Global Survey: How Hotel Revenue Managers Are Preparing For Recovery
After COVID-19 flipped the hospitality industry on its head, business is picking up again around the world. With the road to recovery taking various approaches and forms in different countries, regions and cities, we wanted to understand how revenue managers believe their markets will develop, how they see their business mix change as well as which pricing and distribution decisions they will be making. To answer these questions, OTA Insight surveyed over 400 revenue management professionals in 50+ countries. We have summarised the results in the article below.
Survey participants by property classification
We invited revenue managers of all property types to join the survey. At 23%, midscale accommodations were most represented. 18% of respondents operate in the luxury segment, followed by 17% in the upscale category and 16% in upper-midscale hotels. Upper-upscale hotels made up 14% of the responses. 8% came from the economy and budget domain.
Key segments and dependence on international travellers
24% of survey participants reported that 41-60% of their guests were international - meaning roughly half their business is being restricted by ongoing international travel bans, even after domestic lockdowns have been lifted.
23% of respondents claim that only 0-20% of their guests come from abroad and another 18% state that between 21% and 40% of their visitors are from overseas. Since these properties rely more on domestic business, they have a better chance of making the most of market recovery, as they are well-established in their respective markets.
On the other side are the 23% of contributors who have 61-80% international guests and 9% who rely almost entirely on inbound travellers. They will likely need to revisit their guest mix and target segments more to ensure their post-COVID success.
When asked which segments had been most important before the crisis, 51% named corporate contracted business, followed by third-party non-restricted business (50%). Direct non-restricted came in third place with 39%. Direct promotional rates and third-party promotional rates played a big role for 28% and 24%.
Performance monitoring during the crisis
Since the COVID-19 crisis is unlike anything the hospitality industry has seen, many hoteliers have found it challenging to measure their performance and predict future demand based on historical data as they typically would.
In these unprecedented times that challenge typical reporting procedures, 73% of respondents still use past data to track recovery, performance and pick-up. Instead of comparing year-on-year data, most revenue managers have switched to week-over-week and month-over-month analyses to determine if and how they are recovering as the situation develops.
When looking ahead and predicting upcoming demand for their markets, 68% of revenue managers check market occupancy first. 64% said they review on-the-books data while 57% examine competitor pricing changes and 44% assess search volume on OTAs and metasearch sites. In comparison, only 29% look at traffic on their hotel website. Upcoming holidays and events play a role for 33% of respondents, while 30% analyse inbound and outbound market statistics.
An increased focus on hygiene and sanitation
Hospitality operators around the world have put an increased focus on sanitation and cleanliness at their properties. While details in newly released hygiene guidelines differ, the key points are the same across brands, and this was reflected in survey responses. 97% said they had set up hand sanitiser stations around their hotels. 93% have spaced tables and chairs in dining venues at least 1.5 metres apart and frequently disinfect public areas. 79% reported changes in room cleaning SOPs and 74% of hotels now distribute face masks.
Apart from keeping guests and staff safe, these initiatives also serve as a way to attract future guests who are now more mindful than ever of how clean their surroundings feel. To make it easier for clean properties to be recognised as such, 92% said hygiene ratings would be beneficial post-COVID-19 and 86% want to invest in a hygiene classification.
Revisiting KPIs post-COVID-19
With global travel demand shifting, reviewing key performance indicators (KPIs) could be necessary for hotels to measure their performance more accurately in this unexpected situation. Yet, only 44% of respondents say they have done so.
The KPIs which most properties have reviewed include markers such as RevPAR, ADR and occupancy as well as profitability and the goals for various market segments. On the operations side, many new KPIs have been created, especially relating to hygiene and compliance with new brand and government regulations.
Pricing strategy and positioning post-COVID-19
Besides rethinking KPIs, pricing strategy and positioning are also an important area to re-evaluate. 57% of revenue managers say they will reconsider which hotels they compare to after COVID-19. The approach to price positioning has also changed. While the majority of 43% already priced their rooms very similarly to the competition before the crisis, this figure has risen to 52% now.
The number of properties setting rates 10% above their competition dropped by almost half: from 15% to 8% - while those pricing 20% above their compset decreased from 6% to 2%. The fact that the strategy is to stay in line with competitors rather than starting a price war can give a glimmer of hope that rates may deteriorate less than expected, since they currently are not a demand driver.
In terms of pricing, 68% of survey participants say they have changed or will change how they use advance purchase rates (APR). Common updates include loosening cancellation and rebooking restrictions, offering better conditions for direct bookers and extending the advance booking window. Lesser mentioned were changes to APRs, including eliminating them or combining them with deals for extended stays.
An additional consideration for hoteliers, is the impact COVID-19 will have on efforts to drive direct bookings. 52% believe the crisis will bring a setback in this regard. Others remain positive that hotels will be able to increase direct bookings now by offering better deals and more flexible conditions, which has gained importance in the eyes of guests since the onset of the crisis.
The importance of rate parity
Maintaining rate parity is crucial for a hotel aiming to increase direct bookings. Survey respondents echoed this sentiment when they were asked to grade the importance of rate parity on a scale of one to ten, ten being "very important". The average rating was 7.9, with 35% voting ten, 12% voting nine and 19% voting eight. This may come as a bit of a surprise at a time when many hotels are struggling and it would be understandable if they sacrificed rate parity to generate more overall revenue through third-party channels.
Many hotels still plan on using OTA and FIT levers to help their recovery process. 65% want to implement OTA extranet promotions while 40% want to leverage OTA loyalty programs such as Booking.com's Genius. FIT advance purchase promotions rank third with 36%. Using over-commission to gain visibility and pre-paid wholesaler deals come in at 26% and 23%, respectively.
Recovery will look different from market to market, especially with each country coming out of lockdown at its own speed and with different restrictions. While some revenue managers are waiting to see curfews and domestic travel bans lifted, others are hoping for the complete reopening of borders, the return of international guests and the permission to host large events once again. In order to measure how recovery is progressing for their property, revenue managers most frequently mentioned looking at increasing occupancy and pick-up outpacing cancellations.
When asked which markets they look at most closely as a model for their own recovery, the majority of revenue managers highlighted the importance of their domestic or regional market. Others look to international source markets as well as countries which were hit by the crisis early on and have handled it well. Of course, it is also important to keep an eye on key segments to gauge how and when they will recover.
Due to the impact of COVID-19 on global travel, many properties have shifted which segments they focus on most. The top three key segments for hotels now include direct promotional rates (named by 47% of respondents), direct non-restricted rates (listed by 46%) and corporate contracted business (mentioned by 44%).
When the guest mix changes, an increase in marketing spend can help build awareness among the new target audience. Yet with hotels experiencing drastic revenue drops, it's surprising that 38% of respondents state they will increase their marketing spend to some degree. 32% want to keep it the same, while only 25% plan to reduce it.
Decreasing case numbers in countries which have effectively handled COVID-19, paired with markets such as China show strong signs of recovery, has created a sense of hope and optimism among hoteliers. 11% think their markets will have recovered by Q4, 2020. For some domestic-focused destinations that could be possible.
However, the majority of revenue managers see a proper recovery taking place in 2021. 35% believe a full recovery won't occur until mid to late 2021, while 28% believe the full recovery will happen in the first half of the new year. 17% estimate they will need to wait until 2022, while 4% look to 2023 and beyond.
With positive developments in many markets and the majority of revenue professionals sharing a somewhat positive outlook, we have good reason to hope the hospitality industry will keep going strong on its way to full recovery.
A big thank you to the revenue management experts who participated in the survey - sharing their time, expertise and outlook for this article!
Source: OTA Insight's recovery research was conducted globally online from June 3-30th, 2020, with 441 revenue professionals participating.
About OTA Insight
OTA Insight empowers hoteliers to make smarter revenue and distribution decisions through its market-leading suite of cloud-based business intelligence solutions including Market Insight, Rate Insight, Parity Insight and Revenue Insight. With live updates, 24/7 support from our customer success team, and a highly intuitive and customisable dashboard, the OTA Insight platform integrates with other industry tools including hotel property management systems, leading RMS solutions and data benchmarking providers.
OTA Insight's team of international experts are based all over the world, including the UK, US, France, Germany, Belgium, Spain, Italy, Brazil, Mexico, Singapore, Australia and India, and supports more than 50,000 properties in 168 countries. Named the UK's 17th fastest-growing private technology company in the Sunday Times Hiscox Tech Track 100 in 2019, Number 103 in the FT/Statista list of Europe's 1000 fastest growing companies in 2020, and Best Rate Shopping & Market Intelligence Solution in the 2020 HotelTechAwards, OTA Insight is widely recognised as a leader in hospitality business intelligence.