Some Realizations – from the desk of a revenue specialist

I have been working in the hospitality industry for 17 years now and I have been directly involved in sales, marketing and revenue/commercial management for the last 10 of these years and never have I or will I see something like COVID-19 again, this global pandemic has brought the world to its knees and more so the hospitality and tourism industry.

Since the 16th of March we have been reeling from cancellations, hotel closures and uncertainty, there have been so many different articles, suggestions and even checklists all over the various news platforms and social media, non of them offering a guaranteed solution or even path.

It has now been 5 weeks of lock down and nearly one entire month of hotel closures in South Africa, reality is kicking in and the noise is slowly reducing, this finally allowed me to sit down and just look at everything that has happened.

As revenue managers and hoteliers we have all realized by now that there will never again be a normal in the hotel sector, in any department, in any country. As this realization is setting in the revenue managers and commercial managers would need to come to terms with a few fundamental realizations, these being,

Capacity & Inventory will decrease – this will happen in two stages, the number of rooms in your current market may decrease as some hotels will not reopen its doors after this. This means that the number of competitor hotels trying to gain market share during this low demand period would decrease resulting in a higher chance of conversion for hotels that has survived this. Some hotels will close or be converted to another use buildings or just simply remain close for a longer period of time, all having a direct impact on the capacity and inventory of the market.

Secondly, the capacity of external industries that support the tourism industry may decrease, once again due to closures. Airlines will scrap older planes, be slow to bring back the grounded fleets and may even reject any new planes they have on order. Smaller corporate businesses that used to do the odd international or domestic travel may close down leaving a rather large gap in the hotel occupancies. Businesses that have adopted a work from home on video call strategy may remain doing this which means the amount of corporate travel, even when permitted would be reduced as a drastic cost saving initiative.

Closer to Home will define the new leisure travel landscape – travel by means of your own car would become the new safest way to take a getaway, this would mean that there could be an increased demand for destinations in and around major cities. This could be good for the economy and hotel revenues but may pose a risk of overcrowding and exceeding government stipulated rules. Even if we do see this demand hotels would still have to remain at reduced capacities in order to ensure that all the health and safety regulations are met. A combination of having less rooms to sell at lower prices is going to put added pressure on most hotels as achieved occupancy is often what drives the profitability of the business.

Health & Safety will be front and center stage – post COVID-19 will see many changes to the health and safety across the entire tourism industry with the airline industry being on of the most hard hit – remember airlines bring us hotel guests so this is not good! Hotels also face the same problem and potential opportunity, hotels will be forced to adhere to very strict cleanliness programmes and if done right could be used for potential marketing however without a set date of reopening or regulations around opening any campaign would be nothing but a waste of money as it may run out of steam before consumers can travel again. As most guest review sites have the primary service rating cleanliness as a review score much more importance would be placed onto this, who know we may even see a new guest review criteria develop.

Pricing will never be the same againmany regular travellers would have been directly impacted as a result of COVID-19, some may have had to take salary reductions and some may even have lost their jobs. As a result many consumers would be expecting lower prices in the market, it would be seen as fair from a consumer point of view. Luckily leisure travellers have shown that nothing beats a great deal time and time again however for hotels it means that an increased occupancy would need to be achieved for it to make financial sense. Consumer spending is going to be fragile and all prices are going to be deeply researched in order to get the best deals around, travel will happen but it would be up to the hotel if the lower occupancies at a reduced rate would make commercial sense.

Some travel may never returnwe all have to come to the realization that every segment in the hotels business mix has been affected as a result of COVID-19 and we need to make terms with the fact that some traditional travel may not return very soon, if ever. Domestic and International group travel numbers will be forced to be reduced, conference, meetings and events will never be the same again with social distancing becoming the new norm. Any large chunks of business will now become much harder to get and filling a hotel with individual leisure or business travelers becomes a lot more difficult if there is not base business to assist.

Trust may become the most important element before bookingas the restrictions are lifted and domestic and international travel opens again consumer trust would need to be redeveloped. Many consumers would be scared to travel or stay in hotels, even at a great price. Hotels would need to focus on ensuring that any actions taken to ensure a safe environment needs to be top of mind when marketing the hotel as this could become the new determine factor when trying to convert lookers into bookers.

Affiliate partner marketing spend will slow downwith the demand at an all-time low and many hotels closed the third party affiliates that normally spend on SEO for your hotel would reduce this spend drastically. This means that any third party marketing that was in place is now no longer there and will have a direct impact on the ability to be found when potential travelers are looking to book. This could allow for an opportunity to start driving direct traffic via search engines however this is based purely on the marketing spend that can now be allocated to online marketing.

Will hospitality education ever be the samemany people that study hotel management or tourism require operational internships in order to graduate and now with the low demand and high cost cutting initiatives in place would internships be considered, we may see a spike in the demand for interns as its semi-skilled labor at a low price however only time will tell as to when hotels can be fully operational again.

I agree that there normal will never be what it used to be but now is the time to start working on our new normal and to except it and adapt the way we do things.

Stay Home, Stay Safe – we will travel again

Derek Martin

CEO & Founder TrevPAR World