Industry Update
Opinion Article17 August 2020

It’s Becoming Survival of the Fittest

By Bob Rauch, President of RAR Hospitality

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Prepare your operations to meet what guests are looking for, and prepare your teams for the realities of today's environment.

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Mike Ditka, former NFL star player and coach once said, "Success is not permanent, and failure is not fatal."

Today it is paramount to test, experiment and kill the projects that don't work. Business models and budgets became obsolete immediately. Culture and teamwork became even more critical as our world got turned upside down. As an owner or operator of a hotel, we are now a full-time coach if we were not before. This requires clarity and focus as some departments have really been affected.

Sales

Today's sales process is virtually all digital. We are now required to build a virtual company, where video presentations and electronic content rule the day. Those who feel this is a short-term situation should prepare for a bit longer than this summer. McKinsey & Co. just published a research piece suggesting recovery to pre-COVID levels could take until 2023. They do, however, also have a scenario that brings the market back by 2021. Either way, the rest of this year is about mitigating losses, avoiding litigation and driving enough revenue to reduce operating losses, rather than making profits.

Guest wants and needs

Guests are saying they want contactless check-ins and check-outs and added emphasis on hygiene. Legionnaires Disease can enter the water system, and a COVID-19 outbreak would be as bad or worse. Concern that we are taking reasonable care, avoiding negligent training and using our own policies are some of the challenges of the day. Negligence avoidance, compliance with return-to-work guidance, action plans, robotic delivery and significantly improved sanitization and cleaning protocols must all be in place.

Today's guests want more intense room cleaning, including UV light disinfectant or hospital-grade sanitization, COVID-19 rapid tests for every guest at check-in, additional cleaning downtime between stays and temperature checks for every guest. They would like to be offered free hand sanitizer and let rooms sit 72 hours before cleaning. They want employees wearing personal protective equipment/masks and free personal protective equipment/masks provided to them. They want fewer seats/tables in restaurants, bars and lobbies and no housekeeping during their stay (to minimize exposure). Another comment on the McKinsey survey was that guests should fill out a declaration card stating they are COVID-free.

Trends

For business travelers, demand will likely come back unevenly. Essential travel will differ by industry, reports McKinsey. According to executives and human resources executives interviewed in April 2020 across an array of industries, every one of their companies is using technology as a substitute for nonessential travel. Most expect that certain types of travel—like internal meetings—will never fully return to pre-COVID-19 levels. Many companies say they plan to turn off their travel restrictions in phases with client facing visits such as site visits and sales calls likely to return first. Conferences and industry events will likely be the last to return.

Challenges

Hotels face the prospect of a long recovery. Keep in mind that STR data excludes closed hotels, which causes the reported RevPAR and occupancy metrics to appear better than the underlying fundamentals would otherwise suggest. For April and May, just under 15% of hotel rooms were temporarily closed and excluded from STR's data. This artificially improved occupancy levels plus there was a difference between drive-to markets and those that require flights.

The recently released fourth wave of the MMGY Travel Intelligence and U.S. Travel Association's TIPS report indicates that travelers are less interested in great travel deals and more interested in slowing the spread of COVID-19. They are, however, more interested in postponing travel than cancelling travel.

Finally, COVID-19 has created some potential liabilities for hotel operators. These include the need for training on prevention and protocols, wage and hour law violations due to understaffed team members who can't have breaks, failure to ensure that guests and employees are protected from COVID-19 and the need for some signing of waivers to provide at least some level of protection from the above. I'm not suggesting a primer on hotel law, but assumption of risk, contributory negligence, reasonable care and indemnification agreements might come in handy. See your employment lawyer.

Bob Rauch

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