Guidance and advice on what you can do to cushion the blow of COVID-19 in your hotel.
The recent spread of COVID-19 has strongly affected travel and tourism and as a consequence the hotel industry. Hotels, airlines, cruise lines and entire destinations are recording record losses in business and revenue.
The unexpected market shifts brought about by the spread of the novel coronavirus have left hoteliers around the world wondering what to do and how to react to the spread of COVID-19 and the impact of necessary safety measures in your hotel. Here are some important points for you to consider, including things to do and not to do in order to take your hotel operations through this challenging time the best way possible.
But first, let’s look at a few recent numbers and facts…
COVID-19’s impact on the hotel industry so far
China reports hotels suffering a 64% decrease in business and a loss of $80 billion over the Spring Festival alone. Currently, thousands of hotels across mainland China’s strongly affected areas are closed while properties in major cities like Shanghai, Beijing and neighbouring countries like Macau and Hong Kong report single-digit occupancy rates.
Europe also saw the first effects as early as January and February. For these two months, roughly two million lost hotel nights were reported and the EU department for Internal Markets estimates a financial loss of roughly €1 billion per month for the European tourism industry as a result of the virus.
The 8th of March, Italy announced a quarantine and travel ban for their northern regions, affecting 16 million people. With more and more countries reporting cases every day and increased travel restrictions to and from designated high-risk areas, it´s likely that the picture will look similar for hotel and tourism markets around the world in the coming weeks.
The fact that large trade shows and events such as the Mobile World Congress, ITB Berlin and many more are being canceled, spreads the impact even to markets which are not labeled as high-risk destinations and creates worry among the general public which results in an increased reluctance to travel among both corporate and leisure travelers.
Learning from past public health emergencies
While the outlook may look bleak in heavily affected areas right now and nobody can foresee how long coronavirus will keep the world on its toes, looking at similar events in the past, such as the spread of SARS, can perhaps offer some hope. Even though SARS is not 100% comparable it’s still similar in the different phases of a pandemic spread and how it impacts the market.
For example, STR reports that after SARS-related travel restrictions eased, the bounce-back period in China and Hong Kong took markets back to pre-SARS levels within three months. This means that six months after the WHO had declared SARS a global threat, hotel markets had all but recovered.
The key thing to keep in mind now, even if it’s difficult with new harrowing headlines appearing every day, is to avoid panicking and to focus on long-term strategies to ensure your hotel doesn’t suffer more than necessary during the current situation and is ready for a variety of possible outcomes. Also, important to remember is that different geographical locations will be affected differently although there is no doubt that big cities will be impacted by the virus and that most hotel markets will need to adapt to this new situation.
Now, let’s look at what you as a hotelier can do at your hotel right now in the light of COVID-19.
Market intelligence, price adjustments and distribution strategies in your hotel during COVID-19
Since you’re probably not the only hotel feeling the impact of COVID-19 in your area, it’s important to keep a close eye on your primary and secondary comp set as well as your market as a whole.
Ask questions like:
- How is my comp set reacting
- Who is changing their rates and by how much?
- Are competitors shifting their distribution strategy in obvious ways?
- Are hotels around me closing (or shutting down a floor or two)?
During this time keep an extra eye on up to date market information as soon as your competition makes any changes. Having access to current data gives you the chance to always stay in line with your market and make informed pricing and distribution decisions based on what is happening around you.
Keep an eye on local news regarding fair and event cancellations, travel restrictions or other relevant updates to help you brace yourself for cancellations from impacted segments, e.g. corporate business from postponed trade shows. A good idea could be to let your sales teams target local companies for meetings and events.
Probably the number of guests staying at your hotel from abroad have decreased. Now is the time to steer your focus towards the local market where you can attract local guests who choose to spend their holiday at home. Create an offering consisting of packages to attract ‘staycations´ and market those packages towards local visitors. Review your digital marketing campaigns and ensure that your local markets are targeted. Now is not the time to pull back on marketing!
Make a detailed breakdown of your current revenue to see how your segments are performing considering recent events, and which ones are hit hardest. Looking closely at this type of data can also help you get ideas on where you may be able to replace some of the business you have lost and give you an idea of which segments will be the first and most profitable to return. Start working on ways to target these areas with the greatest revenue potential so that when the time comes, you are ahead of your competitors and bounce back quickly.
Adjust hotel forecasts and rates to reflect recent developments
While the situation is serious, don’t panic and make snap decisions – we recommend this even though we know it’s much easier said than done, especially with management and owners breathing down your neck and wanting to hear your action plan.
An important first step to take is to count your current losses and re-forecast for the coming weeks and months. This is important since it will impact pricing decisions, staffing, cash flow and other important parts of your business.
As hinted at above, you will also need to update rates. For example, if you’ve lost a big group, how would you normally change your public prices?
The immediate reaction to this drop in the market can be an urge to drop your rates, but this is not something we would recommend you do. Keep in mind that reducing rates, in general, does not stimulate demand — this has been proven repeatedly. In fact lowering your rates will increase the risk to eat up your profit and this will not help the situation since price elasticity is different in this kind of health crisis and may make it difficult to increase rates in the future. Rather than lowering you rates one alternative is to instead close sections or levels of your hotel in order to obtain RevPAR and cut direct costs by running a “smaller hotel”.
Another point to consider is what Sheryl Kimes, a leading researcher and authority on total revenue management quotes in her recent video: lowering rates now will not bring in more customers, but the wrong customers.
She goes on to recommend that some discounts are advised but should be very fenced and targeted to specific market segments. That way you can protect your public rates and your online image. You can also offer bundles such as 3-for-2 or packages including F&B or other services. That way you offer a discount without making it too obvious.
If you have access to technology delivering automated pricing, it can surely help in this situation, since it saves you time and takes more data points into consideration than a human ever could. That way you get quick, accurate forecasts and optimized rates, and can rapidly update your prices as soon as the situation develops further. It reduces the risk of you basing your pricing decisions on gut feeling or panicking when demand and occupancy suddenly drops.
Automatic pricing can also help you gain more revenue opportunities when the market recovers and that can make up for some of the losses caused by the drop in the market. When the market recovers you will be in a position to attract business better than your competition.
From a pure business perspective, in these times, it is important to make data-driven decisions that allow you to make the most out of a bad situation and bounce back faster when things turn around.
Maintain your hotel image during COVID-19
Keeping things positive is important for morale at your property, current and potential future guests. That’s why it’s important to keep distribution channels populated with offers and rates you would normally provide, even as things slow down.
How you handle cancellations is also a big deal. Being courteous and generous will likely go a longer way than charging guests. It’s understandable that you don’t want to lose on-the-books business, especially with a slower pick-up for future dates. But a disgruntled guest will not come back when the scare is over and may even share their bad experience in negative reviews. Remember, thinking long-term here is key!
Also, keep up your marketing efforts but perhaps shift your focus. Focus less on segments that are suffering in this situation (e.g. large corporate groups) and more on your returning loyal customers or other segments that have suffered less in your case.
Finally, on your website, social channels and other guest-facing outlets, show what you are doing to keep things clean and safe for staff and guests. Ensure that every employee has received clear communication on how you are dealing with the virus and make sure that this information is also available to your guests and that both guests and staff are updated on your health and safety guidelines.
Your health and safety guidelines should state:
- That you clean and disinfect all rooms multiple times per day and that your staff use gloves and sanitize and provide all guests with anti-bacterial wash.
- That you ensure you do not have any guests at your hotel from any of the infected areas.
- That you provide honest and up-to-date information and keep guests informed
Having clear and transparent health and safety guidelines now and during the rebound phase, will help to encourage confidence in your property and get guests to come back.
And last but not least…
How to measure your hotel performance during COVID-19
This may sound a bit counterintuitive since losing business because of coronavirus doesn’t feel like great performance but keep in mind that the better you manage the situation, the smaller the negative impact will be on your revenue relative to others in the market. To know if your approach is working, keep an eye on the following metrics rather than looking at absolute revenue, occupancy or profit values, which will no doubt be down:
- RevPAR growth/decline: even in times of crisis, your RevPAR is a reliable indicator of how well you are doing. Trying to maintain your target RevPAR or only reducing it by a small amount will ensure you are keeping up your public image and will make it easier to recover after things go back to normal.
- RevPAR index: this shows you how well you are handling things compared to others in the market. If you come out ahead here, you know you are doing well, relatively speaking.
Despite the situation being out of the ordinary, keep seasonality and other demand patterns in mind for your hotel and the market as well. Seasonal dips are likely to be reinforced by COVID-19, so an increased focus on your existing guests and light adjustments to your strategy will take you further than frantic rate cuts.
We hope these ideas help you better deal with the impact of coronavirus at your hotel.
For more up-to-date information and tips on what to do in these times, Atomize , OTA Insight, STR and Benchmarking Alliance hosted a webinar on Monday the 23rd of March about the impact of COVID-19 on the hotel market.
We gave hoteliers guidance and advice on the current market situation and what hoteliers should and shouldn´t do in relation to the coronavirus impact.
We also have 2 more recorded webinars that will give you more information on the coronavirus affecting the hotel landscape and what you as a hotelier can do to handle the situation.
If you want to know more and discuss how you can optimize your revenue during the coming market recovery, please feel free to contact us >