With many prognosticators suggesting it will be 2024 or 2025 before the hospitality industry has fully “recovered,” it might be tempting to keep the purse strings tight and bide your time. But, the hoteliers looking to position their properties as leaders in their markets are preparing now.
While some may sit back and wait for things to “return to normal,” others understand that the landscape has shifted and hospitality may never look the same. To set themselves up for success in this new normal, owners and operators must adapt their strategies to meet evolving industry trends.
Here are seven trends hoteliers must understand and attack with strategies over the short and long term.
As consumer confidence returns, so will spending, with “revenge shopping” sweeping through sectors as pent-up demand is unleashed. That has been the experience of all previous economic downturns, according to McKinsey. One difference, however, is that services have been particularly hard hit this time. “The bounce back will therefore likely emphasise those businesses, particularly the ones that have a communal element, such as restaurants and entertainment venues,” according to a recent McKinsey report.
While the folks at Reneson Hotels – an owner/operator of seven properties throughout California – do recognise pent-up demand among travellers, it’s not materialising yet. “We’re seeing searches but not bookings,” says Reneson COO Scott Curran. “So, to try and capture demand, we’ve got to make travellers feel comfortable. We’ll let them cancel their reservation all the way up until the day of booking, for example. The days of advance purchase rates are gone.”
Linda Gulrajani, VP of revenue strategy and distribution at Marcus Hotels, says consumers are sitting on big banks of vacation time and don’t want to lose it. Leisure destinations, particularly beach resorts, will see an uptick in travellers who want to get away but still need some space to get some work done because they can’t be out of office for that long, she says.
“Go big or stay home – that's the theme we're seeing with travellers in 2021,” according to survey analysis from Amadeus cited in PhocusWire. A series of Amadeus surveys found that 55% of travellers said, in 2021 and moving forward, they would travel for 14 days or more, and 60% expected to take only a few trips a year. This suggests that if people travel, they may want to go “all out.”
On the flipside, business travel is less discretionary. Companies are curtailing budgets and won’t allow their employees to spend as freely as they did in the past. In 2018, business-travel spending reached $1.4 trillion, which was more than 20% of the total spending in the hospitality and travel sector, according to a McKinsey report. It also brings in a disproportionate share of profits—70% of revenues globally for high-end hotels, for example.
How can hotels make up the difference in business travel revenue with more leisure revenue? “Unfortunately, you just can’t,” says Curran of Reneson. “Business travel was five days a week and leisure was two or three. It’s really difficult to try and make up for five days a week.”
In order to speak to the business travellers that are on the road, Gulrajani says Marcus is dedicated to keeping its hotels full-service even as others cut amenities. Frequent travellers have expectations, she says, such as a full breakfast and access to the VIP lounge. By cutting these offerings, hotels are potentially losing repeat business
For the little demand that is out there today, what plans are hoteliers putting in place to ensure they're capturing it? As travellers get back on the road, how are hoteliers making sure their property is considered?
Reducing rate is not the number one strategy hoteliers are using to win back guests, according to a recent study of hotel operators by Hotel Recovery. After all, we know price is not what is preventing consumers from taking trips today; rather, it's uneasiness over COVID restrictions and the fear of potentially becoming infected. The majority of survey respondents said their plans are to be more flexible with cancellation policies.
“Reducing rate is always the last resort,” says Curran. “Sometimes the market will dictate that as a strategy, but just have a blanket discounting plan, those days are done.”
One strategy that has worked well for Reneson is enticing travellers to extend their trips. “We’ll reach out on their checkout date and offer them a discount to stay an extra day or two,” he says. “Oftentimes they’ll take us up on it because they don’t have an office to go back to.”
In the Hotel Recovery survey, hoteliers outlined the operational changes they have made aimed at keeping staff and guests safe. Nearly 50% of survey respondents said they have reduced the number of times staff enters the guestroom during stayovers, which translates to less housekeeping. Of course, this means more on-property communication with guests when they need something – like more towels, for instance – and many hotels are smartly implementing new communication tools allowing the guest to contact staff through their own devices.
“This is the most important part to getting people back in our hotels – providing an environment that looks and feels safe,” Curran says. For example, he pointed to Hilton’s new standard procedure of providing a sticker that is applied to the opening of each guestroom door once it has been cleaned. “People love that sticker,” he says. “They feel really good knowing no one has been in their room since the last time it was cleaned.”
Marcus’s Gulrajani cautioned that mask enforcement will become increasingly tough once more people have either contracted COVID and built antibodies or have been vaccinated. “They’re going to have a sense of confidence that they can’t get the virus,” she says.
Using past-stay experience and individual preferences to tailor a guest’s stay was building momentum before COVID, but in an environment where hotels are fighting over each and every guest, it will be implemented to a greater degree in attempts to provide that unique experience.
“Hotels must outmanoeuvre competitors with better loyalty and perfect perks for your best customers,” according to a recent PhocusWire report. “By catering to individual preferences, you'll maintain competitiveness – vital when cut-throat rates erode guest loyalty as hotels scramble for market share in the early part of recovery.”
Curran says building loyalty is one of the most important things a hotel can do. “It’s so much easier to keep a guest than find a new one,” he says. “Once guests become loyal to your hotel, they don’t even look at the rate anymore, they just know they had a good experience and they’ll consider your hotel home.”
Gulrajani cautioned that using technology to tailor experiences can actually have the opposite effect – it can take away from the personal interactions that many guests value. “Sometimes, even if the guest gets an upgrade, you don’t get the opportunity to tell them personally,” she says. “You lose that ability to personally ‘wow’ the guest.”
Hotels have an opportunity to redefine the business travel segment to include a new type of business traveller: the remote worker, or locals that can work away from the office either part-time or full-time, according to a PhocusWire report. To best serve the remote worker segment, hotels must reposition themselves as “collaborative hotels,” the report says.
Three months in, Gulrajani says Marcus’s “work from hotel” promotions that offered people a quiet guestroom to escape their home office resulted in limited bookings. However, the company’s grassroots marketing efforts around bringing in local businesses and offering them meeting space to hold small gatherings have worked better. “For budget planning meetings or small board meetings, our hotels can be a great place to meet,” she says. “At least it allows the teams to see each other in person.”
Using last year’s data to benchmark today’s performance doesn’t make much sense, hoteliers agree. Instead, analysts must look at short-term trends, comparing performance to last month or even last week.
And forward-looking data is even more critical, according to Gulrajani. “We can use it to really understand what’s happening in our compset by segment and by channel,” she says. “We’re not really chasing our compset but we’re making more strategic adjustments. For example, we can see if a hotel is not getting their fair share from a particular segment and then open that up for a longer-term conversation.”
Curran says hotels must be incredibly flexible when analysing data today. “You have to adjust on the fly and truly understand the data you’re pulling out,” he says. “There are a lot of people who don’t understand what they’re looking at.”
As we gradually move into recovery, there are evidently a number of trends that hoteliers are to be mindful of in an attempt to return to pre-COVID levels of revenue. One trend at the forefront of the push for recovery in 2021 is the use of forward-looking data. As conditions begin to shift, a predictive data solution will be the fundamental tool in your arsenal to correctly forecast the return of demand, giving you the edge in what will no doubt be a highly competitive market.