Industry Update
Opinion Article17 March 2020

The First Rule of Coronavirus: Don’t Panic

By Timothy R. Wiersma, Principal | Revenue Generation, LLC.

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Coronavirus may seem like it's come out of nowhere, but hospitality revenue optimization professionals have been here before. From Sept. 11 to SARS to one hurricane season after another, they have not just survived plenty of crisis events but thrived in the aftermath.

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The number-one thing to keep in mind, according to Timothy Wiersma, founder and principal of Revenue Generation LLC and chair of HSMAI's Revenue Optimization Advisory Board: Don't panic. Wiersma shared some additional advice for revenue professionals in a recent interview with HSMAI.

When it comes to responding to the coronavirus, what should hospitality revenue professionals be thinking about?

From a practical standpoint, be sure to pay close attention to the data. Now is not the time to lose control, by any means. This is an opportunity for a revenue strategist to lead by paying close attention to their pace results and other trending data. Examine closely what's inside the pace results, what type of trends are happening, what segments are canceling, what segments may actually be increasing as a result of shifting priorities, the number of cancellations that you have going on, the number of new bookings, where are the bookings coming from, and where are the cancellations coming from. Additionally, what are you seeing from a pricing perspective? Are you looking at the right competitors and broader market pricing conditions? What about airline cancelations? What about drive market trends? What are your sales leaders telling you?

My recommendation would be, on a daily basis, update the key stakeholders on exactly what's going on with those trends. As far as pricing is concerned, taking a look at not only your competitive set but what you would also consider your secondary competitors — the greater market — ensuring that you're watching those trends and then making sure that you're taking it all into account as you move forward with your strategies.

When you say don't lose control, in this context, what would losing control look like?

Based on my previous experience, I've seen certain hotels, certain competitors, just drop rate. There's only so much demand that will come into a market regardless of market conditions. By discounting significantly, you may be compounding the impact you have on your asset profitability and you're not helping generate additional demand into that market. This also makes it very difficult for you to recover. Smith Travel put out a chart the other day showing that during 9/11, it took about 12 months after the event for U.S. ADR to bottom out. From that point, it took 24 months to get back to pre-9/11 ADRs. In other words, about three years to see pre-9/11 ADRs.

There are huge implications behind that. We don't know how long this particular event is going to last, but if you look at an event like SARS, which occurred around March of 2003, by June of that year they were beginning to lift travel restrictions — and by July the crisis was basically over. They had a vaccine, and any travel restrictions that were in place were completely gone. From that point, occupancy levels normalized about six weeks later.

I'm not saying that's going to be the case here, but we need to look at the long game on this and say, okay, we have to ride this out. We need to make certain decisions from a pricing standpoint but understand that those decisions have longer-term implications. If there is a recovery in place, it's going to be more difficult for you to claw back on the ADR side if you drop significantly. If we as an industry can ride this out without dramatically dropping ADR, we will be in a much better place once this is behind us.

Is there a difference in terms of responding on the leisure versus the group side?

Yes, there is. The leisure side comes back much quicker, and there are many things that you can do to attract leisure demand through packaging, working with your CVBs, OTAs, and so on. If you're a destination, there's many approaches that you can take from a marketing standpoint to generate that demand and give customers incentives to come your way. On the other hand, from a group perspective, it's more difficult to coordinate and reschedule a convention or group meeting. There are so many implications behind that. Depending on the type of group it is, you're going to have a greater lag on recovery.

What else should be on revenue professionals' radar?

Pay close attention to the external data — not just the traditional stuff that you look at, but also items like airlift. How are airlines reducing the flights coming into your particular market? Which markets are they taking away completely? That will allow you to refocus your marketing efforts into feeder markets that still come into your market.

The important thing is being as transparent as possible, trying to stay ahead of the game. The worst thing that can happen is that you continue to have internal surprises. So, not painting too rosy a picture, but just being realistic as to what's happening with your booking pace trends, your cancellations, and expectations for the future.

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Timothy R. Wiersma

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    About HSMAI

    The Hospitality Sales & Marketing Association International (HSMAI) is committed to growing business for hotels and their partners. As the industry's leading advocate for intelligent, sustainable hotel revenue growth, HSMAI provides hospitality professionals and their partners with tools, insights, and expertise to fuel sales, inspire marketing, and optimize revenue through programs such as the Revenue Optimization Conference, Digital Marketing Strategy Conference, and Adrian Awards. We offer organizational and individual membership across three regions — the Americas, Asia Pacific, and Europe, plus a chapter in the UAE — encompassing more than 7,000 members worldwide. Each region has geographic chapters and offers signature programs and services for members.

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