Giovanni Angelini, Updated Sept 15, 2021
Hospitality Industry, Post-Pandemic Evolution
What will determine, reshape, and revitalise the future of our business?
Part One (Core tangibles and intangibles)
A most challenging and unprecedented situation
New waves of consumer demands and preferences, stronger competitors, and investor expectations are bringing about unprecedented changes in the way business is being conducted. As more companies seek to pivot amidst the challenges, how can we rethink and strategise to ensure we turn this period of uncertainty and volatility into a brighter future?
The hotel industry has survived many economic crises in the past, and there is no question the industry will survive this crisis too. No clears indications at this stage that demand levels will decrease in the future. The human spirit is resilient – so is travel and hospitality. People will always gravitate to what they want most which is new experience and human interaction. The long-term view is cautiously optimistic, but the present crisis is a fierce wake-up call for our industry.
While no one can accurately predict the course of the pandemic (3-4 years of disruption), it is expected that the timeline for recovery will be bumpy and most probably will occur in phases – domestic first, followed by international travellers. Consumer attention will be focused on countries and destinations that have managed the pandemic better than others.
We have to expect the unexpected and have a long-term view. The core business of providing hospitality and experiences has not changed. Neither has the basic rules of doing business – revenue-cost-risk-profit. But the pandemic has tested the ability of owners and operators to differentiate, innovate, eliminate formalities, and create clear competitive advantage.
A unified team of experienced and talented professionals with a focused vision and clear objectives is simply a must to pull through this crisis – including diverse and inclusive hotel executives who have faced past crises and know how to adapt and thrive in the post-pandemic market dynamics. This is not only a matter of trends; it is a question of evolution and growth.
How can hoteliers adapt to the factors that are shaping the future of the hospitality industry and resist the temptation to believe that things will return to normal?
Revisiting the basics and understanding the trends that are driving demand are important and necessary processes. People will still travel for business and leisure, of course, but they will travel smarter, favouring low-risk destinations and the safest modes of travel.
Planning and strategising are essential in any business, and in the current situation, the hotel industry has to ask some fundamental questions: “What have we done and achieved so far? What should we do now? What’s next?”. Too often, the hotel industry is smart enough to know what to do, but far too slow at doing it. And do remember that a “strategy without execution is useless and execution without strategy is aimless.”
In response to changing travel patterns, behaviours, and budgets, it’s clear that business models need to be reconfigured. Hoteliers must focus on searching for new sources of business, crafting new SOPs, setting new targets, implementing new efficient technology, reimagining and rethinking all amenities and offerings, and creating new contingency plans. Taking a microscopic view of operating expenses (without reducing the quality) has to be part of the process.
Crises tend to change industries. And in a world of changes that includes, amongst others, major behaviour, lifestyle, financial, and political shifts, anticipating what the future of hotels looks like is so very important to get right. Responsive and resilient business models have to be put in place and embraced by all.
A culture of revitalisation and adaptability plus a positive attitude towards change is simply a must. So is the elimination of past bad habits. Accepting the “status-quo” for a period of time is in most cases, a gradual decline into failure.
The pandemic has accelerated the process of revitalisation and challenged many widely held ingrained beliefs about how organisations should operate.
Adaptability is the ability to learn flexibly and efficiently and to apply that knowledge across situations. During crises and periods of transformation and systemic changes, adaptability is critical to success.
Within the next decade alone, we’re likely to experience more progress than we’ve seen in the past 50 years. In this fast-evolving landscape, hotels will have to adapt the hospitality experience to attract a broader audience. And this offers an excellent opportunity for reinvention.
In a pandemic of this dimension, the handling/control of the cash flow has been and will remain a top priority for most organizations. Fortunately, the attitude of the lending community/financial institutions has been much more thoughtful, flexible, and patient in supporting the industry with loans and working capital.
In today’s ever-changing, uncertain business environment, adaptability is essential. Here are a few guidelines on the post-pandemic trends, behaviours and expectations that the industry and organisations must adapt and respond to:
Trusted leadership and responsible governance
Adaptability comes from trust. In these uncertain times, there is no space for political, self-focused, inexperienced leaders. We need visionary trendsetters that walk the talk, lead by example, create strong teams, and demonstrate leadership agility.
Leaders who are driven by values, selfless principles, facts, empathy and put results before ego. The building of trust is simply imperative.
A learning mindset; fresh thinking, learning agility, emotional flexibility, decisiveness, and openness to experience are all part of a multidimensional understanding necessary to thrive. Change initiatives has to come from the top, and embraced by all.
People need to feel supported when they need to shift and adapt to new directions. Open communication, acceptance of failure, and rewards for success are essential. In this environment, strong leadership is paramount.
It has been proven that creative minds are an asset to the hospitality industry. Anyone with outside-the-box thinking and unique ideas can thrive and advance in this demanding business and ultimately help their companies remain competitive and successful. These people are highly valuable – and needed.
A people-centric approach
The hospitality industry has always been and will remain a people-first business. People are the ones who make great brands and great organisations. Loyal people are the ones who help companies come out of the doldrums when things are bad and ultimately pull through crises. This will always be the case, and organisations must respond with new training, improved rewards, effective succession planning, opportunities for career advancement (career vs job), pleasant and safe working environments, flexibility, adaptability, and empathy.
Leaders have to recognize and accept that people have different sensitivities/expectations and have to find effective ways to create a culture of unity and alignment toward the common objective.
A flat hierarchy and a democratic decision-making process that allows people to take ownership should be the norm. This has to be supported by a strong culture of empowerment and acceptance of responsibility. Remember that success also depends on employee experience – which should be great.
Elimination of internal silos
While the industry has explored not working in silos for years, there hasn’t been much success in this area. The need to break down silos between hotel departments and functions has never been more important, especially as the industry moves towards travel recovery.
Focusing on the ‘we’ and not on the ‘me’, being accountable, and taking responsibility is a must for all employees within an organisation. Each member must know what their role is and what is expected from them.
To facilitate the elimination of silos, organisations should implement effective measurement metrics that outline rewards and incentives for the whole team. Team KPIs with clear, measurable processes are essential for the long-term progress of any company.
Priorities – ‘First things first’
Health and safety considerations have become the primary concern for consumers in the post-pandemic world (especially when it comes to international travel).
Travellers are paying much more attention to the various security, hygiene, and health protocols that establishments are implementing. Thermal scanners, quality of indoor air, touchless/contactless options, digital and mobile devices, biometric systems, voice recognition, robot-assisted deliveries, secure pre-payments, pre-check-in, and lobby kiosks are just a few examples of the new trends and expectations.
A health identification system may become mandatory for medium/long-haul travel. And amongst others, we must always watch for, and protect against, modern terrorism threats. Hotels and hospitality-related facilities are considered soft targets.
Making hotel guests comfortable, both physically and mentally, is simply a must. So is the importance of personalising their stay. Well-being is a clear customer expectation and takes precedence over location, brand, points system, and other factors.
Post-pandemic, hotel customers will be making purchases based on different criteria and expectations. This could be a clear business opportunity for the industry to adapt, respond, and maximise. Think consumer confidence at the forefront.
Technology and digitalisation (Hard-Soft-Hybrid)
Digital transformation is here to stay. Consumers are becoming increasingly digitalised, and demand for digital solutions has increased, especially among younger generations. Digital requirements should be central to the plans and strategy of any organisation, now and in the future.
Practical technology, such as an efficient cloud computing framework, the use of artificial intelligence, of extended reality, robots, voice technology and others have become necessary to drive value, efficiency, and to facilitate new business demands and opportunities (including new digital booking channels). Properly applied, technology plays an essential role in recovery. (And… are you preparing for cryptocurrencies and cybersecurity?)
Technology enhancements and digitalisation efforts should focus on facilitating and enhancing guest experience, revenue generation, efficiency, strategic planning, and decision-making processes. Do remember that, in this industry, tech cannot replace the human touch. “Humans make things happen”.
Influence and value of food and beverage in hotels
Good and exciting restaurants are a large part of the hotel stay experience, especially for upper/luxury market travellers.
An interesting and successful restaurant concept is a great way to differentiate a hotel, effectively creating talking points and gaining followers.
Food and beverage is an integral part of hospitality. It is highly competitive and demanding, and a committed and motivated team of experienced specialists and professionals are needed to stay on top of trends. These are the people who will satisfy different tastes, preferences, and expectations – and maintain the consistency critical to overall success.
Hotel design of the future
Hotels are a combination of bricks, marble, mahogany, orchids, style, and culture. A pleasant, interesting, and practical design is a key element of the guest experience. It’s important for developers, architects, and designers to understand the changing complexity of modern consumers and to adapt to the ongoing social changes, guest’s and workers’ needs, and economic factors.
There is a clear trend away from cookie-cutter properties towards unique, tailored hotel concepts focused on personalisation, practicality, wellness and well-being, privacy, smart technology, and sustainability. A balance between safety protocols and guest experiences, and between automation and human connection.
It is the desire of every hotel brand to be distinctive and stand out in the market. But what drives the concepts and the design of the hotels of the future is the market audience, the brand image, the cultural representation, and the efficiency. A designer’s dream should not be an operator’s nightmare. Hotels are built as part of the local community, and they must succeed and generate ROI.
A must for new building designs to be environmentally responsible and as eco-friendly as possible; efficiency-utilities-recycling facilities-quality of indoor air-carbon/emission output and so on.
Clear indications are that consumer behaviour will be more oriented towards conscious consumption and minimal waste. Sustainable products, responsible brands, eco-friendly policies, ecological products, and environmental concerns will all be of greater interest in the post-pandemic world.
Ethical standards that meet societal needs should be a top priority for any organisation. The industry has to move beyond symbolic statements on sustainability and put in place clear metrics and KPIs. Curbing emissions and mitigating climate change is a clear responsibility, as this could pose huge challenges in the future.
Part Two (Marketplace, Effectiveness, and Success)
Trends and brand recognition
Brands are living things. They represent who you are, what you believe in, and how you are perceived by consumers. Brand revitalisation (not necessarily the logo) is a never-ending process. The creation of a strong brand image is essential for success.
Consumer behaviour and spending has been – and will continue to be – altered, and business plans need to adapt to these new circumstances. Many industries have been negatively affected by this pandemic, and unemployment is expected to remain high. Consequently, there will be less disposable income for leisure travel.
The industry can’t rely on pre-pandemic strategies. Most will no longer apply in a world of new expectations, new needs, new products, new competition, new booking processes, and so on. Operators will have to figure out a way to stay ahead of what’s to come, build new ways to attract customers and gain their loyalty, and, most importantly, learn how to capture a ‘larger piece of the pie.’ Differentiating from the competition is no longer enough; products and services must be exceptional.
It’s not easy to predict the future, but it is anticipated that there will be much more focus on recognised quality products, reliable brands, evidence-based services, overall image, attractive offers, and, of course, perceived value. Many travelers are searching for an excellent service experience and are willing to pay for a quality stay as long as they receive value (high prices for quality experience).
There will be more pre-planning and much less spontaneous purchasing. This is a time to reshape brands and products for new consumers who are becoming more demanding and expect hotels to fulfil their desires (which they consider basic needs). Traditional roles need to be re-assessed and adapted as well.
The ‘guesstimation’ is that traditional tourism will not return any time soon. Demand for popular destinations (over-tourism) is expected to fall, while demand for greener/less crowded destinations will continue to rise. Travellers don’t want the same old; they want something new. They want to explore new and safe destinations.
Selling by segmentation or by channel?
It is a fact that every hotel needs every guest it can get but in a post-pandemic recovery, will we see an evolution in how hotels sell their rooms? By segmentations or by channels?
What strategy will be more efficient in identifying sources of business and new revenue streams? Generating demand? Acquiring customers and responding to their needs?
Some shifts are expected, but the discipline of managing the segmentation and revisiting the channel mix will not change. Who are the most discerning customers, and what is their spending power?
Reducing and controlling online distribution costs and taking advantage of new/efficient distribution and technology opportunities are critical for operating an efficient and productive revenue culture. And it is important to remember that, in this industry, there is no winner in a race to the bottom with pricing – a typical and expensive mistake made by many (remember the rule of thumb; “lower rates do not create demand”).
As travel begins its recovery in several countries and destinations, hotels have an opportunity to influence and reshape customers’ purchasing habits and create a new wave of brand loyalty to increase direct bookings. Of course, this implies and relies upon clean and updated data, increased direct communication, targeted offers, efficient processes, rapid response, flexibility, and recognition.
Bridging the generational differences
The basic principle in the hospitality industry is to welcome everyone without exception. While this will always remain true, the industry has to do better at adapting to shifting demographics and generational requirements.
That different generations have different likes, dislikes and preferences (needs and wants) is a part of life. Young and older people think and act differently; it’s as simple as that. No group is better than the other. We must accept that if you try to please everyone, you risk pleasing no one. It’s a delicate balance.
It’s a fact that experienced senior generations have the time to travel and more money to spend. Young at heart, they are looking to have selected memorable experiences and want to try new things. They will pay for their experiences without much hesitation and, at present, they are the best spenders.
While younger generations have less spending power, they are extremely socially communicative in the online market and highly influential too. They love to travel and spend on exciting experiences and innovative products. They know what they want and how much they are prepared to spend on it. In the pursuit of individuality, they generally have less patience with outdated and inefficient processes and facilities. Of course, preferences and behaviours will change as they age. (Does this mean there is potential to secure them as lifetime loyal customers?).
The success of a brand relies on understanding the needs and expectations of various demographics, their preferences, expectations and responding with targeted products, facilities, services, and offers.
Particular focus should be placed on studying buying behaviour and facilitating the whole booking process to match. Remember that a brand that unintentionally makes consumers feel they are ‘too old’ or ‘too young’ to use a product may risk alienating entire generations. Again, a delicate situation.
Offerings and value
Hotels are seasonal and cyclical, and rate parity across all channels and customers is not feasible. Focus instead on value and what customers want from brands, not what brands want from customers. A successful organisation needs strategies and offerings that appeal to various clients during different periods throughout the year.
Attention has to go to frequent forecasting, pricing strategy, targeted marketing, personalisation, and consistent communication. The creation of credible value perception, quality and consistency are essential for success.
Advanced revenue structure/system
Advanced revenue management (RMS) must be in place. CRS, Metasearch, SEO, GDS, booking engine/direct booking platforms, transparent and engaging website, inventory management, forecasting, yields management, and others are critical to maximising revenue. Are there any areas of untapped potential revenue? Which room types and which segments are most profitable? Operators have to switch their attention and measurements from RevPAR to GOPPAR.
Objective here is to react instantly and intelligently to shifts in market and business conditions.
Can you stop OTAs from displaying wholesale rates? How many contracts have you signed with wholesalers? Can you reduce the number of wholesalers you work with? Are your distribution partners the right fit?
Broader commercial focus; three key hotel functions – Marketing, Sales, and Revenue – have to be coordinated under a strong culture of accountability, responsibility, and profitability. As a suggestion, organisations could consider introducing a Chief Commercial Officer position, (less/no silos), to oversee these three functions – which may help to simplify processes, reduce costs, enhance efficiency, and achieve better results. There should not be any confusion on who leads the revenue process.
Redefine and reimagine loyalty
Clean and current customer data is one of the biggest assets of a hospitality organisation, and it will remain very important. But we have to accept that, in a disruptive pandemic of this dimension, some of the data we have on file may be irrelevant as consumer preferences have shifted dramatically. Every organisation and every market is different, so loyalty can never be one size fits all.
With consumers more willing to try new brands, especially those offering more meaningful experiences than the staid/cookie-cutter hotel products, loyalty is very much up for grabs. We have to accept that frequent travelers usually belong to multiple points-based programmes, and their loyalty goes to whoever can offer them a relevant and easy solution at a particular point in time (note that points are usually for the mass).
Based on management/ownership priorities and market conditions, each organisation needs to redefine its business objectives and strategies towards loyalty and new potential members. The creation of an efficient customer experience framework is essential to success in this area.
What are the expectations of the new loyal/repeat customers? Points or Brand Loyalty? and can organisations or an individual hotel handle both? and can brands make their offers more relevant with the objective to attract and retain loyal customers?
This is not an easy task. An attractive points/incentive/rewards programme is of interest to many and simpler to handle. But it appears that recognition and personal attention are becoming more important to many customers, and here is where organisations can stand out.
Repeat and/or Loyal customers?
It is so important for organisations to know the reason why customers are returning. It is a fact that location and price normally drive repeat guests while service, facilities and experiences drive loyal guests. Both are of course needed, but which one is more important to you? And what will you do to stop them from leaving for your competitors?
Loyal customers in the post-pandemic world will not fall for standard, old-fashioned marketing gimmicks. Now is the time to wear a creative hat and think of novel solutions.
What new post-pandemic benefits could an organisation offer to loyal customers? Would a 24-hours flexible stay be of interest to members? A more friendly cancellation policy? Lower (and less irritating) charges for ancillary services such as minibar and laundry services?
In principle, we have to seek to solve every point of friction for our important customers. The objective is to achieve loyalty towards the brand, and then towards the rewards.
Remember, customer equity/loyalty is for the long term. A ‘forever guest’ approach can play a significant role in leading a company to success.
Events and remote working
The pandemic accelerated many developments in the hotel industry, including hybrid meetings and more efficient technology.
Meetings and large conventions may take time to return, and this area of hotel business will face some modifications. As some organisations have had great success with teleworking, hybrid meetings, and virtual technology, aspects of remote work are likely to remain. As such, IT adjustments may be necessary to facilitate this.
Investments in professional and efficient hybrid studios (featuring LED backdrops, built-in cameras and microphones, studio lighting, virtual whiteboards, etc.) will be necessary for business, commercial, and convention hotels seeking to remain competitive.
Once the situation stabilises, demand for social and corporate events is expected to improve gradually, and hotels will need to adapt to the changes and needs of this demanding and important segment.
This is a challenging but interesting time for the industry. For success, owners and operators need to be open, flexible, focused, and willing to adopt a new way forward. However, they must also be cautious not to fall into the trap of doing something just to do something. Change for the sake of change is not planning nor strategising; it is a fast-track to failure.
This is a time for a clear vision supported by a solid plan of action and time-bound measurable targets. A time to invest in people, products, and systems for the future.
Be proactive and stay on top of the trends that are driving the demands of your customers. Stay focused, and don’t let distractions get in the way of your objectives and goals.
Working toward success is the final aspiration of caring leaders and operators. Success in this demanding business is normally determined and measured by employee and customer satisfaction, market leadership, operating profit, return on investment, and continuous growth.
I hope that the personal views and opinions I have expressed in this document help you to thrive and reshape your business roadmap towards success.