Where is the Hospitality Industry as of Spring 2021?

Current conditions in the state of the hospitality industry include leisure travel, employee challenges and reinvented guest programming.

While I do not know how we are going to pay for the government spending plans, I do know that in the short-term, we will see huge growth in gross domestic product with some forecasters projecting over 6% for this year. Lenders are back in the game and traffic on the roads seems to me like an increase in business overall. To date, all of the hotel business, by and large, is leisure business. Longer weekends have been created by travelers who are working remote on Fridays and Mondays.

Leisure Travel Demand

What is missing from the travel growth is still business travel, group meetings and international travel. Those hotels and markets that rely on these sectors are still likely a year away from a meaningful recovery. The pent-up leisure demand is here to stay due to consumer confidence.

This is based on "revenge travel" as well as savings and vaccine success to date. Business travel will begin to improve this fall but there will be some travel budget cuts from many companies. Group and convention business will be based on meeting restrictions in each market area and international business is a year away. If business is generally coming back, what is not? Employees.

Employees Challenges

I have been in the hotel industry over 40 years and have never seen the employment challenges we have today. Did the pandemic do this to us? It's not that simple. In March, 2020, I had the opportunity to meet with all of our employees at a meeting. I called the meeting as soon as the pandemic was announced to advise our team of what our plan was. Unfortunately, we furloughed all line employees on that day.

Having been through myriad crises including fires, bomb threats, etc. I still felt shocked that I had to let our staff go. We had no revenue at all so I had a fiduciary responsibility to make the tough decision. This has not been a fun ride.

Retention

Fast forward a little over one year to Spring 2021 and now we are struggling to bring back those same employees. Some of those employees sought employment in other industries. Others found jobs at hotels that had recovered more quickly like limited-service hotels in suburban markets that had felt less pandemic impact. Others were afraid of the virus due to underlying health concerns, some chose unemployment and others had child-care responsibilities due to closed schools.

To succeed with our most valuable assets, we have to use caution to not overload our employees with extra responsibilities without rewarding them. This might be a good time for nice bonus checks and raises for those who have worked hard for the entire pandemic. With many other industries offering better benefit packages and salaries, we need to compete with these industries and look to become more effective and efficient. As Peter Drucker explained years ago, there is a difference between these. "Efficiency is doing things right; effectiveness is doing the right things."

Reinvented Guest Programming

We must change the way we take care of our guests. It's not less service, it is more of what they want. As an example, some guests want daily housekeeping. If we have to charge for that, either in the rate or as a surcharge, that is okay. Reorganizing our priorities is not a sin. Doing nothing is dangerous.

Let's use technology and reorganization to become more effective. A good example is providing meeting planners with a hybrid tool for meetings. We are investing in Cvent to drive more small meetings business and Zoom to provide the technology needed to host meetings.

Technology

Technology vendors can help us in many ways and while technology will not replace jobs, it can reduce the load on management. In our case, we have outsourced accounting, human resources and revenue management. All of those tasks were taking managers away from their responsibility to ensure that guests receive service. Kalibri Labs adds huge value to revenue management and analytics.

Guest Interactions With Hotel Managers

I have found our managers are now on the frontline, unburdened with sitting at their desk keystroking rate changes, suffering through paperwork overload and crunching numbers to get income statements done. It is time for us to be creative about our future. Let's talk to our guests and find out what each of them wants today. We have decided to provide more things to do for our guests such as:

  • Beer, wine and liquor tastings
  • Happy Hour programming with great appetizers from our chef
  • Unique grab-and-go product offerings for breakfast, lunch and dinner

The bottom line is that we must ensure that we optimize revenues and expenses to return to profitability. We are a great service industry that can outperform short-term rentals, overcome new supply and adapt to changes in technology and market trends. To the recovery!

Robert A. Rauch
+1 858 239 1800
R.A. Rauch & Associates, Inc.