‘Revenue Superstar’ argues City Hotels will Recover First
By Pedro Colaco, CEO at GuestCentric Systems
Despite optimistic signals of pent-up travel demand, hotels are still at the mercy of ongoing travel restrictions and regulations. As a result, many hotels remain in complete shutdown. Furthermore, the expectation for financial recovery to 2019 levels is increasingly far-off, with more hotels now expecting this to occur in 2023.
Reviewing the key findings in Guestcentric's March 2021 hotel market analysis, published in the 12th edition of The Hotelier PULSE Report, she shares how her role in revenue management has adapted to the reactive and ever-changing landscape of the crisis. She also highlights how teams at MEININGER Hotels have used the downturn to review their tech-stack and collaborate to optimize the digital customer journey.
1. Swift vaccination distribution and partial reopenings across the UK and US have lead to a major influx of bookings from these regions to near-2019 levels. How have these market developments impacted MEININGER specifically?
Based on the current signals from consumers, I think this is no longer a question of demand. Rather, it is a question of how quickly the vaccination program will roll out globally and everyone is free to travel again. Apart from the more vulnerable groups, people are not afraid to travel. However, everyone is also waiting for travel bans to be lifted. When that happens will depend on many factors.
It's also important to note that while these are certainly optimistic signals, city hotels (such as our hotel in London) are not seeing the impact yet. The domestic market is stable, but city hubs and destinations dependent on international travel are crippled right now. It seems unlikely that Americans will travel over in summer, given the slow vaccination pace and soaring cases across Europe. So, while we hope for the best, I am cautious about what the next few months may bring.
2. Despite pent-up travel demand, increasing numbers of Hotels are still completely shut down. What other areas is MEININGER focusing on during minimal commercial activity?
The crisis hit us fast and hard in March 2020. We all fell into a hole that no one saw coming. As a result, revenue management underwent a complete overhaul, with all prior reports and forecasts tossed aside to react to the shock in the industry. A big part of adapting to 'The New Normal' was to educate ourselves and review our tech-stack to strengthen our position for the upturn.
We also increased inter-departmental collaboration to understand all facets of our business activity and the customer journey. A few of the key projects we focussed on in 2020 were to increase digital optimization on our website and IBE, including page loading speed to enhance the customer journey.
From the revenue management side, we adjusted our rates structure and consolidated all of our hotels into one PMS for more efficient, centralized inventory management. We also consolidated customer care and group sales, as many customers were reaching out to MEININGER directly.
I am proud to say that we have completed all the projects we set ourselves back in 2020. It just goes to show that these times should be used as an opportunity to keep going, learning, and moving for when the demand picks up again. I am also grateful for the support of the owners and stakeholders in these endeavors. This year we are opening 5 new European properties - Switzerland, France and Austria - and I feel confident that we have prepared ourselves for this new and exciting chapter.
3. Increasing numbers of Hoteliers now expect to financially recover to 2019 levels in 2023. Does this sentiment mirror your experience? What do you think could happen to change this timeline - for better or worse?
While I cannot predict with certainty what may or may not happen in terms of financial recovery, I can speculate based on current knowledge and market signals. Currently, my expectation is that 2021 should not be worse than 2020. In the autumn, I hope most people will be vaccinated and free to travel.
In 2022, we may start to see more of the recovery, but a slow and steady ascent in terms of revenue. Based on our own system, we will likely see more group bookings and school bookings in 2022. In fact, our books already register a significant volume of bookings for the next school term - September onwards.
Only in 2023, we may begin to see some signs of revenue back to normal. Back to 2019 levels would be great, and the demand is likely to reach those levels. But although supply is coming, 2019 was a record-breaking year. Although we hope that 2023 will reach the 2019 benchmark, we must also acknowledge there have been significant changes to the industry during the pandemic. We need to see how recovery will develop globally, not just in some regions like Europe and the US but in Asia too. We will also need to review how corporate business develops because everything is now virtual.
Depending on vaccination distribution, I do believe City Center Hotels will be the first segment to financially recover in the upturn. People want to be around other people, and enjoy the little 'city life' experiences we once took for granted - such as drinking coffee in a vibrant and bustling downtown cafe. We will certainly see more families and young people coming into the city after being cooped up in lockdown. Supply is also coming in, with new openings over the next years. Let's see how fast we recover.
Overall, I do believe it will likely take us longer than 4 years to completely reach 2019 levels. It is my view that the impact will be felt a little bit longer. But given how most hotels are reviewing their technologies, operations, and sales, implementing more consolidation, the impact could also be a positive one.
4. Over 84% of Hoteliers are optimizing their direct channels to be the top source of hotel bookings. Is this a top priority for MEININGER? What steps are you taking to strengthen your hotel's direct channels during this time?
Optimizing the direct channel is not a new concept. The 'Direct is Best' adage has been a widespread slogan for some time now. In 2019, we at MEININGER had already begun taking steps to regain control of distribution and optimize direct, including the cancellation of many wholesaler contracts pre-covid.
But in today's uncertain climate, more customers are reaching out to hotels directly, and this is reflected in the Direct Channel's powerful position. Since the start of the crisis, we have seen a huge increase in guests reaching out to us directly for advice on everything from cancellations to hygiene measures and safety regulations.
But overall, OTAs are still huge in the distribution share. Leisure travel, which is a primary source of OTA bookings, came to a complete standstill at the start of the crisis and this was reflected in OTA business performance. However, OTAs have also been redesigning distribution strategies and enhancing digital optimization in response to new market demands and to prepare for the upturn. In summer 2020 for example, we already saw OTAs adjust their rates and offers for children and families.
While I sincerely hope customers will remain loyal and book directly with hotels in the upturn, I believe hotels should also pick their battles. Many will not win the war against the technology and budgets of OTA giants. However, hotels can win by maintaining control of distribution - deciding what inventory to give OTAs and what to keep exclusive for direct customers.
For example, we don't have rate parity now, so our IBE should have the best conditions that stimulate shopping behaviors and incentivize guests to book directly. Our marketing teams have also strengthened our organic online visibility through SEO and keywords, reviewing what kind of guests are booking and where.
Overall, I am excited to see how channel distribution will develop in the months and years to come. We have prepared teams and rates to be ready, yet we are sure to see many changes in the future.
5. Could Google be more Dangerous than the OTAs?
The hospitality industry is one where partners and competitors work interchangeably. The best advice I can give to hotels to know your partner and research them. Don't be naive, but also do not be afraid to test new methods. Everything in life is a risk, but if you do not try, you will not learn.
I hope the industry has learned the painful lessons of the past with the OTAs. We made them big, so now hotels need to make sure the relationship furthers business growth. Transparency between partners is crucial, but hotels should also do their homework first before signing up to long-term commitments which may hurt business in the long-run.
6. We've spoken a great deal about technology optimization in this interview. To what degree will Automation replace humans at hotels?
As a Revenue Director, I love automation and the efficiency it brings. However, I also have fantastic revenue management teams that I would never replace with optimization. Why? Because there needs to be a combination of both. We need humans to interpret the numbers and find the story behind them. Algorithms are great, but they need to be managed by humans with experience and an understanding of diverse inventory and customer profiles.
In short, automation should be used to free up humans to find solutions to complex business problems. It is not either-or, it must be both.
About Steffi Breitsprecher
Steffi Breitsprecher started her career working for a tour operator specialized in groups business before she joined MEININGER Hotels overlooking the revenue and distribution for six hotels, initially. Within 14 years Steffi has built an international team that has been instrumental in supporting the growth across the MEININGER hotel group planning to operate a total of 33 hotels by the end of 2021 with new openings in Austria, France, and Switzerland. Steffi is also a member of the Revenue Management & Pricing advisory board at HSMA Germany e.V.
Pedro ColacoMore from Pedro Colaco
GuestCentric is a leading provider of cloud-based digital marketing software and services that help extraordinary hoteliers promote their brand, drive direct bookings and connect with customers on all digital platforms. GuestCentric's all-in-one platform provides hotels with the only unified solution for managing their guests' online journey: award-winning, high impact websites; an integrated, easy-to-use booking engine; social media marketing and publishing tools; a GDS chain code and a channel manager to offer rooms on Amadeus, Booking.com, Expedia, Galileo, Google, Sabre, TripAdvisor and hundreds of other channels. GuestCentric is a proud provider of solutions that maximize direct bookings to hotel groups and independent hotels from collections such as Design Hotels, Great Hotels of the World, Leading Hotels of the World, Relais & Chateaux, Small Luxury Hotels and Small Danish Hotels. GuestCentric is featured on Skift Travel Tech 250, a list of the top 250 travel tech companies shaping the modern-day travel experience.