The state of the global hospitality industry following
COVID-19 and what hoteliers can do now
In our recent webinar about what hoteliers should and shouldn’t do during the coronavirus outbreak, we shared some of the latest updates on hotel markets around the world in light of COVID-19 and answered the burning questions hoteliers have about what to do in these uncertain times.
Alexander Edström, CEO of Atomize, as well as Johan Johander, founder and managing director of Benchmarking Alliance, Robin Rossmann, managing director of STR and Angelika Sharma, senior solutions consultant at OTA Insight, shared their advice for hoteliers in this challenging situation.
Read on for a summary of the main talking points as well as our experts’ answers to the most common questions from hoteliers in relation to COVID-19.
The global impact of COVID-19 on the hospitality industry
To start us off, Robin Rossmann of STR shared the latest data revealing the impact of COVID-19 on the hotel industry.
According to STR, over 40% of hotels in China are closed temporarily. Similar or more severe closures are expected or already enforced in other countries such as Italy and Spain which have also been hit hard by the crisis. Around the world, hotels are seeing a staggering drop in average occupancy. When and how hard individual countries will be impacted strongly depends on how the spread of COVID-19 is managed locally, how much business vs. leisure travel they rely on and if guests are primarily international or domestic.
On a more positive note, first signs of recovery have been seen in China as the number of new cases has been steadily dropping.
Due to the ongoing spread of COVID-19 and the resulting lockdowns bringing many industries to a standstill, economists now expect a global recession, the length and depth of which will depend on the virus and government intervention. Given all this, the main question hospitality industry professionals are asking, is whether this will have long-term effects on travel behavior in both the leisure and business segment and how long it will take for the hospitality industry and the economy as a whole to recover.
A close look at the Nordic and Baltic hotel markets in times of COVID-19
After a quick introduction to the Nordic and Baltic hotel markets, Johan Johander of Benchmarking Alliance shared details of the region’s development over the past five years and COVID-19’s drastic impact on it.
Benchmarking Alliance’s data shows that across the board, Nordic and Baltic capitals have experienced an average occupancy drop of 36% to 52% between March 1 and 20, 2020 due to travel restrictions and other safety measures.
Compared to the global financial crisis, the drop is more severe as the impact has been more drastic in a much shorter time.
Numbers recorded by Atomize echo this. A graph shared by Alexander shows that across the entire Atomize portfolio of hotels, occupancy has gone down to an average of 16%.
Hotel market and customer reactions to COVID-19 so far
Angelika Sharma from OTA Insight then shared snapshots of how eight markets across four regions have reacted to the crisis and gave two concrete examples of customer responses.
The market snapshots showed how prevalent rate adjustments were in markets around the world and that in many areas rates were being right-sized to match the lower demand. So far, most regions have only made larger rate changes in April and May, leaving June untouched, in the hope that demand and markets will recover in summer.
When looking at customer reactions, the impact event and trade fair cancellations are having on urban hotel markets becomes apparent. For example, when the Gaming Developers Conference in San Francisco was officially postponed, demand for downtown hotels on and around the event date dropped by 90%.
What hoteliers can do during the COVID-19 outbreak
Alexander went on to share ideas of what hotels can do to cushion the blow the coronavirus crisis is having on their property.
He emphasized that currently, many leisure travelers still have the same purchasing power as before and are simply not able to use it due to travel restrictions. This means sights should be set on the future, i.e. the second half of the year, when this crisis will hopefully have passed, and people will be taking the leave they accumulated during this time. Due to the degree of uncertainty, hotels will have to be more flexible than usual when planning, strategizing and budgeting.
In regions where hotels are not forced to close but suffer from low occupancy, the key is not to slash rates but rather to right-size them to match the reduced demand and stay in line with the comp set. Creating attractive package rates which focus on added value, staycation offerings for local segments, alternative ways of monetizing F&B outlets via take-away and delivery, offering paid parking to the public or having creative day-use offerings can raise much-needed cash at this time and attract guests post-crisis. Also, promoting relevant offers now, such as airport transfers in sanitized cars, show hotels react to the situation and want to make their guests feel comfortable even in this difficult time.
For hotels facing cancellations due to travel restrictions or mandatory closure, offering vouchers or attractive rebooking options instead of cancellations and refunds is a way to keep on-the-books business. When groups cancel, sales must make a note to follow up for re-bookings once business picks up again.
A note both Robin and Alexander stressed was that hoteliers must keep the time after COVID-19 in mind, when business will return, especially in areas where hotels have been forced to close. To be ready for that time, it is imperative to keep up marketing initiatives. This can be on the hotel’s social media accounts, with the help of staff sharing on their own channels or via suitable influencers or media outlets. By finding ways to maintain a public presence and sharing how a property is going through this crisis, both branded and independent hotels can stay at the front of their audience’s mind and get their share of bookings once demand begins to grow again.
Finally, all panelists agreed that hoteliers, whatever their current situation, need to keep a close eye on market data and, if possible, use supportive software to be responsive when markets start to recover.
Common questions from hoteliers on coping with the COVID-19 crisis
Everything in my market is coming to a standstill. How can an automated RMS help me in this situation?
In the initial phase where revenue managers must react to the quickly dropping demand, an RMS can help by reducing the workload by generating accurate forecasts and recommending or in real-time automatically adjust optimized rates.
Once markets start picking up again, your RMS will allow you to offer the right price point and help you get ahead of your competition to take advantage of new revenue and yielding opportunities. This could allow you to make up some lost revenues by capitalizing on even small positive developments in your market.
It’s likely that domestic corporate will be the first segment to recover after travel restrictions ease. The domestic leisure segment booking both via OTAs and direct channels will follow. Looking at how the situation is currently unfolding, international business will take the longest to recover.
Given that both domestic corporate and leisure will recover first, we are expecting OTAs to focus their marketing efforts on these segments for the remainder of 2020. However, considering that the situation is still unfolding and developing differently across various markets, we still need to wait for precise data to be published by OTA partners.
Which segment is likely to recover first?
How are OTAs likely to respond to the crisis?
Today, flexibility with cancellations is key. What is the best practice when it comes to cancellations and will this crisis impact guest expectations in this area in the future?
Industry leaders have set the standard of refunding guests for canceled stays due to force majeure. While this can cause cash flow problems for hotels, especially with no new bookings coming in now, hotels should follow this example as guests currently have no choice but to cancel. Looking forward, being flexible and courteous with guests now will ensure they have a positive experience and will return once travel restrictions ease.
There is a possibility that demand around cancellation policies will change as a result of the current situation. Travelers may have become more appreciative of refundable rates, so hotels will have to keep a close eye on booking behavior in the future to see if and how it shifts. Will cheaper, non-refundable rates still be popular? Will guests be willing to pay more for the security of being able to get their money back if they need to rebook or cancel? For the corporate segment and groups, will there be a demand for revised conditions? As demand recovers, hotels will have to keep these questions in mind and adapt their offering to evolving guest needs.
As of now, it is hard to know how quickly airlines will resume normal operations. For markets especially dependent on air-travel this means added uncertainty. When forecasting and creating long-term strategies, this is something that must be considered.
What should hoteliers focus on while their hotel is shut down or facing extremely low occupancy to keep busy and be ready for when business picks up again?
For one thing, it is crucial to stay informed about what’s happening in your market and globally. Use a business intelligence tool and tap into the data sources available to you to get detailed, current information. If you are interested, you can reach out to OTA Insight’s team on LinkedIn and request information on 40 markets globally which they have made available for free.
Hotels still welcoming guests should focus on making them feel as safe as possible in this situation. Show them you are there for them and take their concerns seriously. The extra time you have now gives you the chance to tackle projects you’ve previously put off. This can include brainstorming creative ideas for post-crisis promotions, cleaning up your system, researching and testing new tech tools, conducting or designing staff training and working on your online presence (including your website, social media, etc.) to be ready to increase traction when business picks up.
My hotel has/will shut down temporarily, but I’m interested in giving new technology a try once we reopen and things pick up again. What do you recommend?
When the market does recover, you want your hotel to respond the fastest compared to your competitors and gain every revenue opportunity possible. Using an automated RMS as well as state-of-the-art business intelligence (BI) tools is the best way to do that.
To support hoteliers, many hospitality SaaS and BI companies are currently offering their services for free or for a reduced rate. We encourage you to reach out to companies you would like to work with and see what they can offer you. For example, at Atomize, we currently offer new customers free use of the RMS until they get back to 50% of their previous average occupancy percentage.
If you have more questions about bringing your hotel safely through these times or want to know how we at Atomize can support you when the market starts to recover, please reach out to us. You can also watch the webinar recording here.
We wish you, your hotel and your team all the best. Stay healthy, safe, and take care of yourself.