Industry Update
Opinion Article17 August 2020

How Hospitality Can Get Back To Business

By Chekitan S. Dev, PhD, Professor of Marketing at Cornell University’s School of Hotel Administration in the SC Johnson College of Business

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A few months ago, travel forecasts were optimistic, growing, carefree. Consider the following developments:

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  • New brands were being introduced at a never before seen pace (e.g., Hilton's Tru and MOTTO, IHG's Avid and VOVO)
  • Existing brands were being upgraded, new companies were getting into the travel business (e.g., LVMH's acquisition of Belmond and launch of Cheval Blanc)
  • Sky was the limit with new markets (e.g., flights to Vietnam, tours to Bhutan, etc.)
  • Travel was booming with travelers from China and India becoming the fastest growing and most lucrative international travelers.

At approximately 10% of global GDP, travel tourism and hospitality was the world's #1 business, accounting for 1 in 10 workers, often the first job for many workers. Then, in what seemed like in an instant, everything changed.

The Current State of Hospitality

As if a switch was flipped, travel came to an almost full stop at a never before seen pace. Airline load factors dropped like a rock with some air carriers facing bankruptcy, hotel occupancy dropped to single digits with many facing foreclosure, restaurants closed their dining rooms and many went out of business, and travel agents closed shop in record numbers.

In the U.S., about 10 million workers in travel, tourism and hospitality have lost their jobs. Globally, total job losses in this sector are estimated at close to 100 million. Recovering quickly and sustainably from this catastrophic loss of demand and jobs will be key to the world economy getting back on its feet. In the following paragraphs I offer a blueprint for this recovery.

How Hospitality Businesses can Re-Engage

Hospitality businesses need to recognize that travelers continue to be stressed and will be for a while. Because of the double whammy of a health crisis and economic crisis, most travelers have had to cancel travel, many are reviewing their future plans, either because they worry about travelling in close proximity to others or travelling to destinations previously experiencing "overtourism" like Venice and Barcelona which are now COVID-19 hot spots, or just not being able to travel because they have lost their jobs.

Depending on the duration and severity of the downturn in travel, and the impact on the economy and people's livelihoods, once we begin to emerge from this crisis, hospitality managers will most likely have "re-introduce" travel to the world: why travel, where to travel, how to travel. It will be as if we are all coming out of a cave after a long hiatus and need to see value in travel, for business and leisure travel alike. There is the very real possibility that the 'demand curve' for business and leisure travel will shift in that, now that businesses are connecting with their customers virtually for a sustained period of time, and many are considering local or domestic travel, and will most likely reduce their absolute level and length of travel into the foreseeable future. To recover successfully from this crisis, hospitality businesses will have to carefully plan their recovery. Based on my own research and industry experience, below I offer five stages to help hospitality businesses successfully emerge from this crisis.

5 Stages of Hospitality Recovery

Stage 1 is to be kind. The hospitality industry is having to walk a fine line between doing anything to keep the business afloat and being customer-centered. One area where things are coming to a head is refunds. Smart travel brands are either refunding the guests' money without any hassle or encouraging/incentivizing/requiring them to rebook by telling them why a non-refundable trip cannot be refunded because the employees have to be paid so that the hotel can stay open. What this means is to be as lenient as possible in giving travelers refunds or making it convenience and lucrative (e.g., keeping rates the same, adding upgrades or extras) for them to rebook cancelled travel and book new travel.

Stage 2 is to rebuild confidence. This means clear, credible and complete information on what the situation is in destinations where they operate, what measures they are taking to keep guest and employees safe (i.e., revised brand standards) especially as it concerns health and safety. These could include: a note/tab on the website letting travelers know how COVID-19 has changed what they should do and can expect from the travel provider, guest and employee temperature checks (just as many hotels in Asia customarily do undercarriage/hood/trunk explosive checks), screening questions about recent travel when taking reservations and on arrival, self-check-in and check-out, electronic room keys, handing out masks and gloves, no touch everything (motion activated front door, voice activated elevator call buttons and floor selections, room doors, etc.), "sanitized for your protection" strips put across room doors after an "operating room" clean (just as they were used on toilets in the past, like a yellow Police Crime Tape, but with a different "clean" color; Hilton is using blue with white lettering), extra cleaning and sanitizing protocols, social distancing protocols for guests (e.g., 6 feet apart, one guest per elevator ride, etc.) and employees (6 feet apart in workspaces and in cafeterias, moving older employees-who are more at risk-from guest contact areas to the back of the house), room service delivered outside the door, laundering everything in the room after each check out, doing away with self-serve buffets and moving to full-service "digital" buffets (e.g., where the guests could "fill their plate" from a digital display on a device which is then assembled in the "back of the house" and delivered table side), housekeepers to use personal protective equipment, and prospective and in-house guests continually informed about local ordinances that inhibit or enable travel.

Stage 3 is to show heart by letting their customers know what they are doing to help those in need around them, for example assisting front line first responders and medical workers fighting the crisis (e.g., Four Seasons Hotel New York housing doctors and nurses for free), helping those in need (e.g., hotels housing the sick, stranded or the homeless), or just serving their local communities (e.g., restaurants handing out food).

Stage 4 for the industry is to prepare for a rebound in travel by reviewing, revising and sharpening your value proposition. This could include polishing your knowledge assets by spending down time on training, cleaning and updating your customer relationship management (CRM) databases, and better curating paid, owned, earned content. It could also include asking the tough question regarding your business model: are you running your business in the best possible way? Can you restart in a different way? What combination of physical, human and digital experiences make the most sense in the new incarnation of your business?

Stage 5 for the industry is start your engines by reaching out to those companies and individuals who are making travel plans, focusing first on those that need to travel for business (e.g., a friend who works for Bloomberg told me recently that customers in China are requesting in-person meetings with their business development representatives), followed by those that are in close proximity (staycation and drive markets (e.g., The Sagamore Resort in Lake George New York is offering a special rate to 'local heroes' who fought in the COVID-19 war), designing high value packages targeted to profitable sub-groups (e.g., one growing market for hotel rooms is from those who are working from home and need a place to set up an office), offering performance-based incentives (e.g., override commissions) for incremental business to travel agents and advisors who are all hurting and could help 'shift share' from competitors, ensuring a smooth and responsive reservation process, and finally encouraging guest to post on social media once it is safe for them to start travelling to encourage others to do so (e.g., The Breakers Palm Beach requesting guests to post their experiences attesting to the level of care the resort is taking to keep guests and employees safe).

In addition, businesses that have gone virtual will need to re-learn the value of in-person meetings, and leisure travelers who have made their home their havens, need to be convinced why they should get on a plane, train, or automobile to visit or re-visit friends, relatives and destinations. Because business travel budgets have to be unfrozen, and individual travel budgets have to be reviewed especially if the travelers have experienced an economic shock, the value of travel—building better business relationships, getting physical rest and relaxation, increased mental well-being, enhanced spiritual enlightenment, and re-connecting with the world-will have to be re-presented to the world. In marketing and branding terms, just as we learned post 9/11 and the 2008 recession, "category" marketing and branding will be as important as brand and property marketing and advertising. Brands and properties are well advised to allocate a portion of their marketing and branding investments to promoting the category as well as their own businesses.

The Last Word: A Silver Lining

Once the COVID-19 crisis starts to diminish, and it is safe to travel widely, hospitality, travel and tourism marketers should consider planning for a recovery in these 5 stages: be kind, build confidence, show heart, polish the welcome mat, and start your engines. These 5 stages of hospitality recovery will hopefully help businesses get to full recovery as quickly as possible. Moreover, because there is always an opportunity buried in every crisis, hospitality businesses have a once in a lifetime opportunity to get to a "better normal" instead of simply a "new normal" by re-imagining what they do, how they do it, and doing it better by offering "new and improved" hospitality experiences to their guests.

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Chekitan S. Dev

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