By Giovanni Angelini
WHAT THE HOSPITALITY INDUSTRY HAS LEARNED FROM THIS PANDEMIC?
And a Suggested Roadmap for the Way Forward
With vaccination programs being rolled out in most destinations worldwide (in some places faster than others), we are finally seeing some glimmers of hope that the hospitality industry is emerging from the dark shadows cast on it by the COVID-19 pandemic.
Diligent leaders keeping close tabs on the situation now have a much better opportunity to assess where their respective organizations are heading and develop strategies to steer a better course.
Now is time to take stocks, plan effectively and forge ahead with new solutions. How much of the old normal does an organization really want, or can really afford to have back? And what it takes to create a strong competitive advantage?
When the pandemic finally really retreats, there will be no going back to the way things were before the virus emerged. We have transformed the way we live, work, and travel. Many of those changes are here to stay and in order to respond to the ongoing shifts in travel behaviors and customer expectations, re-calibration is simply a must.
Businesses hoping to thrive in this new environment have no other option but to learn to adapt and to create customer trust. Be more agile, resilient and responsive to changes.
LEARNING - STRATEGIZING – RESPONDING (The Takeaway)
To aid your strategic efforts, here is a summary of 20 key lessons learned (to-date) during the pandemic and what they may mean for your business.
- The pandemic has affected most sectors across the globe – travel and tourism in particular. It has created high unemployment, widened economic and wealth inequality, and substantially reduced the spending power of consumers worldwide. For many executives, survival remains top of mind. Many have been forced to make unpopular and difficult decisions to remain competitive and in business. And many tough decisions remain.
- It has deeply altered the hotel industry – a seismic shift – and not everyone understands the depth and breadth of this unprecedented crisis. While, in general, a company’s DNA and values will remain, its mission, strategies, and actions must all be adjusted. Everyone, at all levels of an organisation, will need to learn to do more with less.
- Has accelerated global shifts in consumer behaviours, values, and expectations. With increased clarity about what is truly important in our lives, health and wellness are now at the forefront, particularly mental well-being. People are now much more selective about what they eat, consume, and where they stay when travelling, and the industry must respond accordingly.
- Nobody was prepared for the social and economic impacts of this crisis, and since the onset, many mistakes have been made in trying to handle it. Governments, businesses, and medical practitioners have all been challenged by this unprecedented situation. Plus far too-many “fake news and misinformation” out-there making things worse.
- Hygiene/sanitation, safety, security, indoor air quality, and transparency, have become top priorities for customers and employees in hospitality. Think ‘Peace of mind’ at all times. (On indoor air quality, note that the combination of MERV 13-14 filters and UVC germicidal lamps will capture over 95% of all indoor contaminants/ particles).
- An updated crisis management plan, including securing funds and adequate lines of credit, has become essential for all organisations. Ensuring the safety of staff and guests, preserving cash, and protecting jobs are the most important tasks for any business leader in a crisis, and these must be part of the plan. Remember, cash is king, and reserves are vital. Be ready for next crisis.
- We must plan for business cycles as business will not grow year after year forever. The hospitality industry is fragile, and it depends on many outside factors beyond our control. Over the years, we have seen many negative situations affecting our business – 9/11, the financial/economic crisis, SARS, H1N1, acts of terrorism, political disturbances, etc. – and we cannot take anything for granted.
- While the core business of providing hospitality and new experiences will not disappear, the hospitality industry needs to rethink its administrative and economic processes. We must take the opportunity to correct past bad habits and embrace new beginnings based on efficiency, flexibility, productivity, and profitability.
- We have learned that trends are rapidly shifting, and in response, rules have to be rewritten, and mindsets have to change. Standardisation alone can no longer be the norm; we have to do better. This pandemic has reshaped the hotel industry in ways never before imagined, requiring a shift in marketing strategies and a willingness to explore new solutions. Rising demand for remote work stations, virtual meetings, technology upgrades, immersive wellness products and services, outdoor activities, and others are clear examples of changing trends.
The hotel sales-marketing-revenue departments may need a complete reorganization focused on segmentation and on distribution channels, on sources of business, on loyalty and of course on market position/leadership.
Also the pandemic is forcing hoteliers to find new ways of income. As TRevPAR is becoming a standard measurement in future, hotel/revenue leaders need to look at the entire building/space as a series of opportunities to drive revenue and bottom line; rooms-MICE-F&B-wellness-recreation-retail-parking and others.
Looking at profitability across all square meters of the building will be even more powerful. All in the organization must embrace the fact that bottom line and cash flow derives from quality-value-revenue.
- Direct guest booking remains a priority for hotels, and marketing budgets must focus on branded websites, social media and direct guest engagement. In all probability, hotels will still rely on OTAs, and other similar disrupters, for a substantial percentage of their room business in the future. But hotel organisations need to re-evaluate their relationships with OTAs, especially regarding the amount of commission, rate parity, booking/cancellation/refund policies, and others.
Then there is the sharing economy to deal with. Up to the end of 2019, it was growing rapidly and expanding aggressively into new categories beyond its original supplemental role, slowly disrupting the lodging industry. The lower rates of home-sharing platforms such as Airbnb changed some of the habits of leisure travellers, families in particular. But, like hotels, the sharing economy has also found itself facing an existential crisis linked to fundamental changes brought about by the pandemic.
As the sharing economy is a well-accepted formula, some hotels/products/services may want to consider listing with them to benefit from their successful platforms. This may be out of the box thinking, but leaders should look into it very seriously. “If you can’t beat them, join them,” goes the old saying, and collaboration in this area could potentially lead to some much-needed additional revenue for hotels.
Remember that remote work and extensive video conferencing will put a dent in business travel (expected to be down by around 20% on pre-pandemic levels). Hotels will have to find ways to replace this highly lucrative segment.
Indications are that the GDP growth of the two largest economies (the USA and China) may exceed 5% in 2021, but it will take time before this is reflected in business hotels worldwide.
- Company structures have to be adjusted to be flatter and focus on facilitating innovation, speed, agility, efficiency and empowerment. Productivity and accountability by all team members are essential to ensuring sustained success.
Current methods to train and develop future hoteliers must be adapted to match the character and capabilities of younger generations. As our world becomes increasingly diverse, hiring people from different backgrounds and cultures will bring fresh perspectives to our business – essential in an industry that caters to global customers. Teamwork and alignment towards goals and responsibilities have never been more important. “Silos” between departments must be eliminated for good. So is hierarchical management.
- Brands must create value and clear competitive advantages. Generic or inferior organisations will struggle to attract and retain customers and good employees. Brand identity and market positioning are critical to remaining competitive.
And in terms of pricing, remember that discounting room rates should, in principle, always be the last resort. Many hotel companies dropped their prices as a form of short-term survival during the pandemic. When demand returns, raising rates to previous levels could be very challenging indeed.
- Building confidence and trust will be essential to attracting and retaining customers. Listen to and understand their needs, give them more choices, and personalise their experiences. Remember that people need and want to travel, and business will eventually return. But you must be ready to give guests and customers the new enriching experiences they desire.
- Change is driven by technology, digital transformation, robotics, voice search-control, contactless/touchless guest services/functions, cloud solutions (an enabler) and others. Such innovations will be essential to achieving operational efficiency, reducing expenses, and improving the customer experience. Most organisations may require new capex/investment in new and efficient technology.
“Modernise to future-proof” including sustainability, but remember that in this industry, nothing beats the quality and results of face-to-face interactions.
- A well-kept customer database is one of the most valuable assets of any organisation. Data/guest profile must be better leveraged to communicate and deal with customers, promote business, and create loyalty. Safety, recognition, and personal experiences have become the key drivers of hotel loyalty, not points schemes and/or the offer of air miles.
Now is the time for revenue executives to step-up and take a commercial strategic perspective and a leadership role. Those executives must have the ability to interpret data and convert into bookings.
- A quality communication infrastructure (the latest in fibre-optic network) is a must. While social media can be fun and flashy, and paid advertising can be used for a quick win, make sure to pay close attention to your branded websites and ensure they serve as a valuable and trustworthy resource for potential customers.
- Tourism as we knew it might never return, and international travel will take a long time to recover to pre-pandemic levels. Global health guidelines (health pass/certificates/vaccine passports?) will be required when travellers can venture out again. Indications are that the return to travel hinges almost entirely on the speed, efficiency and effectiveness of the vaccination programmes now being rolled out worldwide.
Travel may become much more stressful than in the past. Vaccination- testing-quarantine for specific countries and destinations may stay with us for a longer period of time as a zero-risk approach to travel is not practical for the near future.
- We should have a hierarchy of needs and strategic thinking for when we open up in full. Accept that expectations without a clear strategy will achieve nothing. The industry has to move quickly to adapt to shifting consumer preferences, make travel better, and take an agile, customer-centric approach.
- Owners, leaders, and operators need to get very creative to shorten the timespan from recovery to profitability (long road to recovery?). Where are the new sources of business, and how can you tap into this as soon as travel is safe? How can you get customers engaged with your brand? How can you enhance your loyalty programme to ensure its members return to your properties?
- We must believe that every crisis brings new opportunities for growth. Instead of focusing on failures, use this pandemic as an opportunity to regroup, rethink, and reset. There are always winners that emerge from every crisis, and those who can maximise the new opportunities will progress the fastest.
Travel and tourism is a perishable business. It’s clear that the whole industry is currently far too fragmented and failing to provide an end-to-end experience for travellers.
Will an interconnected, all-in-one platform combining offers from airlines, airports, ground transport, car rental, hotel accommodation and others be the way to go in the future? Alongside much more collaboration, the industry may need a transformational change.
The next normal awaits
Hospitality was one of the first industries to be heavily impacted, and it’s going to be one of the last to recover. Competition for visitors and travellers will be intensive once the worst of the pandemic is over, and rival brands/markets will continue to do their utmost to attract new business – including your guests.
Clear strategy, planning, and prompt actions provide the link between the current and the future direction of any business, including hospitality. As plans and actions may need to change rapidly and radically, you must always be clear about where your organisation is heading: no second-guessing here, and no going back.
After what is perhaps the worst 18+ months in the history of our industry, most hoteliers remain hopeful and optimistic about the long-term prospects for our business, even if the near-term remains challenging. Hospitality is resilient and has a clear purpose.
Ultimately, hospitality business will continue to evolve, and there will be many opportunities along the way. Make sure you don’t miss them.