Strategy needs to be ON even when the world is OFF

Question

It is completely understandable that most hospitality industry companies are focused on short-term survival right now. World, business and industry conditions require such attention. However, as time passes and we settle into our routines and manage to put out our most pressing fires, it will soon become time for the industry's leaders to look past the clouds of uncertainty hanging over us and take the necessary time to consider how firms need to position themselves once the pandemic crisis has abated and the world returns to normal. Strategy is about the future, and it is a mediator between the firm and the environment. It is what helps us to evolve proactively to changing conditions. Thus, while the crisis will in fact end one day (though we don't as of yet know when), it would be naïve to think that the After Corona (AC) normal will be the same as the Before Corona (BC) normal. New laws, new social norms and behaviors, changes to democracy and governmental intervention policies, employment shifts, and so on will have helped create a new world for people and firms.

The question, therefore, is what will the new normal look like in the AC world? More specifically, how will the decisions, actions and events of today shape the hospitality industry of tomorrow, and what can firms do to prepare for the changes to come?

Alex Sogno · Answer

The big question mark after the coronavirus crisis is, what will be the people's perception? In the short term, the customers and our employees will need to be reassured, with re-inforced hygiene control processes. Also, we expect customers to want more LOCAL: buy products locally made, eat local food, travel domestically... We shouldn't forbid ourselves to be optimistic, as this crisis will also generate lots of opportunities.

Dominic Seyrling · Answer

A lot of different angles could be reviewed with respect to the BC/AC comparison. From an owner's perspective, the current crisis will hopefully benefit us in the long term as we are currently busy 'unfixing' some of the fixed costs of our industry. The most significant factor clearly is payroll. As Europe and the US do not seem to be as successful as some Asian countries in containing the virus we may soon find ourselves in a prolonged period of subdued hotel demand which will put increased pressure on cost containment. Hence, simplistic operating models, select, yet experience-orientated service and technical advancements (having shied away from the hotel sector so long) such as automatic check-in will hopefully become the norm more quickly than would have otherwise been the case. Setting one's strategy in that direction could reap long-term benefits for all.

Scott Woroch · Answer

The longer this lasts -- the lockdown specifically, and then the threat of contracting Covid-19 -- the greater the likelihood that there will be more significant changes in behaviour. Certainly in the short term, when the recovery does start, large group and convention business will likely be the slowest to recover, as both travellers' willingness to meet in large groups, and corporates' ability financially to support those events will be compromised. Travelling closer to home -- staycations -- will likely surge, with drive to destinations likely to recover faster than long-haul destinations. The recovery and health of the airline industry will be a key contributor to hospitality. The sooner that access opens, and is increased with greater airlift, the faster the recovery will begin in earnest, particularly to long-haul and international destinations. Governments will be asked to step up, especially with the flag carriers, to support the recovery of the airline industry. Finally, hotel companies that are seen as good corporate citizens -- supporting their employees with financial aid and job reinstatement, and supporting their guests with more generous cancellation and rebooking policies -- will be remembered and rewarded.

Tim Weiland · Answer

The new normal in the western world may adopt more social gestures already long in place in many parts of Asia, where handshaking is less prevalent and wearing face masks in public has long been accepted as socially wise. We are a culturally diverse industry, and while we probably have not always been the fastest innovators, we certainly know the importance of adapting to everyone's needs on a personal level. This is in the DNA of every hotelier and this must not change. While the current situation certainly leaves the time to work on strategy and long-term plans, I can't help but wonder how many companies are currently ripping apart the projections they had made just 6 months prior to the whole crisis. Flexibility, creativity and a leaner, more dynamic structure will certainly help to recover faster from the current situation, to then quickly find our place in the BC world.

Anne-Marie Auriault · Answer

Even if we cannot predict when the start of the recovery process will be in each country, it should not stop us from making plans and adapt accordingly to a slow rebound. A most likely scenario is a U-shape type of recovery if the virus is contained, and we can start seeing a slow rebound (airlines reopen, diagnostic testing in place, etc.). Having said that, we could also be facing a virus recurrence with slow long-term growth and a muted world recovery (measures are not sufficient and social distancing continue during several months). Business travel is going to be impacted, where large companies will look at reducing business travels to meet sustainability goals and use technology in a more efficient way. However, leisure travel may come quicker, since people would like to get away from their homes if they can still afford some vacation. In order to prepare the changes to come, hotel owners and asset managers should seek to boost resilience and focus on: Operational considerations: sanitation, disinfectant, safety, cleaning, social distancing, testing, etc.Anticipate more alignments between owners and operators when the hotel would reopen, with a new structure of contractsManage hotels in a leaner way with new operating models, especially during the pre-opening periodRethink the fixed cost components to a more variable structureInnovation and Tech-savvy (infrastructure collocation, digitization, etc.)Leverage domestic supply chains to support our industryWork on revenue strategy: plan for domestic leisure segment, since corporate might be a long-haul segment to recoverAnticipate more M&A activities: “the bigger will get bigger “and consolidation will accelerate in the recovery. There is still a colossal amount of capital to be invested in our industryMore importantly, mitigate short term to mid-term cash flow prudently To conclude, we will keep facing more events like this more frequently. We need to make sure the tourism industry can withstand a future crisis.

Strategy needs to be ON even when the world is OFF

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Hotel Ownership, Development and Management

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