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The strongest hotels are strategizing for a successful comeback

Elaine Sahlins • 7/29/2020

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The COVID-19 pandemic has been universal, impacting every country across the globe. With little to zero travel happening on a personal or professional level since its inception, hotels have taken a hit like never before. According to STR Inc., Europe is the most impacted region, with the hotel revenue per available room (RevPAR) declining by 59 percent during the first half of 2020. Asia Pacific, while being the first region hit by the outbreak, recorded a less significant decline at 55 percent. The Americas experienced a 46 percent reduction and the Middle East & Africa region saw a 41 percent decline.

As countries undertake various phased measures and approaches to recovery readiness, the hotel industry is poising itself for its own path forward. While the decline was initially drastic and fast across all markets, the pace of recovery will vary significantly from market to market due to various factors: 

  1. hotels app (image)Role of Governments: Significant differences in restrictions on travel imposed by governments and non-coordinated timing of their lifting, as well as meaningful variances in support provided by authorities to travel sector, including hotels. For example, many tourism destinations in Europe, such as Italy and Spain, have quickly lifted restrictions and launched aggressive campaigns to attract visitors for summer holidays, including offers such as paying for 50 percent of flight costs in Sicily. The UK went the opposite direction by launching a 14-day quarantine requirement in June for all inbound tourists - only to be lifted one month later in July.

  2. Macro-Economic Environments: Post-COVID-19 economic slowdowns, recessions and geopolitical tensions are rising at various levels of severity across geographies, with consequential impacts on business and leisure travel. According to Oxford Economics, GDP forecasts for 2020 are ranging from a -42 percent drop in Libya to 30 percent growth in Guyana.

  3. Hotel Supply: Notable differences in hotel supply growth, with several markets facing significant pipeline influx, that in some cases have already been dwarfing the performance of hotels pre-COVID-19. Conversely, there are also markets with very limited supply and these should see stronger performance recovery once the travel restarts.

  4. Travel Ecosystem: Hotels being part of a travel ecosystem including stakeholders such as airlines, tour operators, tourist attractions and events, conventions and meetings venues. The level of impact by COVID-19 on these players and pace of their recovery can also vary from market to market. According to latest publication by ICAO from June 2020, the airline passenger traffic for full year 2020 is expected to decline by 48-62 percent, a significant threat for markets depending on long-haul tourism.

  5. Health & Safety: Variances in perceived sense of safety or risk, as well as threats of repeat outbreaks rising in various geographies such as in South Korea, China and other sub-regions in Asia Pacific, some regions in number of European countries as well as new spikes in several U.S. states such as in California, Texas and Florida

While initially most markets were expecting a quick V-shaped recovery, it is becoming increasingly clear that while it still might be the case for some of them, other markets will face more extended recovery paths of various shapes with hotels likely to be trading in challenging conditions for some time. But the strongest hotels are not checking out. Instead, they are positioning themselves for success in the face of COVID-19 by coming up with their own strategies in the short, medium and long terms.

Surviving in the Short-Term: It’s All About Safety and Cash Management 

From housekeeping to dining, hotels are having to rethink how they approach everything – at least until the fears from the pandemic are mitigated. Guests will expect – and deserve – the utmost attention to health and safety the minute they walk through the hotel doors, which is exactly what hotels are delivering by following the cleanliness guidelines outlined by various organizations around the world, such as the Center for Disease Control and Prevention (CDC), the American Hotel & Lodging Association, and numerous global hotel companies. 

But surviving this crisis goes well beyond merely operating a safe hotel. Hotels also need to stay afloat. To this end, hoteliers are operating hotels with a multi-tasking skeleton crew who are providing reduced service levels and amenities while ensuring flexibility to deal with notable fluctuations of demand (i.e., full on weekends and empty on weekdays) – all with the goal to minimize expenses. 
Some innovative hotels are even diversifying income sources in the short-term by offering delivery services or repurposing underutilized rooms as office space or private dining rooms. Swedish hotel, Stadt, for example, has opened up underutilized rooms as private dining spaces, allowing people to go out to eat while still maintaining social distancing from other diners. Orders can be placed by phone, so diners never have to leave the room. Vienna hotel, Hotel Sacher, is another example of a hotel renting out its hotel suites or rooms for up to three hours for groups to have a meal served by a private butler. And in partnership with lets work, the UAE’s largest network of co-working spaces, Rove Hotels in Dubai recently launched private office rooms offering reliable and fast Wi-Fi; unlimited coffee, tea and water; private bathroom; comfortable bed; and special meals for a fee. 

Some innovative hotels are even offering ‘bonds’ for future travel where you can ‘buy now and travel later’ at a discounted rate. The 452-room hotel London House in Chicago provides a good example of this strategy. The hotel is offering ‘bonds’ that people can buy in $100 increments. After 60 days, those ‘bonds’ will have matured and be worth $150 instead, a quick 50 percent return on investment. When guests are ready to book post-COVID-19, they can cash these ‘bonds’ in on everything from overnight stays to room service to drinks on the hotel’s rooftop bar. 

Transforming in the Medium-Term: Getting Event Smarter about Smart Technology 

In recent years, many hotels had already started implementing smart technology to enhance their guests’ stay, offering efficiency and convenience via high tech solutions. However, with the advent of COVID-19, the need for smart hotels has been further accelerated. Efficiency and convenience are still drivers of change, but smart technology can also play a crucial role in a hotel’s health and safety going forward. According to our recent report, "Looking Beyond COVID-19: Hotels – In for the Extended Stay in China", smart technology solutions such as smart cleaning systems, automated HVAC services and more should be considered by hotels as they plan for the future. 

In addition, smartphone apps, chatbots, roving robots and in-room technology such as voice assistants are playing more and more important roles and are becoming the connector between the guest and hotel. Equipped with cameras, microphones and speakers, roving robots, for instance, will play an important role by being able to answer common multilingual questions about the hotel such as “where is the bathroom?” while alerting humans for support when necessary. 

Mobile check-in and check-out, digital door keys, delivery robots, and online concierge services are already being implemented and should become a standard soon, allowing the guests and hotel to remain contactless while saving time with administrative processes and formal interactions. 

Thriving in the Long-Term: Positioning Hotels for What’s Next 

While COVID-19 has required hotels to make some necessary changes in order to survive this crisis, it’s also challenged hotels to look at their longer-term plans and strategies as they look towards what’s next. Given cash flow difficulties, some hotels are now struggling from a business perspective and may wish to ultimately sell their property asset. Other hotels, also not in the position to reopen, might choose to repurpose their asset instead as a senior health-care facility, student housing or even a co-living concept. An increasing number of hotels in Hong Kong, for instance, are considering converting their properties to co-living spaces as they face ongoing occupancy challenges. Mojo Nomad Aberdeen Harbour in Wong Chuk Hang is one such hotel to have converted to co-living in December 2019, which now consists of 65 rooms and 250 beds. 

Many other hotels, however, may decide not to check out and to instead partner with their hotel operators and new capital infusions to renovate/reposition their property assets to ensure future business growth. These hotels might see this time as an opportunity to not only come out stronger and better positioned for the future with short, medium and long-term plans in place, but to also ‘reset’ by shaking off some of the industry’s legacy constraints. This is a good time to reassess existing protocols and even come up with new uses for hotel space. 

As a result of COVID-19, hotels are operating with reduced services and amenities to ensure safety, but what if hotels don’t really need to offer all these services? Or, even better, what if guests start paying for services, such as housekeeping and laundry, going forward? 

This may become the new normal as daily services such as providing new towels and changing bed sheets may be deemed unnecessary and either not offered or could be offered only after a certain number of nights or at an additional cost. Reducing stayover cleans in a hotel with an average length of stay of two nights will reduce the daily number of rooms for cleaning by 50 percent, which is a big win from a sustainability standpoint. The positive impact of new technology and reduced unnecessary services not only increase operational efficiency, but also have an environmental benefit.

In addition, underutilized hotel space can provide not only a short-term, but also a long-term opportunity for hotels to think outside of the box. Amsterdam based Zoku is a hospitality brand that has rebranded its hotel rooms during this pandemic as day-stay hideaways, responding to the problems of our new – and hopefully temporary – reality. Zoku’s Private WorkLofts provide guests some peace and quiet for a daily fee of 50 euros, which includes room service, high-speed Wi-Fi and office supplies. A great example of establishing a flexible concept in response to an unexpected shift, Zoku is already considering pursuing this model post-crisis.

Hotels should also be thinking beyond the guest room and into the community. Pre-crisis, innovative hotel brands like the ACE and Standard Hotels Group had been catering to a growing desire among local residents to eat, socialize, shop and work out of hotel lobbies. Based on a Skift consumer research report, when asked about items and services survey respondents had used at a hotel as a “non-guest,” more than a third said they had eaten at a hotel restaurant. In addition, another 29 percent said they had used the hotel’s Wi-Fi, a quarter said they had had drinks at a hotel bar, and more than 10 percent had purchased items from a retail store located in the hotel. These hotels are marketing to not just travelers, but to the local community as well.

The hotel industry is used to dealing with changes on a daily basis which drives its resilience and ability to adapt. The breadth of professionals across the globe that are seeking solutions and evolving operational practices is impressive. The current environment is providing a rare opportunity for implementing new technology and service protocols with potential long-term benefits for hospitality practices and financial profitability.

Hotels aren’t checking out. Instead, many are learning daily to become savvier, smarter, more resilient and more prepared for what’s next.

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