Industry Update
Opinion Article15 January 2021

Light at the End of the Tunnel

By Craig Jacobs, Freelancer

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As we recover from the ravages of the Pandemic and the hospitality industry re-emerges from its devastation, the good news is that there is unprecedented opportunity for improvement. Much of the upcoming change is directly related to the virus and is well underway; improved cleanliness standards, solutions to minimize germ spreading, and the re-invention of hotel dining among them. One school of thought is that business will naturally return to 2019 levels eventually. While that may be true, now is not the time for passivity. This crisis has been shocking and painful, and while it has brought our industry to a screeching halt, it has also cleared the decks for meaningful innovation. In addition to a rapid national economic recovery, a hotel's future success will be determined by its ability to identify, prioritize and take action on opportunities to make changes that accelerate revenue, profit and engagement results. Three examples that should be considered priorities include:

1. Marketing Personalization: Digital marketing dominates every segment, channel and platform in the travel industry including search, social media, site selection, online travel agencies and destination experiences. The exponential growth of digital marketing has permanently and drastically changed the roles, goals and required skill sets of executives responsible for revenue generation, creating a new business paradigm with customer data at its center. Privacy and permission planning is one of the most important elements of this new marketing environment. Hotels are in a unique position to acquire extensive, invaluable information about their customers that can lead to meaningful marketing personalization and relevancy. Decisions on the details regarding who, how, why, when, and where are urgent and can make a profound impact on both revenue generation and customer engagement. While data collection consistency, professional content quality and elegant software simplicity are crucial, systematically and proactively respecting privacy and obtaining permission to communicate with customers are the most important keys to success.

2. Third Party Power: Travel agencies are a necessity for knowledgeable luxury travelers. They provide invaluable services for their clients including VIP recognition from hotels, insight and access to the best destination experiences, and most significantly, someone reliable to turn to when unexpected calamities occur during a trip. Informed expertise on COVID-related local updates, safety, and health will be invaluable in 2021 and beyond for every step in the travel experience. Hotels that commit to proactive, caring relationships with agencies can gain a competitive advantage in the leisure segment. Tactics include focused, proactive engagement from senior management, a long-term commitment to their marketing channels, consistent recognition of both agencies and their clients and prompt payment of commissions. Travel consortia can provide a path to scalable sales for knowledgeable, committed hotels and resorts. In the luxury universe, where the pricing is bold, the value of travel agency relationships is vital. Unfortunately, many properties continue to assign a junior sales person to their travel industry accounts. Understanding and exceeding the requirements of travel agencies has never been more important for luxury hotels and resorts because Leisure business has become the pre- eminent customer segment and their end-user clients are its stars.

3. Business Mix: Group business volume is going to take time to recover. Initially, its potential will be diminished not only because of the lingering reluctance to meet in person, but also because of the new protocols that will significantly reduce the number of people allowed to be in public function space at the same time. Further, approval to meet in person or to attend a conference or tradeshow will require a convincing argument to overcome the Zoom option. On the other hand, the recovery of the meetings industry is crucial to a healthy global economy and the experiential difference between online and in person meetings is profound. People will continue to meet for all of the reasons they did before COVID, but not at the same business volume. To win group business, hotels must elevate their competitive skills by reinventing sales strategies, digital presence, and unique sales propositions. It is going to be more expensive to produce an in-person meeting experience, so discounted pricing due to less demand will not be a viable strategy. As long as the value ratio between price and quality is rational, revenues will grow, but the formula will change to lower volume and higher pricing than before the pandemic. So how will hotels replace the diminished group contribution to total sales? They will compete ferociously for mid-week leisure business and will need to innovate at a local level that may not fall into historically traditional segments with a focus on incremental revenues. Day use of resort amenities and personal office space for locals are examples.

There are other promising innovation opportunities for the hotel industry to consider including re-imagining resort fees, rewards programs, sales job descriptions and reconsideration of the potential of an in-house reservations department. Service will continue to depend on the competence and friendliness of staff, so hiring, compensation, performance evaluations and coaching are more important than ever (and ripe for change.) There are also numerous opportunities to manage costs more efficiently in ways that do not impact the guest experience. AI has a place in the hotel business and will save money for operators with one caveat: as travel becomes more expensive, quality and service levels must justify the price.

Craig Jacobs

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