Industry Update
Opinion Article 3 June 2020

4 Steps Hotels Should Take To Adapt To A Post-COVID World

Preparing for the comeback: Hospitality rising from the ashes.

By Achim Schmitt, Associate Dean and Professor at Ecole hôtelière de Lausanne

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With decreasing infection rates and a slight recovery from the pandemic, many hotel and restaurant owners are raising the question on how to prepare for the post-COVID 19 world of hospitality. While some fear a second wave with similar economic implications, others consider that the reopening of national hotels and restaurant industries can come quicker than expected.

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All hospitality professionals admit that the current crisis marks a turning point in their industry: nothing will be as it was. However, there is little assured wisdom and research done on strategies that can help hospitality companies survive in a slow-growth recovery after such a pandemic. That's why EHL has decided to provide some strategic reflections and insights for the next months to come. They are based on various exchanges with the industry and prior experiences in handling periods of crisis and recovery.

1. Reopening - how to best manage costs

Hotels and restaurants need to be financially alert and flexible, especially about how they manage future revenues and costs. In fact, predicting future revenues under the current circumstances is similar to looking into a crystal ball; markets can always shut down from one day to another due to increased health concerns on behalf of local authorities. Survival hinges on strategic cost structures.

  • The reopening of a business will depend on how owners can adjust operating costs to uncertain and varying levels of market demand.
  • Hotel and restaurant owners need to be creative when attacking operational costs, e.g. the creation of partnerships between hoteliers would allow them to create cost synergies like shared housekeeping services or food outlets.
  • Flexible arrangements with suppliers or real-estate owners could also help to better manage cash-flows.
  • Inadequate staffing levels that consume already limited financial resources need to be avoided at any price.
  • Daily and/or weekly cost and revenue planification must be established in order to closely manage the operational and financial risks during times of uncertainty.
  • If the risk and financial burden is too high due to low and fluctuating levels of demand, it might make more sense to keep the business closed. Past experiences show that managing an operational and liquidity crisis while trying to gain back customers in an increasingly competitive market is often doomed to failure.

2. Reopening - under what conditions?

For the time being, the reopening dates and the various possible scenarios remain very uncertain. Domestic and international markets are differently impacted, and no one is certain when borders will open and international travel will be possible. Probably, markets will re-open in a three-step gradual process: (1) smooth re-opening of local hospitality markets under tight restrictions of local authorities, (2) re-opening of national tourism markets, and lastly (3) the re-opening of international hospitality markets.

  • From a consumer side, tourists will be more cautious in the post-crisis period. Social distancing and new health regulations will become a new norm for restaurants and hoteliers to integrate as quickly as possible. The implementation of these activities also consumes additional resources (financial, HR, time) which should not be underestimated.
  • New operating procedures for consumer touchpoints will require additional training efforts for service staff.
  • The health of staff must become a prerequisite for rebuilding trust and safety into any service business.
  • Social distancing, partial use of available space, conscious limitations on available rooms and reduction of certain service offerings need to be carefully taken into consideration. This is easier said than done as it means putting "safety and health" first and the often urgently needed financial and economic interests second.
  • Ask the question: is it worth putting the new measures in place at the cost of reduced earnings? Some restaurant businesses, for example, may be better off sticking to takeaway and home deliveries rather than re-opening with 50% less tables available.
  • Don't start a price war! Previous downturns have shown that everybody suffers if markets start price competitions during and after periods of decline. In light of the additional costs for implementing health regulations, adequate margins guarantee the safety of staff and employees.

3. Reopening - harnessing changes and digital solutions

Given the pandemic's implications and different dynamics linked to the reopening of hospitality markets, we expect that consumer profiles and demands will probably change in comparison to the pre-COVID 19 situation. For instance, domestic tourists have different needs and service expectations compared to international tourists. Future local service-offerings need to include this national dimension in their offers. In addition, hoteliers must consider an intensification of digital solutions in their business.

  • Virtual tourist guides, specific service apps, virtual menus, automated check-ins and paperless payment systems are potential areas where human touchpoints can be decreased while increasing service experiences and efficiency.
  • At the same time, the individual needs of the customer dictate the intensity of the digital experience. The use of technology can become a double-edged sword: it's beneficial to innovate in terms of service and create cost synergies, but it can also destroy loyal customer groups that adapted in the past to a specific service experience and now feel lost in the impersonal, technological world.
  • Those who know how to combine innovation and profitability will be winners. Realistically speaking, post-COVID-19 consumers will be more open to the use of technology based on health regulations.

4. Reopening - managerial implications?

As mentioned before, employees and teams must be managed on the basis of uncertain demand and occupancy rates. However, this creates a multitude of managerial challenges for hoteliers and restaurant owners. Typical challenges in the COVID-19 world often relate to (1) finding adequate and trained staff - some borders are still closed and foreign seasonal workers might not be able to come back to the local hospitality market. After that, the question arises of (2) how to plan for enough staff? Once you have the right people in your business, you then need to (3) invest in training to respect health regulations and keep the quality of service. And finally, you have to (4) avoid multiple rounds of hiring and firing decisions given the uncertainty in the market.

  • A good approach is to identify a core team that consists of a few key employees for the hotel and/or restaurant operations. Ideally equipped with experiences in various departments or operational tasks, this core team ensures the critical competences required for the functioning of the business.
  • The multi-tasking nature of the core team will allow managers to fill resource gaps and manage the quick integration of newly hired employees.
  • Employees need to be motivated and reassured about their roles. It is important to remember that hospitality professionals have suffered heavily during the pandemic and thus might be susceptible to personal or emotional constraints. By providing, for instance, a minimum level of income security, an open ear for operational concerns and long-term commitment, managers can show empathy and kindness in these difficult business circumstances.
  • Managerial communication and proximity are key.
  • Teamwork and multi-tasking are excellent ways of bridging operational gaps and avoiding high fixed costs based on overstaffing.
  • The objective is to have motivated and skillful service employees since they are a source of excellence in the service delivery.

Conclusion

Whilst preparing for the comeback, industry professionals must not forget one fundamental rule that built their past success: good service is based on friendly staff and happy clientele. Knowing their customers' concerns, adapting operational processes to their new needs, and building a competitive advantage around them will mainly depend on how well business owners can listen and interact. Service is all about people - this is a basic fact that will remain so despite the many changes brought on by the post-COVID 19 world!

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Achim Schmitt

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