Fulfilling obligations, firming-up balance sheets, and securing adequate cash-flow for the duration of the crisis has become a considerable and vital challenge for any business leader and for any organizations.
Wise leaders and established companies have to be prepared for the worst and know that additional capital/loans may be required if the present unstable situation persists longer than anticipated. Survival is at stake.
Reflecting on the overall health of the hotel industry during the COVID-19 outbreak, I find there are many unanswered but crucial questions surrounding how hotel business will be reshaped during these trying times and also in the recovery ahead. Similar questions are also being asked by heads of hospitality organizations worldwide.
Here are just some of the questions which immediately come to mind:
- With the market already confused by a proliferation of similar-looking brands, who will survive and who will not? Cash is running out for many and …. without any income in the near future.
- How can new hotel projects be financed and positioned for sustainable value creation? What would be a lender's expectations for ROI and loan repayments?
- What do hotels of the future look like? Where are the new sources of business coming from? What’s their expectations?
- With safety a major factor affecting consumer behaviour, will customers now prefer to stay in smaller hotels rather than larger, branded properties?
- What do small operators have to do to compete and survive? What are their options?
- Who will be the best innovator/s in introducing clear competitive advantage products that stand out in the industry?
- What does a flat/lean/efficient corporate, or an individual hotel, structure look like?
- What is the best way to handle disruptors such as online travel agents and the sharing economy?
Observations and Views
Adjust to the moment and readjust over time
The travel and tourism industry is vital in any functioning economy, generating a considerable amount of GDP. The industry's global contribution, however, has been decimated by the COVID-19 pandemic, which has hit travel and tourism harder than any other economic sector. This unprecedented fall-off in demand has left the industry facing its toughest challenge ever, leading many companies to financial distress, cash crunches, and fighting for survival.
Preliminary indications are that hotel business has reached rock bottom in most parts of the world, and from now on, the only way is up.
Some regions and countries are showing signs of improvement, but, in general, there is a long and painful way to go to return to acceptable performance and profitability. An immediate turnaround is impossible.
In this period of 'doom and gloom,' hotel companies should use this time to reflect on, and try to understand and correct, the slip-ups of the past and ultimately plan for a brighter future. Look at this crisis as an opportunity to implement new principles and business models and strategies.
Think not where the organisation was going, but where it wants to be. This will require a total rethink and reboot from previous frameworks, structures, and dependencies.
Ironically, this destructive crisis has created a 'convenient excuse’ for any poor results generated (and that includes problematic areas and mistakes made prior to the outbreak). The hotel industry has to recognise and accept, however, that some important corrections were indeed necessary well before the crisis as performance/yields were gradually moving downward.
While the crisis has brought the travel industry to a screeching halt, remember that the world is not coming to an end. Undoubtedly, the industry will emerge from this dark period, travel will gradually return, and business will eventually start to grow and return to a position of strength.
However, the industry has to adjust to a changed market driven by different consumer needs, and readjust over time. The past is gone forever and it will not return. Preparing a well-articulated and practical recovery and action plan is a priority for everyone in this business. Plans should take into consideration shifting travel trends/expectations, the best ways to leverage brand strengths and competitive advantage, and also the continuous evolution of customer preferences.
Rebooting for a leaner, agile, and wiser future
Following the pandemic, behaviour at work must change and must adapt.
The business landscape will face multiple transitional changes (in some cases transformational changes) and hotel groups have to embrace new values based on the principles of Efficient Processes, Agility, Innovation, Entrepreneurial Drive, and Financial Viability. These will be the characteristics of any organisation seeking to redesign itself for sustainable growth. The extent to which organisations learn from the pandemic and set their learning strategies will be critical to future success.
Employees' values and expectations are also evolving rapidly and, now more than ever, people are looking for engagement, innovation, continuous learning, and open communication. The bureaucracy and micro-control of the past is out in favour of adaptability, a greater focus on people, and the opportunity to work together towards common objectives and goals. Mature and trusted leadership is essential in this crucial area.
Agile business practices are also essential. Hierarchical structures based on control mechanics are definitely over and hotel companies which do not recognise this will remain stuck or become obsolete. Leaders must promote agility and flexibility in all aspects of the business – from mindset and learning, to operation, innovation/technology, and, most importantly, in their ability to compete and perform in the marketplace. Of course, in this business, RGI and Profitability remain the key performance measurements, and this will not change.
The time it takes for the divided world economy to get back on its feet, coupled with the duration of official travel restrictions, will profoundly shape the future of the travel and tourism industry. We also have to accept that, in the medium term, most households around the world are expected to have less disposable income, and consumer confidence will be much lower than in the past.
No expert can predict the future, but there's no doubt that 2021 and 2022 will be very challenging years, and hotel business will be faced with new normal practices that, in addition to much more stringent and transparent hygiene and safety practices, must also incorporate:
- A leaner/flat/efficient management structure.
- The ability to operate profitably with lower occupancy levels.
- Multi-skilling and cross/functionality ensuring higher productivity and efficiency.
- Methods/products to inspire a new generation of discerning and demanding travellers.
- Increase in online business opportunities.
- A strong empowerment culture enabling effective decision making at all contact points.
- Technological transformation based on innovative, practical, and user/friendly solutions.
- New products and services, including wellness/well-being, healthy eating, and new-interesting F&B concepts, virtual/live events/conferences, sustainability, and others.
- Getting the basics right, and embedding long-term resilience.
Facing the new reality and implementing progressive/radical measures will be vital to surviving the crisis. Be future-ready in delivering your brand promises, and be absolutely clear about why travellers choose your destination and particular hotel. To stimulate demand, you must promote both, and offer a more authentic and purposeful product and/or service.
Hotels have to be sensitive and respond to the fact that, for the next couple of years, the volume of business is expected to be lower than normal and customers have a much wider choice of places to stay.
Now is the time for the whole management team to be fully aligned and made accountable for their actions/performance. All must contribute to assessing what's changed temporarily, permanently and fundamentally, and respond effectively. As an example – how much longer will it take to clean and sanitise rooms and public areas? And what is the cost of the new tasks and processes? (It will be interesting to see which of the current changes are temporary and which are permanent).
Take this opportunity to challenge existing norms, and align expectations and intended results. Reassess, re-evaluate, and strategize all aspects of the business, from changing consumer trends/sources of revenue to expenses and profitability. And remember that the future is all about building trust, as customers will only do business with organisations that they trust. Clear/frequent communication and transparency are essential to creating trust.
Caring and visible leadership is needed now more than ever.
Keeping each other safe and connected during this difficult period is everyone's responsibility. Mental health and psychological support services should be provided by all companies to help colleagues who are struggling with feelings of fear, anxiety, stress, depression, anger, or other negative emotions in these difficult times.
Companies must be very sensitive to this and provide all necessary assistance and guidance. It's important that leaders are visible and personally involved in people's well-being during these trying times.
We are all human, and we all have personal, family, and job-related situations to deal with. Always treat others with sincere empathy, and never forget that health – including physical and mental well-being – should and must always come first.
A 50 year veteran of the Hotel-Hospitality-travel industry with a wealth of experience acquired in 4 Continents, Asia in particular. A long term resident of Hong Kong and Retired Chief Executive Officer of Shangri-La International.
A board member of several large corporations and member of many industry related and quality management organisations. Founder of Angelini Hospitality, providing consultancy and advisory work to developers and hotels-travel-tourism organisations.
Recipient of two Honoris Causa (Doctorate) in Business Administration and in Global Business Leadership, four Lifetime Achievement Awards, the 2006 Corporate Hotelier of the World, Maestro del Lavoro (2014) and of several other recognitions and awards.