Hospitality Trends: Lockdown 2.0 – Now What?

Nov 13 / admin@aplbc

Hospitality Trends: Lockdown 2.0 – Now What?

This could be one of the best weeks for our industry in a long while. There are certainly grounds for optimism thanks to the recent news that there could finally be a credible vaccine available as soon as this Christmas. I have every confidence in its potential to accelerate travel industry’s recovery timeline, but at the same time, it is clear that there will be huge pressures on the corporates across the world to keep their business travel spend from getting anywhere near 2019 levels any time soon. We’ve shared some tips on how to best prepare your business for the weeks and months ahead.

A recent STR European hotel performance report confirms some of the worst fears: thanks to the second wave of Covid-19 related lockdowns across Europe, the region is the only geography globally currently trending downward in occupancy. Leisure demand has all but waned by now, and business travel demand hasn’t come back. The current situation is only about 20% better than in April.

China is leading the pack in terms of industry recovery metrics; the US is also fairing reasonably well, considering the steep rise in Covid-19 cases across the country. As for Europe, even as soon as the next 14 days business on the books is looking extremely weak, let alone 90 days. Cancellations are also coming in. ADR has declined, although the STR experts think it is not likely to get much worse over the next couple of months as hotels have found their optimal pricing. However, as more hotels stay open this time than in the previous lockdown in spring, there may be more fierce competition which would impact ADR performance.

Unsurprisingly, serviced apartments continue to outperform conventional hotels due to the segments they cater to. In a longer run, this could be helped even further by the corporates likely moving away from the home-share options (e.g. Airbnb) due to compliance management issues and competitiveness of offers within the hotels and serviced apartments.

So what should hotels do in the current climate, and is temporarily closing down your property the only feasible option given the bleak outlook at his time? STR case study offers some useful data to help with this decision. The hotels in the Edinburgh region (which was used for this case study) that either have stayed opened throughout the lockdown, or have opened prior to the end of lockdown have fared much better in the longer term, both in occupancy and ADR metrics, mostly attributed to customer loyalty, the familiarity of returning guests. So whilst closing might seem attractive, it makes it much harder to gain traction after opening, especially if opening after the lockdown had already ended. To be precise, your property could be around 10% below market in the short to medium term if you open later, so the revenue lost vs. the cost of staying open can be quite easily calculated to define the most optimal decision for your hotel.

If this wasn’t enough, the industry’s path to recovery isn’t looking very straight forward either. We know that in the top tier markets, the hotels’ occupancy is largely driven by international and corporate travel. We are currently witnessing an unprecedented crisis in aviation. Again, unfortunately in Europe, the industry has been hardest hit. It is now all but certain that this will be the worst year in aviation, ever; 50% decline in traffic, but almost 80% down on passenger traffic perspective! On the other hand, most corporate offices remain closed for the foreseeable future, and most of our key contacts within top global companies are reporting declines of up to 80% in their business travel traffic and many transient RFPs have been held off even still. In other words, the business is thin on the ground and all hotels are competing for the little that there is left.

How can you stand out from the competition?

1. Once the delayed RFP’s get eventually released, each programme will depend on the individual companies travel strategy. Nevertheless, safety and security will remain the number one priority for months to come. Lanyon Content Module now contains 59 questions on Covid Safety. If you haven’t done it yet, do make sure this section is accurately filled out. In addition, do update Lanyon and other tools with correct NAM and property level contact details as these may have changed due to staff reductions and furlough. The last thing you would want is to miss the opportunities due to out of date contact details being used.

2. Whilst safety is paramount, the global buyers are also realising that travel category is likely to be a buyers’ market, potentially as far as into 2024. So savings is as important as safety, and as we already advised previously, hybrid and dynamic rates is the name of the game. This is the first year ever that Lanyon is seeing 100% of the RFPs released via its platform accepting dynamic pricing. Whilst it is not mandatory, we strongly recommend our partner hotels to submit dynamic rates in parallel to the static rates. As we have already seen in our client programmes so far, and as now also confirmed by the likes of Pfizer and Advito, RFPs are shrinking by up to 60% of invited properties. Dynamic rates is increasingly seen by corporates as real opportunity for savings, and in addition programme consolidation continues to be seen as a real necessity in the current climate. After all, some top tier markets have seen their average rates deteriorating as much as 50%, compared to 2019 averages.

3. Many corporate buyers are expecting greater compliance with their travel programmes than in the past. Even the loyalty programmes might be less important than compliance, especially in the light of recent staffing reductions at many companies and many travellers being more conscious about the lack of job security. At the same time, travellers are expected to be a lot more vocal about their travel experiences. With safety so high on the agenda, it won’t be very hard at all to get removed from the programme if what you promise in your marketing collateral or the Lanyon Covid Safety module does not match up with the guest experience on the property! This is the time to really step up the game. Guest loyalty will be very important; travellers will go where they feel safe, and where hotels are doing a better job in communicating their standards.

As always, at APLBC we stand ready to help our partner hotels in Europe and other parts of the world to navigate the complexities of the current trading conditions. Whether you are unsure about conducting communications with your local bookers or would like to understand how your outdoor space can elevate your property to new hospitality heights, we are here to help.

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