public health emergency caused by COVID-19 triggered the temporary shutdown of all U.S. commercial casinos, as seen in Figure 3, and almost 650,000 casino employees were laid off (Brewer, 2020).

Figure 2.

March jobs one-month net change.

Figure 3.

The empty Las Vegas Strip with all business shuttered.

However, despite the severe and challenging economic circumstances, numerous hospitality companies spontaneously initiated a variety of CSR efforts to help cope with the spread of the COVID-19 pandemic, including donations to communities and support for employees. Therefore, the objective of this case study is to explore various CSR activities that hospitality companies employed to support their employees, customers, and community. The pandemic created a unique event in the history of humanity, in which hospitality companies found themselves in a position to help society in profound new ways. Consequently, the present case study provides unique contributions not only to hospitality literature but also to CSR literature in a timely manner. This study additionally presents vital insights to hospitality executives in charge of CSR initiatives.

Theoretical Background

Corporate Social Responsibility

Corporate social responsibility (CSR) can be defined as “actions that appear to further some social good, beyond the interest of the firm and that which is required by law” (McWilliams et al., 2006, p. 1). Caesars Entertainment, which is a U.S.-based gaming-entertainment company, describes CSR as “a business’s ongoing commitment to contribute to economic development while improving the quality of life of the workforce and their families as well as of the community and society at large” (Caesars Entertainment, 2020b). CSR participation includes environmental sustainability, support for employee wages and benefits, and community service (Arora & Dharwadkar, 2011). Thus, it can be inferred that CSR activities do not necessarily guarantee value maximization for firms (Jung et al., 2016).

CSR and Triple Bottom Line

Triple bottom line theory postulates that to accomplish sustainable management, companies should be responsible for three pillars: (1) Economic (Profit) responsibility, (2) Social (People) responsibility and (3) Environmental (Planet) responsibility (e.g., Dixon & Clifford, 2007; Gimenez et al., 2012; See Figure 4). First, economic CSR refers to the activities that make a profit as well as how to best utilize them to benefit multiple stakeholders in society. Examples include supporting employment and building trust in a community. Second, social CSR refers to the activities to develop and keep a good relationship between companies and people (i.e., employees, customers, and community). Examples include safety measures and ensuring the well-being of employees. Third, environmental CSR refers to initiatives to prevent and alleviate environmental destruction. Examples include waste management and recycling.

Figure 4.

Triple bottom line.

Companies can engage in economic CSR by dedicating resources to support local communities (Coffman & Umemoto, 2010). Companies that build and develop a strong relationship with communities by dedicating resources are more likely to attract and retain outstanding employees due to a positive corporate image (Inoue & Lee, 2011; Lee et al., 2013). Sustaining profound relationships with employees is especially significant in the hospitality industry because hospitality firms’ strategies and success could hinge heavily on the workforce (Lee et al., 2013). Considering that the hospitality industry is labor-intensive business, recruiting and retaining talented employees could enhance companies’ competitiveness and value (Youn et al., 2016). In a similar vein, social CSR is associated with the well-being of individuals and with social benefits, prompting companies to invest in their employees, for instance with employee welfare (Farooq et al., 2014). Social CSR is especially essential in the hotel and airline industries, as success in both fields depends significantly on employees (Inoue & Lee, 2011). The hospitality industry is highly correlated with the health of customers, employees, and communities. Thus, it is critical that hospitality companies support for the safety, health, and welfare of employees, customers, and communities.

CSR Participation in the Hospitality Industry Amid Covid-19 Pandemic

The Restaurant Industry

To help recover from the COVID-19 disaster, numerous hospitality companies voluntarily participate in various CSR activities by (1) contributing large sums of money to funds; (2) foregoing their CEOs’ salaries to the employees; (3) donating essential personal protection equipment to first responders, hospitals, and more; (4) providing complimentary hotel rooms, meals, and flights to medical professionals, workers, and volunteers; and (5) redoubling safety standards for customers. In the restaurant industry, Starbucks has contributed $10 million to Starbucks’ Global Partner Emergency Relief Program to support its partners (Starbucks refers to its employees as partners) who undergo hardship caused by COVID-19, in addition to donating $500,000 to support front-line responders (Starbucks Stories & News, 2020). Inspired by its employees who return to their local communities, Starbucks additionally has offered complimentary coffee to front-line workers who keep the communities safe, as seen in Figure 5.

Figure 5.

Starbucks offering free coffee to front-line responders amid COVID-19 outbreak.

The CEO of Yum! Brands, David Gibbs, donated his salary to an employee relief fund. The fund not only helped with $1,000 bonuses to 1,200 general managers at Pizza Hut, Taco Bell, KFC, and The Habit Burger Grill locations, but it also contributed toward the Yum! Brands Foundation Global Employee Medical Relief Fund (Coley, 2020). Operated by Yum! Brands, Taco Bell, and The Habit Burger Grill have donated to local food banks and provided complimentary meals to the medical community, including first responders and volunteers, by utilizing their food trucks (Coley, 2020). The founder and CEO of Texas Roadhouse, Kent Taylor, also chose to forgo his annual salary and incentive bonus from March 18, 2020 to January 7, 2021, to support front-line hourly restaurant employees (Tobin, 2020). For reference, Taylor earned over $1.3 million in total compensation for the 2018 fiscal year, based on a company filing with the Securities and Exchange Commission (Tobin, 2020). The CEO of Darden Restaurants Inc., Gene Lee, likewise gave up his salary to help company workers (Coley, 2020).

The Casino/Gaming Industry

In the casino/gaming industry, despite its facilities remaining closed, Wynn Resorts paid more than 15,000 salaried, hourly, and part-time workers for 60 days in efforts to retain them (Hotel Business, 2020). Wynn Resorts spent as much as $2.6 million a day, which was mostly for salaries during the shutdown in Macao, China, in February 2020 (Tobin, 2020). Moreover, Wynn Resorts has donated over $2.5 million in essential supplies to medical facilities and nonprofits in Las Vegas and Boston (Wright, 2020b). In addition to paying 9,300 employees for two months, Las Vegas Sands Corp. paid approximately 1,200 employees of third-party restaurants at the Venetian Resort (Wright, 2020a). The company has donated more than two million medical masks, 20,000 protective suits, and almost 2,000 COVID-19 test kits to support healthcare professionals, first responders, and nonprofit organizations in Las Vegas as well as New York, which became the epicenter of COVID-19 in the U.S. (Las Vegas Sands Corporation and Media Relations, 2020). As of March 26, 2020, Caesars Entertainment has also donated more than 250,000 pounds of food, which is nearly 208,000 meals, to various charities and food banks. The company has also donated considerable essential personal protective equipment, such as masks, gloves, and hand sanitizers, to first responders, hospitals, and local charities to help healthcare workers, law enforcement, and more (Caesars Entertainment, 2020a). Additionally, Caesars Entertainment paid their furloughed employees for two weeks and covered 100% of health insurance premiums through June 20, 2020 (Caesars Entertainment, 2020a).

The Hotel and Airline Industry

In the hotel industry, Hilton and American Express, through a variety of Hilton brands, such as DoubleTree by Hilton, Hampton by Hilton, Hilton Garden Inn, and others, made nearly one million hotel rooms available across the U.S. free of charge to frontline medical professionals in need of a place to stay isolated from their loved ones (Hilton Corporate News, 2020). The Four Seasons Hotel in Manhattan also provided complimentary rooms, which regularly cost up to $1,000 a night, to support doctors, nurses, and other medical personnel working in hospitals near New York (Clark, 2020). Likewise, in the airline industry, Delta and JetBlue offered complimentary flights to medical workers and volunteers traveling to help in severely affected areas including New York (Ellis, 2020). As shown in Figure 6, Air Canada rearranged the cabins of its aircraft to transport critical medical equipment more frequently (Ellis, 2020). Furthermore, many airlines, including Delta, Alaska Airlines, American Airlines, and Southwest Airlines, blocked middle seats and lowered passenger capacity to redouble safety standards for passengers and prevent close contact, known to aggravate the spread of COVID-19 (Ellis, 2020; see Figure 7).

Figure 6.

The newly configured cabin of Air Canada.

Figure 7.

Blocked middle seats as one of the new on-board safety measures.

Discussion

Since the first case was reported in December 2019, the COVID-19 pandemic dramatically disrupted the globe, severely impacting physical and mental health worldwide, as well as creating one of the worst economic crises since World War II. Among other industries, the hospitality industry was one of the most severely impacted by the pandemic. Due to the unprecedented economic downturn caused by nationwide lockdowns and social distancing measures, millions of hospitality employees lost their jobs, and the value of stocks in the hotel, restaurant, casino, airline, and cruise industries plunged sharply. During this challenging climate, CSR activities were most difficult to initiate without financial hesitation. Nevertheless, a great number of hospitality companies participated proactively in a variety of CSR initiatives to support their employees, community, and much more. It is very encouraging to make commitments to communities; however, these commitments raise questions about several perspectives for discussion. It is worthwhile to explore what aspects drive these companies to be more socially responsible, especially when resources and funds are restricted.

By surveying restaurant franchisees, Kim and Pennington-Gray (2017) revealed that firms’ moral values affect corporate philanthropy, which consequentially contributes toward firms’ financial performance, such as profitability, as well as non-financial performance, such as employee and customer satisfaction. In a New York Post column, Las Vegas Sands CEO Sheldon Adelson stated as follows (Adelson, 2020):

“I hope to do that right up until the time that we can reopen our businesses. It’s not only the right thing to do—it’s good business.”

Companies’ efforts to work together with their employees instead of laying them off can strengthen stability and loyalty for employees, even though paying employees while remaining closed increases upfront costs for companies. It may not be worth the cost immediately but given that the highest cost is incurred from turnover, it is ultimately worthwhile to retain employees and keep them loyal to their respective companies. Firms’ commitments toward health and safety at work support enhancing security and loyalty within the workforce (Jones et al., 2007). Loyalty is a two-way street. Companies are judged on how they manage their employees in difficult and urgent times. Companies’ management of their employees during the COVID-19 crisis promoted the attraction and retention of talented employees. Wynn Resorts CEO Matt Maddox indicated that from the global financial crisis in 2008, he learned a lesson that retaining employees is worthwhile in the long term, although the firm suffers in the short term (Brewer, 2020). In an interview with CNBC, he stated as below:

“I can’t imagine going out (to) rehire and retrain 13,000 people. I’d rather keep the knowledge and experience that we have now in the service standards.”

Furthermore, firms’ commitment to community can enhance their brand reputation and brand loyalty. In the highly competitive hospitality industry, CSR participation toward the community, such as through charitable giving, is significant for brand management (Singal, 2015). Specifically, CSR commitments are found to enhance brand image, brand awareness, and brand loyalty in the hotel sector (Martínez & Nishiyama, 2019). Thus, companies prevalently adopt CSR strategies to strengthen organizational identity, reinforce brand image, and satisfy multiple stakeholders (Martínez et al., 2014). People all around the world are currently living in fear due to the novel COVID-19. The hospitality industry is closely associated with the health of customers, employees, and communities. CSR accentuates the need for hospitality companies to care for their customers, employees, and local communities. This need becomes especially prominent when the world is facing a fatal global public health crisis. It is very encouraging to observe all the contributions that companies can make to look after the health and well-being of customers, employees, and communities.

As the COVID-19 pandemic has devastated communities all over the world, it becomes clear that more research is needed to provide better responses to global crises. As one of the ways to better respond to pandemics, diverse CSR initiatives have been implemented by hospitality companies, and this current case study has presented an accessible review of various CSR activities that numerous hospitality companies have engaged in to help curtail the outbreak and alleviate the public health crisis during the pandemic. Therefore, this case study on the hospitality companies’ CSR initiatives will advance the knowledge of the CSR literature and hospitality literature, and possibly catalyze effective CSR development, strategies, and implementations in the long run. It is foreseeable that people will return to traveling, enjoying eating with their family at a restaurant, and making unforgettable memories at a hotel without any anxiety or worries very soon.

If you are an ICHRIE member, you can access the Teaching Notes for this case study here: https://ichrie.memberclicks.net/jhtc. If you are not an ICHRIE member, the Teaching Notes will be published in a future Sage Business Cases (SBC) annual collection: https://sk.sagepub.com/cases. For more information, please contact info@sagepub.com.

Footnotes

Declaration of Conflicting Interests

The author declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author received no financial support for the research, authorship, and/or publication of this article.

References

Adelson

(2020). Adelson: I’m paying all my workers for 2 months, so should any business that can. Retrieved April 14, 2020, from https://nypost.com/2020/04/01/adelson-im-paying-all-my-workers-for-2-months-so-should-any-business-that-can/

American Hotel & Lodging Association. (2020). COVID-19’s impact on the hotel industry. Retrieved April 12, 2020, from https://www.ahla.com/covid-19s-impact-hotel-industry

Arora

Dharwadkar

(2011). Corporate governance and corporate social responsibility (CSR): The moderating roles of attainment discrepancy and organization slack. Corporate Governance, 19(2), 136–152.

Brewer

(2020). Wynn Resorts CEO says company is paying employees to retain them despite coronavirus closures. Retrieved March 24, 2020, from https://www.cnbc.com/2020/03/24/coronavirus-why-wynn-resorts-is-paying-employees-despite-closures.html

Caesars Entertainment. (2020a). Caesars Entertainment donates more than 250,000 pounds of food and thousands of personal protection supplies across the United States. Retrieved March 26, 2020, from https://investor.caesars.com/news-releases/news-release-details/caesars-entertainment-donates-more-250000-pounds-food-and

Caesars Entertainment. (2020b). Our commitment to corporate social responsibility. Retrieved January 14, 2020, from https://www.caesars.com/corporate/corporate-social-responsibility

Clark

(2020). Four Seasons provides free rooms to NYC Coronavirus doctors. Retrieved March 25, 2020, from https://www.bloomberg.com/news/articles/2020-03-25/four-seasons-to-provide-free-rooms-to-nyc-coronavirus-doctors

Coffman

Umemoto

(2010). The triple-bottom-line: Framing of trade-offs in sustainability planning practice. Environment, Development and Sustainability, 12(5), 597–610.

Coley

(2020). Yum! CEO donates salary to employees. Retrieved April 7, 2020, from https://www.qsrmagazine.com/employee-management/yum-ceo-donates-salary-employees

10.

Connor

(2020). More than nine-in-ten people worldwide live in countries with travel restrictions amid COVID-19. Retrieved April 1, 2020, from https://www.pewresearch.org/fact-tank/2020/04/01/more-than-nine-in-ten-people-worldwide-live-in-countries-with-travel-restrictions-amid-covid-19/

11.

Dixon

S. E.

Clifford

(2007). Ecopreneurship–a new approach to managing the triple bottom line. Journal of Organizational Change Management, 20, 326–345.

12.

Ellis

(2020). Our favorite ways travel companies are giving back during coronavirus. Retrieved April 12, 2020, from https://thepointsguy.com/guide/travel-companies-give-back-coronavirus/

13.

Farooq

Payaud

Merunka

Valette-Florence

(2014). The impact of corporate social responsibility on organizational commitment: Exploring multiple mediation mechanisms. Journal of Business Ethics, 125(4), 563–580.

14.

Fuchs

(2020). Coronavirus job losses ‘way worse than anything we saw in the great depression:’ Economist. Retrieved April 3, 2020, from https://finance.yahoo.com/news/coronavirus-job-losses-worse-than-great-depression-kpmg-economist-222238539.html

15.

Gimenez

Sierra

Rodon

(2012). Sustainable operations: Their impact on the triple bottom line. International Journal of Production Economics, 140(1), 149–159.

16.

Hilton Corporate News. (2020). Hilton and American Express to donate up to 1 million rooms to frontline medical professionals during COVID-19 crisis. Retrieved April 6, 2020, from https://newsroom.hilton.com/corporate/news/hilton-american-express-team-up-to-donate-rooms

17.

Hotel Business. (2020). Companies respond as COVID-19 impact continues. Retrieved April 2, 2020, from https://www.hotelbusiness.com/companies-respond-as-covid-19-impact-continues/

18.

Inoue

Lee

(2011). Effects of different dimensions of corporate social responsibility on corporate financial performance in tourism-related industries. Tourism Management, 32(4), 790–804.

19.

Johns Hopkins University & Medicine Coronavirus Resource Center. (2020). COVID-19 Dashboard by the Center of Systems Science and Engineering (CSSE). Retrieved April 11, 2020, from https://coronavirus.jhu.edu/map.html

20.

Jones

Comfort

Hillier

(2007). What’s in store? Retail marketing and corporate social responsibility. Marketing Intelligence & Planning.

21.

Jung

Lee

Dalbor

(2016). The negative synergistic effect of internationalization and corporate social responsibility on US restaurant firms’ value performance. International Journal of Contemporary Hospitality Management, 28(8), 1759–1777.

22.

Kim

M. S.

Pennington-Gray

(2017). Does franchisor ethical value really lead to improvements in financial and non-financial performance?. International Journal of Contemporary Hospitality Management, 29(10), 2573–2591.

23.

Las Vegas Sands Corporation Media Relations. (2020). Las Vegas Sands to donate more than two million pieces of personal protection equipment. Retrieved October 13, 2020, from https://www.prnewswire.com/news-releases/las-vegas-sands-to-donate-more-than-two-million-pieces-of-personal-protection-equipment-301032775.html

24.

Lee

E. M.

Park

S. Y.

Lee

H. J.

(2013). Employee perception of CSR activities: Its antecedents and consequences. Journal of Business Research, 66(10), 1716–1724.

25.

Martínez

Nishiyama

(2019). Enhancing customer-based brand equity through CSR in the hospitality sector. International Journal of Hospitality & Tourism Administration, 20(3), 329–353.

26.

Martínez

Pérez

Del Bosque

I. R.

(2014). CSR influence on hotel brand image and loyalty. Academia Revista Latinoamericana de Administración.

27.

McCartney

(2020). Coronavirus is spreading and cruise ships are still sailing. Retrieved April 4, 2020, from https://www.bloomberg.com/graphics/2020-where-are-the-cruise-ships/

28.

McWilliams

Siegel

D. S.

Wright

P. M.

(2006). Corporate social responsibility: Strategic implications. Journal of Management Studies, 43(1), 1–18.

29.

National Restaurant Association. (2020). Coronavirus information and resources. Retrieved April 1, 2020, from https://restaurant.org/covid19

30.

Singal

(2015). How is the hospitality and tourism industry different? An empirical test of some structural characteristics. International Journal of Hospitality Management, 47, 116–119.

31.

Starbucks Stories & News. (2020). Starbucks commits $10M USD in COVID-19 relief for partners around the world. Retrieved April 8, 2020, from https://stories.starbucks.com/press/2020/starbucks-commits-10m-usd-in-covid-19-relief-for-partners-around-the-world/

32.

Tobin

(2020). Texas Roadhouse founder and CEO foregoes annual salary, gives to frontline workers. Retrieved March 26, 2020, from https://www.usatoday.com/story/money/2020/03/26/coronavirus-texas-roadhouse-ceo-forgoes-salary-frontline-workers/2919112001/

33.

U.S. Bureau of Labor Statistics. (2020). The employment situation –March 2020. Retrieved April 10, 2020, from https://www.bls.gov/news.release/empsit.nr0.htm

34.

Vigna

(2020). Hospitality stocks are biggest losers in week of carnage. Retrieved March 20, 2020, from https://www.wsj.com/articles/hospitality-stocks-are-biggest-losers-in-week-of-carnage-11584702000?ns=prod/accounts-wsj

35.

World Health Organization. (2020). WHO Director-General’s opening remarks at the media briefing on COVID-19 - 11 March 2020. Retrieved January 20, 2021, from https://www.who.int/dg/speeches/detail/who-director-general-s-opening-remarks-at-the-media-briefing-on-covid-19—11-march-2020

36.

Wright

(2020a). Las Vegas Sands to cover emergency pay for employees at 3^rd-party Venetian restaurants. Retrieved February 3, 2021, from https://www.8newsnow.com/news/local-news/las-vegas-sands-to-cover-emergency-pay-for-employees-at-3rd-party-venetian-restaurants/

37.

Wright

(2020b). Wynn Resorts now up to more than $2.5M in total donations. Retrieved March 27, 2020, from https://www.8newsnow.com/news/local-news/wynn-resorts-now-up-to-more-than-2-5m-in-total-donations/

38.

Yang

Zhang

Chen

(2020). Coronavirus pandemic and tourism: Dynamic stochastic general equilibrium modeling of infectious disease outbreak. Annals of Tourism Research, 83, 102913.

39.

Youn

Song

Lee

Kim

J. H.

(2016). Does the restaurant type matter for investment in corporate social responsibility?. International Journal of Hospitality Management, 58, 24–33.