Industry Update
Opinion Article16 March 2020

Twelve Strategies For Managing Hotels In Time Of Crisis

By Alex Sogno, CEO - Senior Hotel Asset Manager at Global Asset Solutions

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Maintaining Hotel Performance in Times of Crisis

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The Coronavirus epidemic seems to be at a turning point in terms of spread as we speak, yet it is difficult to know its true impact on the economy. At this stage, it has a very tangible impact on hotels: a drop in booking pace, increased room cancellations, many events been postponed at best, and soon, pressure from third-party capital (banks / lenders). Looking at numerous hotel markets in Asia and parts of Europe (in or outside of China, Italy etc.), hotels are now running at single-digit occupancy. The hospitality industry is already in a "Corona-crisis".

At times like these, hotel owners should continue to be rational and keep their eyes on the long game, as well as to deal with the immediate effect of the virus. We need to deal with the facts and act accordingly. Your hotel teams are running a complex business, trying to achieve the budget, maintaining brand standards, retaining and managing talent, and ensuring customers are satisfied. At the same time, owners continue to seek sustainable returns and to achieve this, the operation needs to adapt to this crisis rapidly, and react in the most efficient way.

Through the application of industry best practices and customized tools, our multi-disciplinary team works side-by-side with your managers and employees to identify and then implement a profit protection plan, as well as forecasting and productivity enhancements. The results go beyond management and hourly labour, benchmarking other department costs, and bidding service contracts. Our services also include a full and complete review of non-rooms revenue, menu engineering, and hours of operation analysis. While generally retained by owners and investors, our approach helps make it easy for a manager to deal with the current challenges of the COVID-19, forecast better, and measure operational efficiency so that our installed process changes are implemented for the long term.

How do businesses deal with Black Swan Events?

Basically, Black Swans like the Coronaviruses (COVID-19, SARS, H1N1) or the September 11th attacks are rare events that no one could have predicted, which dramatically alter the course of history, society, and economies. The American-Lebanese author and former risk analyst, Nassim Nicholas Taleb refers to events like these as Black Swans. Black Swans often create chaos in the short term and are drivers of major change in the longer term. At Global Asset Solutions, we prefer to think about their positive effects and the opportunities they create.

Therefore, we encourage hotel owners to start planning now to ensure that their businesses remain viable. The following is a series of best practices that businesses can adopt to ensure adequate preparation for business continuity in case of an outbreak.

  • Have a very clear revenue management direction to avoid 'knee jerk' discount responses to reduced demand
  • Facilitate guest needs for additional hygienic care at all times
  • Planning for adequate staff coverage for essential business activities through appropriate human resource management
  • Safeguarding of employees' and customers' well-being through instituting proper control and health measures.
  • Managing relationships with suppliers, service providers, and customers
  • Maintaining effective communications with employees on epidemic-related issues
  • Consolidate the crisis management manual
  • Create a cost containment list now to be prepared to preserve the bottom line in case top-line performance is worse than budgeted
  • Update the reforecast weekly, closely monitor the impact on cashflows, and keeping owners appraised
  • Build a Profit Protection Plan with the operator, based on potential shortfalls/scenarios.
  • Start up conversations with the bank/lender around capital plans of action and (however unlikely) worst case scenarios.
  • Try to maintain the guest experience if at all possible to avoid negative guest comments on-line

In some areas, hotels are forced to close. The executive team needs to prepare for this eventuality. Security needs to be put in place, re-opening team needs to be created. We will provide you more information on this in the coming weeks.

Alex Sogno

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