An opportunity for hotels to regroup, rethink and reset

All hotels have been forced to change the way they operate and for many, the immediate future is about damage limitation – managing cash flow and costs in particular.

As difficult as it may be, you need to think beyond just dealing with the now and should use this as an opportunity to regroup, rethink and reset and emerge from the crisis in a better position than you started. It is easy to forget how things were pre COVID-19, as it sometimes seems a lifetime ago. The reality is that most hotels were already facing increasing competition with consumers having more choice than ever before. Getting through the immediate crisis doesn’t guarantee continued success and there is always a need to build competitive advantage.

We remain hopeful that travel restrictions will continue to be eased, even if gradually. That being said, there are still huge uncertainties about the recovery timeline and the recovery pace will vary by destination and property types within the same destination.

Recent surveys however suggest that consumer sentiment is generally positive about travelling once restrictions are eased and it is therefore important to put yourself in the best position to take advantage of the rebound when it happens.

Over the past few months, there have been numerous articles addressing the devastating impact of COVID-19 on the hotel industry and giving advice on how to manage the recovery. Very broadly speaking, these cover three main areas:

1.     The impact of the new health and safety protocols on hotel operations and the guest experience

2.     The new trends in travel – some of these include: more domestic travel, less frequent trips but longer stays, the importance of technology, and shorter booking windows with flexible cancellation policies

3.     Strategies and tactics for business recovery – for example, creating new revenue streams, adapting revenue management strategies, building customer relationships, and being more creative to stretch marketing budgets

Rather than repeat plenty of already good advice on specific tactics to aid the recovery process, I have tried to take a step back and approach this huge challenge by identifying four fundamental questions, which if answered objectively and candidly, will give you a good indication of whether you are on the right track to emerge from the crisis in a stronger position. I have considered this with the hotel industry in mind, but most of these questions are generic and could be applied to most industries.

1.     Does your strategy make difficult choices?

This is a basic question but needs to be addressed. The global nature and size of the hotel industry lends itself to hotels trying to be all things to all people and keeping their options open. The problem is that this goes against the underlying principle of strategy – making choices. More specifically, making a series of choices that increase your odds of being successful. As this process forces you to eliminate options, it also tends to make you uncomfortable about making the wrong decisions. 

As you revisit your strategy, there are plenty of unknown factors to deal with. However, three things you can say with certainty, are:

·       Competition is more intense than you have ever faced before and will continue to be so for the foreseeable future. Hotels that were previously not regarded as competitors now need to be considered as everyone is competing for whatever business is available

·       Despite the industry in general saying the right things about maintaining rates, many hotels due to financial pressures, are significantly reducing their rates in order to secure business

·       You will be operating with fewer resources – almost definitely in terms of budget and probably in terms of staffing levels as well 

In the current environment, where demand is drastically reduced, it is natural to want to compete for all business opportunities. In the short term, this may be a necessity, but it is important not to continue down this path as the recovery process develops. You should think of the choices that you make as enabling you to maximise your limited resources most efficiently and allowing you to differentiate yourself from the competition. Your choices should be based on these three questions:

      I.         Where will you compete?

Choosing which market segments, geographic source markets, distribution channels, price points and competitors to focus on and which not to is critical and forms the basis of any strategy. Again, it is important to separate short-term necessity from your medium to longer term strategy

     II.         Do you have a compelling value proposition?

Why should your customers choose your hotel over your competitors? What makes you special or different? Providing meaningful answers to these questions is actually more difficult than we are sometimes willing to admit, and there is a significant difference between having a value proposition and having a compelling one. Even if you felt totally comfortable with your value proposition pre-crisis, it is worth re-evaluating by asking the question, what do your customers value most now and how has this changed due to the global pandemic?

    III.         Do you have a list of no more than 5 strategic priorities? 

Another obvious point but always worth a reminder. You should have between 3-5 strategic priorities that you believe will have the biggest impact on your business and focus all your resources and time on them. If you have more than five, they are no longer priorities and you will not have the resources available to execute them effectively.

2.     Do you have the capabilities to execute your strategy?      

A capability can be defined as a deeply ingrained ability to do something well in a way that improves business performance. There are four main components of a capability:

·       Competencies – skills, knowledge and behaviours

·       Processes – allocation of responsibilities, decision making processes

·       Tools & Systems (e.g. CRM, revenue management, website, digital & social media platforms, etc.)

·       Management – accountability, reporting structures, measurement and KPI’s

      I.         Have you identified the critical capabilities needed to execute each of your strategic priorities?

We know that good strategies often fail because of poor execution. As a starting point, you need to be clear about the critical capabilities required to deliver on each of your strategic priorities – you should be focusing on which capabilities will have the biggest impact on performance.

     II.         Have you identified the gaps between your required and existing capabilities?

Objectively evaluating your current capabilities can be difficult, but it is an essential task and is the best way to test your strategy. Make sure you are using your major competitors as a benchmark and listening to customer feedback.

    III.         What resources and how much time do you need to close the gap?

It makes sense to split this question into two parts, Firstly, the immediate recovery phase (next 6 months) – if you don’t have the resources or the ability to quickly develop the necessary capabilities, you should reconsider the strategic priority in question. Either modify it, or revise it completely. 

Secondly, your mid to longer term strategy (more than 6 months) – In such cases, there may be a justification to invest your time and resources into building the necessary capabilities.

3.     Does your culture encourage innovation?

Given fewer resources and greater competition, the relative importance of creativity and innovation is self-evident. Innovation is also one of the most over-used terms that almost every organisation will say is key to their success. The reality is that only some organisations are truly serious about making innovation a part of their culture. Those that do are able to answer yes to the following questions:

      I.         Do you encourage your team members and give them the capacity to think?

A culture of ‘busyness’ where team members are constantly trying to deal with day to day issues, is the antithesis of an innovative culture. Innovative thinking requires mental space – leaders need to free up capacity for employees to be creative. This can take many forms such as, a dedicated ‘innovation time’ set aside each week for teams to brainstorm ideas, or cross-functional teams coming together to work on common projects.

     II.         Are you able to make decisions and act quickly?

Clearly, there needs to be a process to assess good ideas with a certain amount of analysis and due diligence, proportionate to the size of the investment. However, good ideas should not be held up by over-analysis and bureaucracy – it can be very demotivating for individuals and teams who put in the time and effort to innovate. In addition, there may be a short window for successful execution, due to market conditions, competitor action, etc.

    III.         Is it okay fail?

Let me just state the obvious here – it is not acceptable to fail consistently, as apart from the financial consequences, it shows that you are not learning from your mistakes. However, failure is an inevitable part of successful innovation, and yet too often employees are terrified of failure and its consequences. As a business leader, unless you are comfortable with a degree of risk taking and failure, you will not create an innovative culture.

   IV.         Do you recognise and reward innovative behaviour?

Your performance management systems must support your goals. If you are trying to create a culture of innovation, you must reward and recognise innovative behaviour, including risk taking, even when results aren’t immediately positive. One way to achieve this is to reward the process and innovative thinking, rather than just specific outcomes and results. Sometimes, it’s as simple as verbally recognising your team members during meetings, to let them and everyone else know their innovative ideas are appreciated.

4.     Do you have an Effective, Cohesive team?

In today’s world of information transparency and rapidly changing technology, an effective and cohesive team, can truly be your one sustainable competitive advantage.

However, teams are made up of imperfect human beings and are inherently dysfunctional. In the current environment, everyone will be under more pressure than ever to perform during the recovery process. They will also be stretched and often taken outside of their comfort zone. It is critical that Hotel ExComs are completely aligned on the strategic priorities and overall direction. It just takes one member of the leadership team to be ‘off-message’ to create confusion and for dissenting voices to start to spread among the wider teams across different departments.

How can you evaluate the effectiveness of your team?

Dysfunctionality within teams can sometimes be obvious, but symptoms can also exist below the surface and only become apparent with further probing. This can be done through a combination of 1:1 discussions with team members and structured questionnaires. I like to use Patrick Lencioni’s “The Five Dysfunctions of a Team” as the basis to carry this out.

Lencioni’s basic premise is that truly cohesive and effective teams exhibit the following behaviours:

·       Trust – Are your team members comfortable being open to one another about their failures, weaknesses and fears?

·       Conflict – Are your team members unafraid of conflict and to engage in passionate dialogue around issues and decisions that are key to the organisation’s success?

·       Commitment – Are you able to achieve genuine buy-in around important decisions, even when some members of the team may have reservations? You cannot always have consensus.

·       Accountability – Are your team members comfortable to hold one another accountable for adhering to decisions and standards?

·       Focus on Results - Do your team members set aside individual needs and agendas and focus on what is best for the team to achieve success?

These are tough questions to address and it takes courage, discipline and persistence, driven by the General Manager and the ExCom, to turn teamwork into a real competitive advantage. Unless every member of the ExCom is fully committed to the process, it simply will not happen.

A couple of final points in summary: 

Whatever decisions you make for your business, a high degree of uncertainty currently exists, particularly with regard to time frames which means that flexibility and agility are essential to the way you operate. I doubt anyone would disagree with this, but it needs to be truly ingrained into your culture.

As I have said, these are some basic but fundamental questions to ask yourself – the key is to be able to address them with complete objectivity and candour. Use the collective experience of your teams to challenge each other to find the best solutions.

If anyone is interested to explore in more detail, the process of putting this into practice, please do contact me directly.

DAVID JONES

[email protected]