The Travel industry’s growth over the last two decades has led to the corresponding growth of the Hospitality industry, a now $600 Billion global industry that directly and indirectly employs 250 million people. However, the recent COVID-19 outbreak is having a devastating impact on the world, leaving the travel and hospitality industries reeling from its repercussions.
Assessing the impact of COVID-19 on the hospitality industry
Across the globe, the entire industry stands in solidarity, supporting those affected and extending support to government efforts, like providing space to hospitals in need. Businesses are pitching in despite huge revenue losses, property shutdowns, and large financial cuts for employees.
Many large hotel chains have reported occupancy ranges below 50%, while in some areas, others are experiencing less than 15%, resulting in no revenue and facility shutdowns, all while having to maintain operational and fixed costs. Lodging businesses are set to decline 60-65% for Q1 YoY with a projected revival timeline of as much as 3-5 years to be at par with pre-COVID-19 forecasted growth. The main challenges faced by the industry are broad:
- Low occupancy, reduced revenue per available room
- Property shutdowns
- Financial implications
- Continued operational and fixed costs
- Unsure revival timelines
Implementing strategies for survival and growth
Reviving the hospitality industry and rebounding from the crisis will require its management to be patient. Key focuses will be twofold: reengaging past customers from where they left off and identifying newer non-core areas for additional revenue simultaneously to contain costs.
Here are some key actions the hospitality industry needs to take:
Rejig Revenue Management: Revenue Management needs to revise all forecasting models to revive business, leisure, and group bookings. This involves repricing inventory, as well as offering complementary services, promotional discounts, and competition-based dynamic pricing.
Reimagine Marketing: Marketing teams need to be creative with offerings -- now’s the time to try it all. For example, targeted marketing campaigns specifically focused on segmented audiences and goodwill offers for existing customers are recommended activities. Additionally, create customer-focused brand promotions across your channels -- e.g. special attention can be given to the specific steps taken to maintain hygiene on the premises to give customers the confidence to visit.
Alternate Service Model: During the crisis and recovery periods, hotels can look for alternative service models to increase revenue. Usage of conference rooms for social gatherings and catering services, as well as redesigning Food & Beverage delivery are some examples of improvised services.
Rationalize Finance: While taking measures to increase sales, hotels also need to decrease expenditure and capital costs – some of which will be difficult. Internal cost-cutting measures such as pay cuts and consumables cost reductions, along with external measures like tax concessions and loan rate revisions from banks and governments, are good starting initiatives. Capital spend cuts by deferring dividends payouts, expansion plans, and investment strategies will help hotels sustain working capital until the industry revives.
Building a resilient strategy for post-pandemic growth
Until things fall back in place, the hospitality industry will need to stay strong using tough, creative measures so they can sustain themselves, their employees, and their customers. The fighting spirit and the maturity of the industry that we saw following the 2008 market slump and 9/11 will be seen once again in the days to come.