As we push to flatten the curve of the Coronavirus (COVID-19) pandemic globally, it is important to plan for the immediate rebound in travel as well as the long-term impact of COVID-19 as travel demand strengthens.
According to a special forecast from STR and Tourism Economics, due to the COVID-19 outbreak, the hotel industry is projected to report significant declines across demand, occupancy, ADR, and revenue per available room (RevPAR) in 2020. While travel has come to a virtual standstill due to the COVID-19 outbreak, the market is expected to regain its footing in the latter part of the year and next year.
Best Case vs Worst Case Scenario. The recovery of our global economy heavily depends on our ability to flatten the curve, and mitigate a resurgence of cases once restrictions are lifted. For a deeper understanding of different recovery scenarios, review this thorough analysis from McKinsey & Company on different recovery scenarios based on the world's ability to curb the spread of COVID-19.
Based on research from CBRE, from the start of the US outbreak in January 2020, forecasts stated that it will take approximately 6-10 months (June) for US hotel demand to begin to recover, and 12-16 months for ADR and RevPAR to recover.
However, in different forecast scenarios, CBRE indicates that occupancy may not recover to pre COVID-19 levels until 2023 and some researchers are predicting that travel industry recovery will be worse than 9/11, going beyond a three-year recovery cycle to about five years (2025) for the industry to recover to levels before the pandemic.
In light of this, hoteliers should do their best to forecast to these different scenarios, take the necessary steps to adequately prepare for recovery, and set proper expectations and KPIs.
Overall, your hotel should consider a three-phase approach:
- While Travel is on Pause: While people are not traveling and many hotels are closed, hotels should stay connected with past and future guests through social, email, and editorial content that entertains and adds value to maintain a strong brand relationship.
- Initial Rise in Travel Demand: Ramp up marketing efforts focused on brand awareness and fueling new guests into the booking funnel with affordable CPCs and CPMs to reach people beginning to daydream about rebooking and planning vacations. Ensure a flexible cancellation policy and sensitive messaging relevant to the situation.
- Travel Demand Strengthens: Continue marketing efforts shifting focus to lower-funnel intent as well as targeting the right demographics and feeder markets with the right messaging and packages. Learn from marketing insights and performance, and adjust strategy to growing travel demand and seasonality as travel begins to stabilize.
This is the third article in a three-part series focused on each phase of a hotel's COVID-19 recovery strategy. This article focuses on phase three: how to plan for success when travel demand continues to strengthen. For the full recovery strategy across phases, download our COVID-19 Hotel Recovery Strategy eBook.
Recovery Phase Three: Travel Demand Strengthens While we continue to strive to flatten the curve around the world, hotels should be proactive in planning for the initial rebound in travel demand that seamlessly transitions into a longer-term strategy for when travel demand strengthens and the world begins to recover.
Going Beyond Travel Demand for Long-Term Planning As we prepare for travel demand to build long term, it is important for hotels to take a step back and go beyond travel demand forecasts to look at the state of the world holistically. Long term, there are so many variables that will impact a hotel's business plan that go beyond travel demand. These factors include the state of the economy, unemployment rate, consumer spending power, as well as shifts in consumer behavior. For example, it is predicted that post COVID-19, virtual meetings will become more common place which will most likely impact business travel as well as meetings and groups.
Ultimately, as hotels prepare for the phase of recovery when travel demand strengthens, it's a delicate balance between preparing for a "new normal" while implementing tried and true digital best practices and strategies.
Be Ready for the Shift in Consumer Priorities. As a result of the outbreak and social distancing guidelines, consumer behavior is evolving. These trends need to be taken into consideration when preparing your digital strategy for recovery both short term and long term.
Overall, middle class consumers are becoming more value conscious, while luxury consumers are becoming more discerning as they really want to make their travel choices count when it's safe to travel again. After COVID-19 subsides, many consumers plan to make up for lost time by not only taking trips but potentially indulging to a greater extent in rich experiences.
As the world recovers, consumers are going to expect brands to give more, be more supportive, and give back more to the consumer and to the greater good. And finally, consumers will still want to be put at ease and want to know that brands are taking proper measures.
What does this mean for your recovery strategy?
- Consumers are searching for more experiential packages and offers because they were unable to dine out and get spa treatments while they had to stay at home.
- Consumers will expect flexible cancellation policies and hotels to be socially involved; selling too hard will likely damage the brand long term.
- Be prepared to shift USPs that you're highlighting with the changing needs and times.
- Reiterate the hotel's standards of cleanliness such as daily housekeeping and other preventative measures.
Your Digital Strategy Should Be Ready for Anything. Overall, while it's important to understand best case and worst case scenarios long term, no matter the outcome, hotels will need to be thoughtful in their digital planning and take a holistic approach to recapturing lost revenue. Your digital marketing arsenal will be one of the most effective ways to impact your bottom line.
Here are the top 10 considerations to prepare your digital strategy for travel demand strengthening long term: 1. Consistently Align your Marketing and Revenue Management Strategy: One of the first steps in developing your recovery plan is to align with revenue management on rate strategy and parity across channels, direct booking perks, any new offers and packages, and most importantly, a flexible cancellation policy. However, as travel demand continues to strengthen, a simple reset on rate strategy and cancellation policies isn't enough. Your marketing and revenue management team should align on a frequent basis to discuss shifts in strategy. This will be one of the most critical factors to your long-term success.
2. Consistent Fresh Content on Your Website: Gone are the days of static website content, especially in the new volatile post COVID-19 environment. Guests will expect up-to-date content that reflects the state of the pandemic and your website should serve as a source of truth for potential guests.
If you haven't already, ensure the following content is immediately available on your website:
- If the hotel has closed, clearly state that the hotel is open and accepting reservations, groups, spa appointments, etc. Be sure to address cancellation policies.
- Reassure guests that the hotel is still taking proper precautions on property and will continue to do so to ensure the safety of staff and guests.
- Highlight the destination through a blog post, on your area guide, and hero image to show that businesses and attractions are open. Ensure that all destination content on the website is up to date.
- Promote special offers and packages that are tailored to your target audience at this time. Consider highlighting a LOS offer, staycation offer for locals, or a business to leisure package for business travelers.
- Implement website content personalization based on customer segment, feeder market (local vs international), and website pathing behaviors.
As travel demand continues to strengthen:
- Develop more content around the destination and local experiences as this becomes even more important as travelers will be looking for unique experiences to make up for lost time.
- Incorporate rich hotel and destination imagery and video that guides guests throughout the travel planning journey and brings your hotel experience to life.
- Create interesting editorial content which will become critical in keeping potential guests up-to-date on your hotel, destination, and any unique experiences your hotel is offering.
3. Maintain a Flexible Cancellation Policy: Implementing a flexible cancellation policy is one of the first steps in planning for the initial rise in travel demand. However, as the pandemic continues to be unpredictable and travelers are uncertain about the future, if your hotel brand wants to maintain strong brand loyalty and enforce confidence to rebook, your hotel should maintain a flexible, stress-free cancellation policy for at least the next six months or until end of year. Once end of year approaches, revisit your cancellation policy and determine appropriate measures for 2021.
4. Delicately Balance your Direct and OTA Strategy: For the initial rise in travel demand, focusing on shifting distribution to the direct channel is one of the most effective ways to positively impact your bottom line. This includes prominently displaying book direct perks throughout the website, a flexible cancellation policy through the direct website, and so on.
However, hotels cannot afford to ignore the role OTAs will play in the distribution mix long term, especially in the new economic environment.
According to a recent study from the Cleveland Research Company, 84% of revenue managers say they plan to shift more distribution to OTAs post COVID-19. However, maintaining a healthy distribution mix, and proper planning to encourage bookings through the direct website is critical to maximizing profitability. Long term, it is critical for hotels to closely monitor rate parity across channels. Any rates, special offers, or promotions provided to the OTAs should be available to book on the direct website.
5. Develop a Month-to-Month Marketing Plan, Learn from Marketing Insights, and A/B Test: As travel demand rebounds, strategizing a month-to-month marketing plan that progressively builds with the rise in travel demand over time will allow you to fuel the booking funnel and maximize revenue. If your hotel has closed, your plan should start one month prior to hotel reopening and continue to shift from upper-funnel to lower-funnel targeting month to month. For month-to-month targeting and messaging strategies, read Recovery Strategy Phase Two: The Initial Rise in Travel Demand.
As travel demand begins to strengthen and stabilize over time, prioritize lower-funnel initiatives and focus on targeting potential guests based on real-time travel intent to your destination. By this final phase in your recovery plan, marketing should have been live for about three to four months with healthy reach, awareness, and a remarketing pool. In light of this, budget allocation should be roughly 20% upper-funnel, 80% lower-funnel and you should continue to adjust your strategy to reflect shifts in travel demand. Messaging should focus on answering key business needs and typical seasonality as travel demand begins to stabilize.
One of the key benefits of building a marketing plan that shifts month-to-month is learning from marketing insights so you can better allocate your marketing dollars to focus on the right audience and targeting over time. During this uncertain time, A/B testing will also be critical to understand what imagery, messaging, and strategies resonate most with potential guests.
Considerations for your month-to-month marketing plan as travel demand strengthens:
- Marketing should ramp up over the course of three to four months to build reach, awareness, and a healthy remarketing pool.
- Beyond month four, budget allocation should be roughly 20% upper-funnel, 80% lower-funnel and you should continue to adjust your strategy to reflect shifts in travel demand.
- Messaging should focus on answering key business needs and typical seasonality as travel demand begins to stabilize.
- Closely monitor marketing insights to adjust strategy for optimal performance.
- A/B test imagery, messaging, and strategies to understand what resonates most with potential guests during this uncertain time.
6. Maximize Website Conversions: While hotels ramp up their marketing budgets to reflect the increase in travel demand, the performance of these campaigns is dependent on your website's ability to convert potential guests. Overall, ensuring your website is optimized for conversions is one of the most critical factors of your digital strategy long term.
Considerations for optimizing website conversions:
- Ensure rate parity across all channels, and prominently display book direct perks throughout the website.
- Conduct a UX Audit of your website looking at metrics such as conversion rate, look-to-book ratio, website pathing behavior, dwell time, top pages, and booking flow to improve overall user experience and increase conversions.
- Implement a reservation abandonment strategy to recover lost bookings.
- Remarket website visitors who searched for specific dates in the booking engine with personalized messaging.
- Personalize website content based on customer segments, feeder markets, and website pathing behaviors to ensure content resonates with customer personas and fuels them through the booking funnel.
- Conduct A/B testing throughout key elements of the website and booking engine experience.
7. Stay Connected to Guests Who Have Cancelled Reservations: During the initial rise in travel demand, recapturing bookings you've already won is one of the best ways to swiftly increase occupancy. When travel demand first picks up, send an email campaign prompting cancellations to rebook with an added complimentary bonus or perk to incentivize them to purchase. Long term, segment cancellations that don't rebook into their own email list and consider sending an update or exclusive offer in the next three to four months as travel demand strengthens. These travelers may simply be more cautious and may consider a stay once the pandemic significantly improves.
8. Revisit Your Automated Marketing Campaign Strategy: Staying connected to past and upcoming guests through email is a great way to drive bookings as travel demand increases and build a long-term brand relationship. As hotel marketers roll up their sleeves to plan for recovery, automated marketing campaigns can do the heavy lifting with past guests behind the scenes.
Considerations for your automated marketing campaigns:
- Develop an automated marketing campaign for the anniversary of past guests' stay, prompting them to come back and relive the memories.
- Develop an automated marketing campaign for past guests' birthdays with an exclusive package or complimentary offering.
- Develop automated marketing campaigns around loyalty status offering ongoing perks and inviting members to come back and stay.
- Set up an OTA bounce-back campaign, prompting those who have booked through OTAs to book through the direct website.
9. Maximize Revenue by Focusing on Upselling Ancillary Services: Increasing ancillary revenue will be critical to success once the COVID-19 pandemic subsides. Creating experiential packages with dining and spa inclusions and marketing your ancillary offerings in unique ways will help your hotel increase your average booking value and even market these offerings to locals.
Considerations for marketing ancillary offerings:
- Create experiential packages that include dining, spa, cabanas, and any other ancillary offerings.
- Send pre-stay and in-stay emails highlighting critical revenue growth opportunities such as room upgrades, spa, dining and other ancillary offerings.
- Once a website visitor books, include the user in a remarketing pool for users who have converted to serve display campaigns upselling your dining and spa packages leading up to their stay.
Create New, Unique Ancillary Revenue Opportunities. To truly move the needle on boosting ancillary revenue, hotel brands need to think outside of the box and create new revenue opportunities beyond dining and spa. For instance, creating a seamless way to book onsite property features online such as cabanas, bicycles, or even paying a bit extra to reserve that perfect seat at the lobby bar are all unique examples of ways hotels can get creative to boost ancillary revenues. Website visitors should be greeted with endless opportunities to enhance their stay throughout a simple online booking process. Hotels can even consider allowing guests to add-on welcome champagne, a treat basket, or a welcome spontaneous surprise to their stay. Consider the following additional ancillary opportunities:
- Upselling property features like cabanas, bicycle rentals, resort activities, and property activations like fitness classes.
- Upselling local experiences by partnering with local attractions and businesses.
- Upselling unique inventory like booking a seat at the lobby bar, booking professional or polaroid cameras, or allow guests to add on welcome amenities.
10. Get Creative with Hotel Inventory: With occupancy expected to be down year over year and into 2021, hotels need to begin to think a bit differently about their room and meeting inventory. Hotels can capitalize on newly emerging trends such as the rise in demand for coworking spaces and meeting space that is bookable in hourly increments. Create new revenue opportunities by partnering with companies like Kettlespaceand DropDesk to utilize your space for coworking businesses.
Another trend on the rise is the demand for places where people can have a meeting, take a phone call, or simply take a break for a few hours. Companies like Dayuse, Day Break Hotels, and Dayrooms allow people to book a hotel room for the day or in hourly increments.
Better yet, allow your room inventory and meeting space to be bookable in hourly increments on your hotel website.
Consider the following ideas to increase the revenue potential of your hotel inventory:
- Allow locals to book rooms, meeting space, and areas throughout the hotel in hourly increments.
- Partner with local businesses to repurpose areas of your hotel as coworking space.
- Allow rooms and meeting space to be bookable in hourly increments on your hotel website.
Overall, as we begin to flatten the curve, proactive planning for the rebound in travel demand and your digital strategy long term as travel demand strengthens can help your hotel make up for lost revenue. Travel demand will steadily increase, and your hotel must be ready to take full advantage. For the full recovery strategy, download our COVID-19 Hotel Recovery Strategy eBook
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