In the aftermath of the COVID-19 outbreak, the global economy is still under shock, as supply chains get disrupted, the development of infrastructure is stalled and travel has only recovered to 40% of pre-COVID levels mostly due to domestic travel and staycations.
NB: This is an article from RateGain
This is what everyone is calling the new normal, the perennial shift to the digital workplace and the end of corporate travel as a lot of experts have predicted. Now, as the fear of the second wave grips, it is expected to remain so for the foreseeable future.
An obvious impact of such disruptions is visible on the sectors that rely on the physical infrastructure, especially the sectors such as hospitality. So, what will be the way forward for the same?
A Paradigm Shift in this ‘Novel’ Scenario
Today, the pandemic has changed a lot of things around us. Some of these changes are welcoming as they promote the adoption of digital services and payments. They also encourage healthy practices such as constant sterilization of in-use public places and other measures to contain the spread. For business, however, some of the recent changes are not so welcoming since they go way beyond social distancing measures. The COVID-19 outbreak has also changed the geopolitical alignments and hence, access to the global markets. We’ve seen a lot of activity in this area over the past few months. The direct implication of this development is a slower recovery for hospitality. Most industry experts have predicted that the industry could take upto 24 months to recover.
Nevertheless, a silver lining can be seen with deepening relationships with other economies. For instance, India opened a gateway for international flights to resume by signing bilateral agreements with the US, France, Germany, and the UK. It came with its riders – such as ‘air bubbles’ to minimize the COVID-19 transmission – but was a good start. Recently, several restrictions have been done away with. It has also opened the doors for inbound travelers from these countries for business, medical, and employment purposes. The international aviation industry has not seen the protocols that are in force right now in a long time. Thus, we can infer that the political and pandemic-led landscape together will change how the industry works.
Going by the growing political confrontations, there is no doubt that the pandemic will transform the business scenario globally. The economic conditions and hunger for evolved data about new demand pockets will lead to a paradigm shift in consumer behavior and data privacy. The socio-economic implications of the outbreak will trigger price-sensitivity for both passengers and businesses. Industry leaders will leverage new-age technologies to make crisis-proof business decisions. Investors will be cautious and may exercise frugality.
Let us try and analyze how these changes will affect the hospitality industry in terms of stability and continued operations.
The focus on unit economics and unit profitability rather than external funding
Businesses would partner with financially stable organizations backed by institutional investors, preferably, profitable. Such companies will continue to invest in R&D and create more value over time for the customers. Since the outbreak, there is a tremendous focus on unit economics and unit-level profitability. These companies will continue to be preferred by investors for future expansion.
The institutional investors have become much more conservative around capital deployment. As a result, companies with high burn rates have had to resort to mass layoffs, cost-cutting, and curtail expansion plans which could impact their capability to service their global accounts. We have not seen its downsides much till now due to fiscal stimulus and monetary easing. But the government will not be able to continue this support. Also, any curbing will expose the companies relying on external funding or those having a high burn rate, to adverse business environments. The nationwide lockdowns and strict travel advisories disrupted general travel patterns. From now on, the travel industry will have to adapt significantly to these changes in order to thrive. The changes can be categorized under the following buckets:
‘Long stays’ will comprise a different market segment. The ability to work remotely and the inner desire to travel will inspire people to go on work vacations. If businesses come up with tailor-made offerings for this segment, it will help them in attracting this audience. Creating compelling packages, driving content-based awareness via marketing tech platforms, and the ability to track similar offerings (across long-stays) by your competition, will go a long way in converting the business from this segment.
Hotels work with a vast ecosystem of technology platforms and some of them are in-house. This has resulted in high-touch servicing models. With more businesses opting for cloud-based solutions and self-serve offerings, low-contact technologies will be the preferred choice for hoteliers. Besides, cloud-based applications also offer the agility to work from multiple locations.
Hotels have been affected by data breaches which end up as an expensive affair. With businesses moving online, hotels will have to invest heavily in guest data platforms that are compliant and secured. Today, the data resides across multiple platforms and point-solutions with duplications on servers that lack network hygiene. This has not served well. Hotels will prefer to work with systems that have a partnership spirit and extensive integration infrastructure.
Integrated platforms will ensure that data leakage is minimized and AI platforms will leverage data to enhance the guest experience. Thus, hotels will look at AI, data security, platform, and integrations as must-haves in the times to come.
Hotels will have to re-evaluate traditional sources of business and work on gap analysis to identify new sources of business. Earlier hotels in big cities used to be busy during weekdays and lean on weekends. Against the new landscape of remote working, people prefer to check into hotels over the weekend now. This is how new segments are appearing owing to the current disruptions.
Hotels will have to resort to the following to tap into this dynamic landscape:
- Business Intelligence: Identify new demand patterns and monitor competition offerings through business intelligence platforms.
- Data-driven Social Media Marketing: Educate the new target segment on new or hyper-customized packages through social media marketing and technology.
- Convergence of Revenue Management and Marketing Functions: Increase the lead generation and conversion through social and search campaigns. So far, such initiatives were carried out in silos but now revenue management and marketing functions will converge and work in tandem. It will be critical in understanding the current and future customer demand. Businesses will need to not look at the rear-view mirror but use telescopic vision to chart out the demand. New demand indicators like ‘looks vs. book’, ‘availability’, and ‘price bands’ will be a better signal to track than traditional occupancy patterns.
- Distribution Strategy: Hotels will have to revisit their distribution strategy. There will be a tectonic shift in pre-COVID demand sources as compared to the post-COVID ones. Hoteliers will have to assess new demand potential, contract demand sources with priority, and seamlessly distribute to demand partners. Since hotels may not have access to this kind of information, they will have to make use of smart distribution capabilities to stay ahead.
Traditionally, management trainees or those with an operations background might’ve been the revenue managers. With new-age affordable computing, an increase in the amount of data, and businesses shifting online, there is a demand for data scientists to rebuild revenue management architecture for a business or a hotel chain. There are plenty of new data sources across marketing, demand, e-commerce, analytics, revenue management, and so forth. So, the ability to use data for the benefit of the enterprise will not be optional anymore.
If you are not able to hire them directly, partner with companies that can let you avail data science capabilities. Besides, have a consultative approach to solving problems, especially the ones that are unique for your hotel or region.
Restructuring of Organizations
With a focus on efficacy and running lean, the roles will entwine, talent will need to be multi-skilled, products will have to be intuitive, and the vendors will have to be consolidated. This will reduce finger-pointing and increase accountability. Technology companies will work very closely to help hotels in making this transition.
Incorporating the above changes and generous use of predictive technologies will mitigate the operational implications that the sector is presently seeing and will set the sector sailing once again into abundance.