Hotel Management, COVID-19, Government/Politics and You
Worst nightmare or brightest star?
COVID-19 has become our worst nightmare or our brightest star, it all depends on the part of the economy you call home. If your revenue stream relies on success in the hotel, travel and tourism industries, you may be seriously disappointed.
Beginning in January 2020, this virus changed segments of the economy that are unlikely to fully recover until 2022 or 2023. Owners, operators, administrators and staff have watched massive trip cancellations, suspension of national and international flights, postponement or cancellation of large and small events- without the power to make it stop. People are fleeing cities and avoiding travel to these destinations although the health problem is unrelated to urban density but rather to structural inequalities and the quality of urbanization.
All industry segments had been experiencing growth and financial success through the end of 2019, only to be struck by a widely spreading virus of uncertain origin that quickly spread through the air. The tourism industries are ill-prepared to deal with disaster situations, even in high-risk areas. Research indicates that after large-scale health and climate related disturbances, tourists are reluctant to travel to these destinations and, adding to the onerous state of affairs, governments impose obstacles to the travelers heading to these regions.
Economic forecasts suggest that the multifaceted tourism industry will not recover in the short or near-term as demand is tethered to income, and a decline in income results in similar or a deeper decline in the consumption of tourism products/services. In addition, there is likely to be a shift in destination demand from international adventures to local destinations.
The hotel industry is particularly vulnerable to crises as performance is based on the derived demand from tourists. With the closure of airports, the cancellation of airline flights, and quarantines, there has been little or no demand for hotel rooms resulting in decreased occupancy and revenues, the reduction of employment and the deterioration of unused, non-maintained properties.
These changing conditions have caused a revision in booking/cancellation policies, evolving from very restrictive to flexible. In addition, the booking window has become shorter and shorter in many market segments, with both leisure and business travelers looking for elasticity in rates, fees and cancellation policies.
Governments: A Positive Force?
Actions taken by governments and private sector leaders can assist or hinder the industry; unfortunately, neither elected officials or administrators are tuned into the nuances of the industry so their actions and activities are likely to be coercive rather than helpful and supportive. It is critical that, after the crises, all levels of government concentrate on tourism promotion and marketing, but more importantly, focus on fiscal and monetary policy, enabling tourism organizations to increase liquidity and sustain operations.
Each hotel will experience the negative consequences of COVID-19 in its own unique way. How the owner/management team responds to the challenges depends on how the hotel is affected. The impact will be viewed from the prism of size, category, franchise or family run.
Hoteliers focused on up-market properties with a brand are likely to handle the challenges efficiently and realistically because professional managers, playing a key role in the recovery effort, will take the lead. These executives, responsible for strategy, new procedures, and guidelines for staff, and communication, are in a position to stimulate creative approaches to the tasks and encourage innovation. In a few cases, the crisis may actually reveal a turning point for the hotel, finding new markets and/or other unique competitive advantages.
The Job is Not Easy
Hotel executives will be required to communicate and cooperate with significant internal and external stakeholders, restructure or reduce overall costs, including canceling or renegotiating agreements with vendors and suppliers with special attention to travel agents and tour operators. They will also be tasked with developing new revenue streams and identifying new market segments. The senior executives will have to:
- Restructure all departments and schedules based on new tasks related to the crises,
- Support staff to withstand the challenge of a new reality,
- Design and apply new and more flexible cancellation policies, while adapting procedures, standards and facilities to operate in this new normal, and
- Reconsider operational and financial data collection, analysis, and forecasting to deal with the aftermath of the crises.
It is likely that employees will need new procedures, education programs concerning health and safety awareness, and new hygiene equipment and procedures that will be in use after COVID-19.
New Target Markets
In some countries the virus has created temporary new niche markets for peer-to-peer accommodations and even Airbnb properties have stepped into the picture making rooms available for self-isolation of residents who returned to their countries or needed to be separate from their family because of illness.
In other markets, hotel operators and hotel technology providers are building an ecommerce platform or connecting properties directly, offering healthcare services (i.e., beds or laundry services for medical workers and hospitals). While the rooms are free to the healthcare workers, many governments are paying the hotels for accommodations, helping the owners/managers to cover their fixed costs.
In the US, Hospitalityhelps (Cloudbeds) and Hospitality for Hope (American Hotel and Lodging Association), are leading the effort. Intercontinental Hotel Group (UK), Accor (France) and Apalleo, a technology supplier in Germany (Hotelheroes), are offering assistance. In Poland, GK Polish Holding Company is supporting medical workers and hospital employees by offering complimentary meals and accommodations through their Hotels for Medics Foundation.
Reality Check. Not Magical Thinking
Industry leaders tend to be very pragmatic and Michelle Russo, Founder/CEP of HotelAVE posts on her website that, “…it’s hard to rely on historical data or past recession to navigate the decisions needed today.”
Chris Hague, the Chief Operating Officer for HotelAVE, recognizes that, “most hotels still have the majority of employees on furlough and many have gone through permanent layoffs,” noting that the industry recovery will not be quick. Hague finds that, “Closed hotels continue to evaluate reopening costs/criteria with a focus on ‘losing less,’” whereas “open hotels are focused on capturing the limited demand that currently exists and mitigating controllable expenses, while ensuring employee and guest safety are prioritized. According to Hague, “Many owners are evaluating alternative demand sources to weather this storm while some are taking advantage of the current environment to executive displacement-free renovations and repositioning efforts.”
The past is slowly being tucked into history books and now is the time to plan for the future. Hague recommends that managers, “develop creative ways to leverage outdoor space and venues at their properties” and suggests that hotels, “focus on promoting all new cleaning and touchless experiences…”
Hague is optimistic and sees industry resilience, creativity and a strong work ethic – all necessary if the industry is to be rebooted. He is certain that, “technology will continue to evolve the guest experience…and certain job functions may be replaced by robots. However, we continue to see new and creative job additions and transformations in the hotel space as guests are seeking more experiential places to stay.”
Matt Fairhurst, the CEO and Cofounder of Skedulo, also forecasts a slow recovery as the, “current crises have created consumer skepticism and hesitancy, especially around the idea of traveling and hospitality. Hotel executives are now tasked with regaining consumer trust, rebuilding operations and recovering lost revenue.” Fairhurst recommends that, “In order to safely and efficiently bring guests back, hotel executives need to invest in strong procedures and backend technology that will reduce complications, streamline front-ling workers’ jobs and improve the customer experience.”
Fairhurst also finds that, “With constantly evolving governmental regulations and hotel policies, the front-line workforce can often become overwhelmed or confused, resulting in missed safety procedures (like failing to wear masks or inconsistent cleanings of high-touch surfaces). Guests need to feel confident that their safety is being prioritized and that the staff is aligned on protocols and communication.” Fairhurst notes that inconsistency in hotel services and procedures are likely to end up as bad reviews or a non-returning guest.
Fairhurst encourages the use of contactless technology as a way to regain trust and confidence while simultaneously protecting employees and recommends, “Checking – in via QR codes, providing disposable keycards and contactless payment options,” that minimize “contact with high-touch surfaces…”
Social distancing is important to consider throughout the hotel and Fairhurst advises that management look for technology that monitors and limits capacity for rooms and other potentially high – crowded areas, including the bar, restaurant, gym, pool and other leisure spaces.
Cost containment is likely to be a priority post COVID-19 and Fairhurst counsels the use of “Automated communication solutions” to help remind guests of upcoming visits and requesting reservation confirmation for high-demand dates,” and recommends wait-lists so that managers can rebook cancelled rooms.
Fairhurst’s organization, Skedulo, is currently exploring the application of high-capacity scheduling technology that automatically and intelligently organizes large quantities of people making appointments and adapting the technology to the hotel industry. The technology can be used to schedule guest’s arrival times and limit the number of people in elevators. It can also provide insights to hotel administrators as to demand by the time-of-day or day-of-the-week, allowing smart decisions to be made in regard to ideal cleaning times and staffing needs.
Jay Stein, CEO of Dream Hotels, has directed his property managers to “supplement the American Hotel and Lodging Association’s Safe Stay guidelines,” and the marketing campaign for his hotels emphasizes sanitation and social distancing with the objective of sharing Dream’s health and safety message.
Stein views technology as part of a continuum finding that, “Robots, AI and other technology will continue to play a large role in the hospitality industry, but this was true even before the pandemic,” citing “contactless check-in, iPads for preordering, and apps that assist in check-in.” Stein does not anticipate new hotel design post-COVID-19; however, amenities may be modified with the addition of “hand sanitizers or perhaps even materials that are easy to clean and wipe off”; however, he does not think guests will start to see meeting rooms with permanent seating that’s built six-feet apart, although Stein does find that hotel design is important to presenting a “luxury hotel experience.”
Are We There Yet?
Post-COVID-19 it is highly unlikely that the economic rationality model for decision-making will return as it is no longer useful in making hotel, travel and tourism choices. The selections on when, where and why to travel may not be completely rational as the traveler will have limited information and unaware of all the possible alternatives.
Having lost trust in government and private sector leaders, sourcing truthful and valid information will consume more time and energy and rather than result in a GO action, will end with a “wait and see” decision. The way the potential leisure or business guests make reservations, interface with travel agents and hotel staffers, order drinks at a bar or restaurant, or swim in the pool – all actions and interactions will morph into something new. The changes are not voluntary or arbitrary, they are being mandated by government agencies, health-care experts and industry leadership.
At the beginning of the crises many organizations stopped their marketing efforts and limited their internal and external communications creating the need for new messages and methods designed to address the new reality.
Slowly the communiqué channels are reopening, but with a great deal of caution. Every step along the pathway, from the research and reservation process through the check-in/out experience is being reevaluated.
As Marshall McLuhan found, “The medium is the message.” What is said, how it is communicated, and the channels selected – all require assessment and will be critical if the objective is to re-establish connections with target markets. Some hotels with loyal guests will find messaging with a focus on health and safety resonating with these travelers. For other hotels, they will have to re-invent themselves as markets have changed due to income, employment, family size and residence circumstances. The family that looked to a property/destination in order to spend more time together may, in fact, want a holiday where distance is at the top of their priority list. What will emerge will be a New Traveler and the demographics and psychographics of this guest are yet to be defined.
Every local, national and international market/destination will be unique, based on rules, laws and regulations determined by governments in cooperation with health-care experts. Hotel managers will have to devise their own new strategies based on these requirements. Meetings and incentive programs, once the sweet-spot for hotel revenue generation may return – but slowly. Sales teams will have to thoroughly review their source markets and consider ways to pivot to new consumers and/or new products and services to meet changing wants and needs.
Build a Better Model
It may be the right time to burn the old organizational chart and rethink the entire managerial process with the thought to streamlining personnel in light of layoffs, retirements, new consumer profiles and innovative technology that will influence many hotel changes, from destination and hotel promotion information, to reservations, shopping, dining, entertainment, professional and social interactions.
We are living in a time of risk and uncertainty, but eager to find ways and means to bring confidence back to leisure and business travel. The hotel, travel and tourism industries are evolving, transitioning into a new business model. The industry has successfully adapted through the millennium, and to quote Fred Rogers (Mr. Rogers), “Often when you think you’re at the end of something, you’re at the beginning of something else.”
© Dr. Elinor Garely. This copyright article, including photos, may not be reproduced without written permission from the author.