The COVID-19 pandemic has drastically altered the world’s economic situation leading many economists to predict that it will have as significant an impact as the great depression of the 1930s. As such, many of the field’s fundamental principles must be reconsidered for the coming years, including several which received less attention in recent years since learnings from the Great Recession have superseded them. In order to properly educate students and managers about the relationship between economic theories and practical implications on the hospitality industry, such shifts must be incorporated into macroeconomic courses and executive education programs so to better reflect the current economic realities facing firms and their leaders.
Until March 2020, what kept economists awake at night was the fragile recovery from the 2008 recession, the biggest financial crisis since the Great Depression (Blanchard & Johnson, 2013). The case study of the 2008 financial meltdown has been part of standard undergraduate programs (Colander, 2010) which enabled instructors to draw practical links between traditionally abstract macroeconomics theory and the hospitality industry’s contemporary challenges.
From a pedagogical point of view, it is worth illustrating the contraction of aggregate consumption with an industry-related example. For instance, in the hospitality industry, the drop in income was reflected in a contraction of the occupancy rate, average daily rate, and revenue per available room in hotels across most of the world (Alonso-Almeida & Bremser, 2013). The COVID-19 crisis has already put the 2008 crisis – and its substantial fallout – on the back-burner. Students and managers need to understand the current situation (Colander, 2010), which means that the 2008 financial crisis could be part of an economics “history” course but perhaps no longer play a central role in an undergraduate macroeconomics course for hospitality management students since this industry is largely recognized to be one of the most severely impacted by the current crisis.
The impact of COVID-19 on aggregate supply also requires the introduction of new elements traditionally not part of an undergraduate macroeconomics course in hospitality management education. In fact, the COVID-19 crisis brought Say's law back into vogue. As mentioned above, this new element needs to be incorporated into the medium-run model. Traditionally, the medium-run analysis is presented through the use of a graphical analysis.
Today, educators need to not only cover the medium run in greater depth via a simple model combining price setting and the wage setting equations, but also by adding extra components such as labor productivity. It is, nonetheless, undeniable that COVID-19 has impacted the productivity of workers and, as such, assuming that it holds constant (as standard undergraduate textbooks generally suggest) is no longer accurate. Such changes would provide a more nuanced and refined model for analyzing complex macroeconomic conditions and their impact on, for example, the labor-intensive hospitality industry.