In just a few short months the hospitality industry has gone from all-time highs to soul-crushing lows. Since March, much of our workforce has been laid off, demand has temporarily run dry, and fundamental assumptions about our industry have been altered forever. While we’re beginning to see early signs of life, the recovery may progress more slowly than initially anticipated.
And yet there’s an upside. They say nothing creates opportunity like a crisis and that the toughest lessons are also the most memorable. If true, now’s a pretty good time to be excited about the future of the hotel business.
Here are 10 lessons we’ve learned during the current crisis:
1. Our people are resilient. No industry has been hit harder by COVID-19 than hospitality. And yet our people have come together for the greater good. Hoteliers are housing healthcare workers and first responders, establishing employee relief funds, and donating food and meals to food banks, nonprofits, and impacted team members.
2. Hoteliers are in the real estate business. It’s never been more evident that the hospitality industry is driven by real estate. The primary factor in a hotel’s ability to stay open throughout the crisis is its capability to help their owners meet their debt service. Johnathan Capps, vice president of revenue for Charlestowne Hotels, states that “forecasts have been a top priority” as their owners work with equity partners to maintain a strong cash position, retain staff and reopen hotels as quickly as possible.
3. The relationship between hotel owners and hotel managers is changing. In the past, relationships between owners and managers were at times fraught with tension. Shalina Daswani, corporate director of revenue strategy for MAKEREADY, states that this has changed, with asset management relationships “becoming a partnership with more frequent calls to touch base and collaborate regarding trends or indicators they may be seeing across a larger portfolio of hotels.” Managers and owners alike are realizing there is value in increasing transparency and working together from a shared set of data. A few management companies have even leveraged their business intelligence tools to provide automated daily reports with commentary for their owners.
4. It’s easy to confuse tailwinds for success. Over the past decade hoteliers have been able to rely on strong demand to fill their funnels. Sales managers have forgotten how to hunt, hotels have relied primarily on pricing tactics to yield demand, and low conversion rates have been ignored. Demand has dried up nearly overnight, and hoteliers are recognizing the reality that their success over the past few years can be attributed more to a healthy global economy than the efficacy of their tactics.
5. We are not currently well equipped to create demand. In better times, we were able to rely on our efforts to harvest existing demand through pricing and availability controls. For the foreseeable future generating occupancy will be a zero-sum game, meaning we will need to steal guests from competitive hotels or markets to improve operating results. This will require us to think much differently about our commercial strategy efforts.
6. Effective revenue management requires close collaboration between man and machine. For years, hoteliers have leveraged tools that rely on existing demand to optimize their results. While a revenue management system (RMS) can help hotel management teams monitor trends more closely and adjust their rates based on market dynamics, most require history to repeat itself, or at least rhyme, to produce accurate decisions. Kyle Workman, director of revenue for CPG Hotel Group, feels that they are “starting from zero with data collection” and will have to “teach their systems about the new climate, which will take a while.” This has “led to much more time spent on manual overrides and setting rates” to ensure they remain competitive.
7. Internal data is more relevant than benchmarking data. Hoteliers have long used external benchmarking tools to review performance and formulate strategies based on prior results. However, with many hotels closing temporarily or implementing policies that limit the number of guests they can serve, the relevance of these tools has been called into question. Kyle McKinnon, revenue manager for Yukon Hotel Group, states that while “external data is valuable in setting a performance benchmark, internal data is more heavily relied on in the current environment. As the pandemic is felt at different intensities between regions, and as market competitors temporarily suspend operations, external data’s relevance and reliability is questionable.” By “focusing on internal data such as recent booking trends,” he mentions, “hoteliers can be more agile in the current environment.” It’s important that hoteliers adopt tools that will allow them to track booking trends across multiple dimensions—market segments, channels, companies, and geographic regions—in real time.
8. Legacy metrics need to evolve. Hoteliers have long relied on net pickup reporting as the best indicator of strategic results. This often prevents them from understanding variances in wash and booking patterns across segments, channels and geographic origins. Additionally, “looking at search vs. booking pace,” can be helpful, says Capps. Charlestowne has witnessed strong web traffic from those “daydreaming and window shopping” who have little intent or ability to book. Geographic origin data is also increasing in importance, says Workman, who is using this information to “look for patterns and target similar guests with specialized promotions and digital marketing.” Given the need to be judicious with marketing spend, Daswani echoes the importance of leveraging your geographic data to deploy more targeted campaigns.
9. Differentiation is key. At the start of this crisis, email inboxes became cluttered with an overwhelming number of updates regarding COVID-19 precautions. I received well over 100 updates from hotels, and yet I’d be hard pressed to recall the names of said hotels or the steps they are taking to ensure the safety of their guests. Likewise, hotels are currently gearing up for an onslaught of local marketing messages in an attempt to convince those in drivetime markets that they represent a safer alternative than traveling farther afield. In order to stand out they will need to come up with differentiated, memorable messages tailored to relevant customer segments.
10. Whether we like it or not, we’re in an all-out war for the future of the hospitality industry. The hospitality industry has existed for thousands of years and is not going away. However, the traditional hotel model is ripe for disruption whether hoteliers want to believe it. Airbnb and emerging competitors such as Sonder are doing an excellent job of appealing directly to travelers and have used the current crisis to fire shots across the bow of the hotel industry in an appeal to customers and asset owners alike. Hoteliers must prepare for a competitive onslaught or risk obsolescence. The taxi industry was fine until it wasn’t. Blockbuster was fine until it went bankrupt. Let’s make sure the traditional hotel model isn’t next.
The current crisis is an excellent opportunity to harness the lessons we’ve learned and adopt an improved approach. By doing so, we can ensure that we leverage the current crisis as a springboard for growth rather than an impediment to success.