Another day another lockdown announced, another batch of new cancellations, another day and the revenue pace of most of the hotels in Europe is dropping.
NB: This is an article from Catala Consulting
This has been our day to day for the last weeks. Everyone is starting to feel directly or indirectly the impact of the coronavirus and the business consequences. While everyone is fighting to capture the demand in the market, some are actually fighting to survive and ensure the cash flow of their operations in the next weeks.
Unfortunately, we don’t have any miracle solutions to this crisis, however we have a few tactics and recommendations that you can implement today to mitigate the impact in your hotel.
Revenue Management Tactics and Recommendations
Not The Time To Panic. Safety First
The most important is the health and safety of your hotel staff, guests, family and friends. Everyone has a responsibility to take in this challenging time. Make sure to follow the guidelines shared by your government and the WHO to help prevent the spread of COVID-19 and other seasonal viruses. Everyones’ efforts are critical to helping us get back to normal as fast as possible.
Easier said than done but now is not the time to panic. You as a leader need to lead by example and panicking will not help you think clearly in the next weeks. So, breath, take a step back, analyse the situation and take the rational decisions to maintain your business afloat and ensure the health and safety of everyone around you.
Negativity tends to snowball, derail people and cascade into catastrophizing. Focus on what you can control and forget the rest for the moment. You as a leader set the tone and everyone is actually watching you, today more than ever. Remain calm. Be realistic about the situation but keep the panic for yourself.
Dropping The Rates Will Not Necessarily Increase Your Demand
The first big temptation in this time of crisis is to heavily drop the rate and expect the demand to increase. While this can have a short-term positive impact, this will very quickly lead to a “race to the bottom” in your market where everyone starts dropping their rates. A situation we want to avoid as this will have even more negative economic impact in the medium/long term, and hotels will have difficulties to re-increase their rates post crisis.
Moreover, think about your hotel positioning in the market. Does it still make sense to sell your 4-stars hotel for £50 a night at the same price than the 2 or 3-stars hotels? Which impact this will have on your brand? Are you sure you are going to attract the right clientele to your hotel? Therefore, we recommend to stick to your usual price positioning.
Having said that, there are still a few options that you could consider to catch some demand without dropping your rates:
- Stay 3 Pay 2 options (no discount in the front end but more attractive)
- Include free breakfast (or any added value to increase your offer without impacting your public pricing)
Empathy And Kindness Always Pay
Nowadays people are looking for flexibility when booking their travels and hotels, and any kind of strict cancellations, deposits or strict terms and conditions are completely a turn off. The future remains so uncertain that people currently don’t want to commit to anything.
A few ideas:
- Offer a “Book Now, Cancel Later” option (this is your best flexible rate but reinforce the messaging in the rate description about the flexibility on dates changes, no prepayment and cancellations at any time)
- Completely remove your “Non-Refundable rates” and be aggressive with your “Flexible Rates”. In a situation like this, the risk is selling non-refundable rates too cheap. Moreover, as mentioned above there is no point of having the non-refundable rates open at this time.
- Communication with your guests is key. Communicate what the measures you have taken to ensure the health and safety of your guests (hand sanitizer, air purifier, follow WHO guidelines, …) as well as ensure them that the team understand the current situation and everyone is there to support them and is flexible with any changes of plan or refund.
- Encourage change of dates rather than full cancellation of the stay. In the last weeks we have seen many transient and group reservations changing their stays to Q3 or Q4, so people are still quite positive about the second part of the year. Even if this was initially booked in non-refundable rate, try to be flexible and offer them to keep the deposit for a future stay in the next 6 months (1 year?).
Being good is always the best option and showing that you care gives you the chance to make your relationships mutually beneficial (be it with your guests, partners, staff but as well with everyone around you). This may indeed cost you in the short term, but your business and relationships can actually be stronger post-crisis.
Focus On Your Domestic Market
This is clearly not the time to cut down on your sales & marketing activities. This just needs to be more targeted. One simple strategy you can implement today in your hotel is to go back to your Google Analytics to identify who has been looking at your website in the last days. Which countries? Which segments? And retarget your digital marketing and sales efforts accordingly.
In most cases, we have seen that the last one to remain has been the domestic market. And the last data from Asia has shown the same trend, with domestic market being the last market to stop and the first one to start travelling post-crisis (already showing some positive signs of recovery in Asia!)
A few ideas:
- Geo-targets your Website SEO, SEM following your Google Analytics analysis
- Start/Send a newsletter to your guests’ database (using your CRM)
- Offer some “Staycation packages” to your domestic market
- Change your hotel name to “Coronavirus free hotel” on all channels to increase your visibility online (no just kidding on the last one this is actually a very bad idea!)
Diversify Your Distribution And Segmentation
Any good portfolio investment manager will tell you: “Don’t put all your eggs in one basket”. And while this should be part of any good revenue strategy (more medium/long term), you have a few tactics that you can start implementing tomorrow. Are there any channels (OTA, Wholesalers) that you have been leaving aside for a while? You may look to reconnect with them as they may have some business for you.
Analyse your data correctly and make sure you are tracking everything correctly. This may be the right time to audit your full revenue management operations. The basic segmentation should be in place in your PMS to be able to track properly:
Market segmentation
- Retail
- Discount
- Wholesale
- Corporate
- Groups
- Complimentary
Channel mix
- OTA
- Website
- Direct
- GDS
A few ideas:
- Analyse your data and see which segments and channels are dropping YoY or which channels are actually still producing? Focus your sales and marketing activities accordingly
- Get in touch with your OTA market managers and see if there is anything you can do in the back end to optimize your visibility (commission increase in back end, opaque packages & offers?)
- Look for any new partners or channels that you could connect with. Even a few bookings could help you increase your revenue in the next few weeks.
- Corporate travels are at the moment close to zero, but Retail and Discount are still bookings (until when?). Adjust your strategy accordingly to the different channels and segments.
Be Creative With Your Revenue Streams
Maybe your room revenue is going to fall short, but did you think about your banqueting or restaurant revenue? New restrictions on restaurants? No problem! Did you think about having a “ghost restaurant” for a few weeks? In difficult times we can also start being creative with our revenue streams.
A few ideas:
- What about opening up your kitchen to online deliveries services such as UberEats, Deliveroo, JustEat, …?
- Banqueting and meetings could still go strong in certain areas. Corporate “crisis meeting” or other small meetings could still happen.
- Focus on the wellness part of your offers: Spa retreat, no internet and a media detox (could be a good one this one).
- Discounted upsell for your existing customers. Maybe it could be to look for ways to increase the average spend per existing guests. If you usually offer an upgrade to a suite for an extra +£100 you could now do it for +£50.
Contingency Plan
When you tried everything and the demand is still not there, then more drastic approaches need to be taken into consideration to ensure the bottom line of your operations.
It all starts with an accurate revenue forecast for the next 3-6 months ahead to understand your top line and look at different ways to cut on costs to mitigate shortfall on the bottom line.
Cashflow is actually key for a lot of businesses around and even if you have to cut costs for a few weeks/months, this is still better than actually closing the doors forever. I know this is a tough call but sometimes necessary to ensure the long-term success of your hotel.
A few steps to consider for a good-quality contingency plan:
- Start with an accurate revenue forecast for the next months. How much are you estimating the downfall? -20%? -40%? -60% versus your targets?
- Depending on the different scenarios, adjust your costs accordingly:
- Freeze hiring new positions
- Schedule vacations accordingly
- Reduce labor cost
- Reduce operating hours (Spa, Restaurants, room service, …)
- Review and reduce non-essential spend
- Any floor that you can put OOO for a few weeks (reduce utility costs)
- …
Next Steps: Developing Your RM Strategy And Be Ready Post Crisis
After each large crisis, we can expect a rebounce even stronger than before (see baby boom Post-1940), therefore you need to plan and be ready when this time comes. We have unfortunately no idea on how long this will continue but hopefully, we should start seeing some signs of recovery by May/June this year.
