By Larry Mogelonsky, MBA, P. Eng. (www.hotelmogel.com)
By now, we’re all well aware of the dire state of
Covid-related affairs still facing many tourism and hospitality operators
around the world. Specifically for hotels, some of experienced victories by
feeding the summer staycation crowds while others have yet to open or are
operating on barebones staff. We all yearn for the pre-pandemic golden years of
travel, but through what is termed as the ‘next normal’ in lieu of the more
binary ‘new normal’, it will take several consecutive cycles of turbulence for
us to regain some semblance of normalcy.
Back in March 2020 and amidst all the lockdowns and
furloughs, pure optimism was the name of the game as I applied a sagacious
quote from Winston Churchill, “Now this is not the end. It is not even the
beginning of the end. But it is, perhaps, the end of the beginning.” Fast
forward almost six months and the tarmac provided by government stimulus
packages are drying up, yet the number of total travelers has hardly reset to
its 2019 level. Staying optimistic is no longer good enough.
The first post-pandemic next normal we are currently in has
brought about some calamitous prognostications for the hotel industry for the
next year ahead highlighting just how stormy the waters will get. As an
example, in early July 2020, Chip Rogers, president and CEO of AHLA said that
as many of 8,000 hotels might close without the proper support from the US
government.
Should we be concerned? Is this the beginning of the end of
our industry? Or, is this simply more akin to a herd of buffalo struggling
through a rough winter and culling the old, weak or infirm?
Let’s do a bit of math to dissect the impact of a loss of
that many hotels on the US economy. According to a quick Google inquiry, the
country currently has around 54,000 properties in total, so removing 8,000 from
this body represents a decrease of roughly 15% of the total available rooms.
With 60% of US hotels either flagged or branded (according to a research
editorial by Hotel
News Now from April 2019), this can also lead to a tremendous revenue
loss for the major chains.
I say that this is bittersweet as per the title because the
remaining 85% stand to benefit at the expense of those who end up crushed by
the pandemic. If these closures are evenly distributed, macro-market RevPAR
figures will grow due to the fewer guestrooms to divide by, thus implying an
industry recovery and perhaps even allowing some hotels to experience increased
occupancy and ADR as a direct result of the reduced supply.
Demand, though, is a whole other story as it is heavily
influenced not only by one’s ability to visit a destination unencumbered by
viral safety measures but also gross confidence in the stock market.
While an 85% survival rate may be somewhat bearable in the
short run for the total economy that incorporates all other sectors, this says
nothing about the number of people – frontline staffers and managers – who will
be put out of work permanently by all these closures. Then add to this all the
employees still furloughed or on a part-time salary due to lowered travel
volume and new technology implementations which render certain duties
redundant. With travel and tourism encompassing every tenth job, this is a huge
number of people left struggling and not spending.
In a consumerist world, the stock market is ultimately
buoyed by people consuming, so any large-scale contraction in the workforce
still inevitably trickle up as a market correction. This in turn could lead to
a stagnation in both local demand and the total number of travelers from all
segments as everyone looks to cut expenses due to the fears of another global
recession.
What does this mean to you (primarily as an owner, general
manager or regional director)? Thinking glass half full, this chain of effects
should lead to opportunities to add revitalized hotel products into the market,
taking advantage of our current technological innovations to simultaneously
improve margins. An infusion of better products will lead to higher levels of
guest loyalty and an improved industry over the next five years.
Regardless of whether you are in the 85% or the 15%, now is
the time to focus on the future of your property. Just because you may think
you are in the latter camp is no reason to throw in the towel just yet. Rather
than fall into a rut of strictly minimizing costs, cutting both staff and
expenses, or looking at how to liquidate all remaining assets, use this period
to plan a reset that is cognizant of all the global market forces at play.
Who can your property appeal to? Are there opportunities to
relaunch your product with a different USP? To discern the answers to these
questions, start by taking full advantage of your CRM to reap business from the
low hanging fruit – targeting past customers with personalized loyalty
incentives. Use electronic marketing techniques to fine tune how you motivate
the guests that are out there, and then develop a plan to funnel them from the
OTAs and meta-search into direct bookings.
While I trust that you have already done your due diligence
in updating your property or brand to include the perquisite contactless and
physical distancing measures, the next normal will be about discovering the new
niche for your hotel, all the while remembering that any victory may be part of
a grander zero-sum game. Proceed cautiously as we’ve yet to see what the
hospitality landscape will truly look like once restrictions are fully lifted
and the scare of foreclosures has passed.
About Larry Mogelsonsky
Larry Mogelonsky
One of the world’s most published writers in hospitality, Larry Mogelonsky
is the principal of Hotel
Mogel Consulting Limited, a Toronto-based consulting practice. His
experience encompasses hotel properties around the world, both branded and
independent, and ranging from luxury and boutique to select-service. Larry is
also on several boards for companies focused on hotel technology. His work
includes five books “Are You an Ostrich or a Llama?” (2012), “Llamas Rule”
(2013), “Hotel Llama” (2015), “The Llama is Inn” (2017) and “The Hotel Mogel”
(2018). You can reach Larry at larry@hotelmogel.com to discuss hotel business
challenges or to book speaking engagements.
Media Contact:
Larry
Mogelonsky
Email: larry@hotelmogel.com
Website: http://hotelmogel.com/
0 Comments
Hate messages, hate speech, and any form of bullying and racism is not our cup of tea but the healthy discussion is. So, beware of such habits! Thanks for your comments. Comments with respect!