From having to practice social distancing and wearing masks to watching just about every type of business struggle to survive, this virus has turned into something none of us expected. Over the past three months travel has come to a virtual standstill, but as the month of May comes to a close, we’re beginning to see some light at the end of the tunnel. “The trend of ‘less bad’ data continued with occupancy and ADR on a slow climb driven by a fifth consecutive week-to-week increase in demand,” said Jan Freitag, STR’s Senior VP of Lodging Insights. Year-over-year declines continue to remain significant, but we feel the market will improve dramatically this summer after this promising Memorial Day Weekend for some. It is amazing that despite the California Governor Newsom’s call for no leisure travel, some hotels filled up.

 

Protocols

By now, hotels have developed and enhanced their hygiene practices and sanitation protocols. We are still waiting on uniform industry standards from Marriott, Hilton, IHG, and other large brands, but are working with state and national health guidelines so that all guests and staff recognize that health and safety is everyone’s top priority. Until those industry standards are more firmly established, transparency is critical. This means displaying and communicating changes in policies so that guests are cognizant of current requirements (face masks in public areas, limiting 1 guest per elevator ride, etc.) and staff is properly trained (wearing disposable gloves, using correct disinfectants and truly sanitizing every area of the hotel and guest room).

 

Marketing

As hotel market dynamics change rapidly, it is important to constantly reassess campaigns, creative, and even guidelines. The one constant assumption to have in this situation is that things will change. What our team decided two weeks ago isn’t necessarily appropriate today. Brand and image protection are more important than ever as it will have long-term implications for how our properties are perceived both by guests and by staff. Group business will have to be sold based on much more scientific protocols like diagramming software that optimizes capacity based on all new formulas. Sales calls will require more comprehensive data gathering followed by more “Zoom-style” calls, 3D virtual tour experiences that will replace onsite walkthroughs this year and a much more creative approach to getting in the door so to speak.

 

Operations

While maintaining the safety of staff and guests, now is the time for operators to assess employee retention, PPP forgiveness and operational policies to mitigate COVID-19’s impact and position ourselves for a strong return. We need to analyze our availability of cash via liquidity management strategies, such as optimizing one-time revenue opportunities, realigning and reducing costs, employing working capital crisis management techniques and deferring capital expenditures. Property improvements that require a capital expenditure might actually be more productive now with lower occupancy levels—it’s all about cash management. Strategies should reflect our commitment to the guest experience while emphasizing the importance of booking as many rooms as possible at any given time to increase profitability. Spacing out check-outs and check-ins is a great idea now but down the road, it must be balanced with reality.

 

Market Segments

Historical analysis indicates that leisure travel comes back quickly based on a combination of pent-up demand, targeted drive-to markets and rate discounting, while group travel takes longer to rebound. Rate discounting could lead to longer-term issues with average daily rates so it is critical to carefully think through revenue management and channel strategies. While group travel will take until this fall, now is the time to be selling and business travel will require immediate attention in June to pounce on the return of that market segment.

Room revenue has always been paramount due to profit margins but we must remember that ADR will be tougher this year and selling services that have both a reasonable margin and provide competitive differentiation might be worthwhile. This means selling food and beverage like never before and seeking other revenue streams. Resort fees are hated but value-added services that are not required are not hated. Think about some partnerships that could drive revenue—remember, vendors are not our enemies!

 

Final Thoughts

Once travel resumes, the combination of pent-up travel demand and federal aid will help fuel the recovery as we move into the latter part of this year. After reacting and recovering, attention will turn to how to grow. Strategic options will exist that were not available before, and operators should start thinking about: (1) Where will opportunities arise as a result of the changing environment? (2) How can we prepare ourselves to take advantage of any opportunities that arise?(3) How can we build resiliency into our operations to protect against similar future shocks and the resulting disruption? Maybe we can take back market share from Airbnb with superior sanitation and safety protocols and increase our percentage of direct bookings to reduce OTA commissions.

As we all collectively grapple with what this global pandemic means for us — as humans first, but also as professionals — there are often more questions than answers. For most of us, daily life does not look the same these days. Living in times of uncertainty can be overwhelming, so we cannot forget to foster our personal wellness. Limit the news, take advantage of stress management techniques and stay in touch with friends and family. To navigating this new normal safely and successfully and remember Shakespeare’s famous words, “the world is your oyster!”

 

By Sarah Andersen and Robert Rauch

 

Note: Sarah and I will be taking a short break from these timely articles. We hope you find the content here at www.hotelguru.com to be compelling, clear and concise and having enough range of content to find almost any hotel industry subject covered.