Are you getting ready for the recovery period?

2020 was a year like never before. It was a particularly devastating year for the hospitality industry in particular - for the first time in history, travel was dependent on daily updates in the news, travel restrictions and lockdowns. Many hotels were forced to close down and millions of jobs in hospitality were at stake. For many hoteliers it wasn’t a question if there would be high or low demand, it was a question of whether to stay open or close  the hotel completely.

But that’s enough about 2020. Now, it’s time to look forward and think about the rebound. It’s also time to think about how you can position yourself to be successful in the new normal. Despite the many lockdowns that are still going on in countries across Europe and Asia, I believe that this one is different from the previous lockdowns for hotels. 

Here is why:

• During the previous lockdowns there was still a lot of uncertainty about vaccine safety and how to distribute them quickly on a global scale. Today we know that most countries are planning to have a big part of their population vaccinated by the end of March - April. For the first time in over a year, there is now light at the end of the tunnel
• We know that many hotels will re-open at the end of Q1 and people will start travelling again. Demand will gradually come back and will be still lower than pre-COVID, so it will be a very competitive world out there once countries are fully open again and business picks up.

The past year has made a major impact on consumers, and a significant impact on hotels:

Impact on consumer behaviour:

1. Consumers are following government rules and travel restrictions. For the first time in history, travel is heavily influenced by travel restrictions and lockdowns. It is no longer a question of high or low demand. Instead,  it’s a question of whether people are allowed to travel to this destination. The challenging part for hotels is that these restrictions are changing frequently. This makes it increasingly more complicated to forecast and understand what business will look in the upcoming weeks.
2. The booking window is much shorter. People aren’t booking months in advance since they aren’t sure if they will be able to travel, as restrictions are changing frequently.
3. There is a significant increase in domestic travel, due to the restrictions people changed their preferred way of traveling. With the risk of COVID more and more consumers are traveling by car in their own country. This means that people’s search criteria has also changed compared to pre-COVID. Facilities like parking - apartments, and studios  are increasingly more important nowadays
4. There has been a huge impact on corporate travel and hotels that had corporate and MICE as a key segment have suddenly needed to adapt and compete for leisure travelers with hotels they normally wouldn’t compete with. So with less demand than pre-COVID, but supply remaining the same, the competition for the customer is more dynamic.

Impact on hotels:

1. Demand drivers, historical data and YOY comparisons are irrelevant. With booking behaviour experiencing drastic change,  it is increasingly more complicated to make accurate forecasts. In the current market conditions,  historical data and patterns are not relevant. Many hoteliers need to follow the news to stay up to date about restrictions. 
2. More difficult to forecast and implement pricing strategies to drive Revpar.

With shorter booking windows, there is less time to respond to increasing/decreasing demand. Hoteliers need to be at the top of their game, all the time. Demand is significantly lower than pre-COVID,  so whenever there is an uptick in demand, hoteliers need to act in order to not lose out on valuable revenue. 

1. Less hotel staff, but workload remains the same. Many hotels have had to furlough or make a part of the staff redundant in order to keep their businesses alive. In general there are less staff and resources than pre-COVID. The landscape has become more challenging, with historical data and patterns increasingly irrelevant. The end result? More work needs to be done, with far fewer resources.
2. Increased competition from hotels that used to focus on other segments pre-covid: Corporate business has taken a serious hit since the start of the pandemic. Hotels that mainly focussed on this segment need to change their strategy and compete with other hotels to focus on leisure. This results in special promotions, flash sales, last minute deals and in general, increased competition in many markets since MICE is extremely low to non-existent at the moment. Often these business hotels have less favorable locations for consumers (close to convention centers and airports for example) so to compete for leisure business they need to try and win the customer on price. 
3. Increased competition from alternative accommodations: The searches for apartments - studios - aparthotels - alternative accommodation have gone up compared to the normal hotel searches (since many people feel safer in an apartment/ private house than a big hotel with many guests.) This is another challenge for hoteliers and means increased competition in the market.

Let’s take a step back and ask ourselves a simple question:  how did we conduct revenue management pre-COVID? A big part of revenue management was understanding the demand drivers, analysing historical data, pick-up and events.  Based on all this data, we would then start implementing pricing strategies that helped to optimise revenues.

The reality in 2021 is that the demand drivers will still be heavily impacted and historical data will continue to be mostly irrelevant, since booking patterns and behaviour changed significantly. So how can hoteliers understand when demand is picking up again?

Now is a good opportunity to look into new data points. If there is one constant that we learned from previous recessions, it is that technology and innovation has always thrived after a recession. One of the key objectives in revenue management is to understand when there will be high or low demand and optimise rates in order to maximise profits.

So, we should ask ourselves what is truly driving demand?

• Is it an event?
• Is it a festival/concert?
• Is it a school holiday

All of those are certainly influencing demand and are demand drivers but at the end of the day it’s the consumer that drives demand and decides to:

• Attend an event
• Go to a festival
• Go to a beach destination during a school holiday

If we take a look at other industries and the most successful companies like Amazon, Facebook, Google, Booking.com - they all start with putting the customer front and centre in their strategies. These companies make data-driven decisions based on forward looking customer data, including:

1. Finding and driving traffic 
2. Understanding where and when the traffic/customers are looking
3. Understanding the origin and interest of the customers
4. Showing the traffic/customer high converting products based on their interests

So why haven’t we done this yet in the hotel industry? We have asked many of our customers, including some of the leading hotel companies in the world. The main reason? It is extremely difficult to have access to all these data points, since there are so many platforms and channels to sell your rooms.  It’s considered almost impossible to bring all these data points together.

At OTA Insight, it has always been our mission to help the hotel industry in the best possible way, across the many challenges in the distribution, revenue and marketing landscape. We have been in discussions with many industry leading companies (OTA’s - meta sites - flight websites - event sites - rental companies - ….) and today we are honoured to help hoteliers with Market Insight, our new product that takes a look at pre-booking data points (e.g. where are people searching on all these sites? - for how long are they searching? - where are they searching from? - what districts are they searching for? - what hotels are they looking into?)

We are extremely proud and humbled that the hundreds of hotels that have subscribed to our Market Insight product are now among the best performing hotels in their locations. It really motivates our teams to keep enhancing our products and solutions to include more and more forward looking data points.

Another important change we have seen, (due to the increased competition that we talked about earlier), is that hoteliers need to understand that they are no longer only competing with their traditional 5-10 competitors they use to have. Twenty years ago, the larger brands were competing mainly with each other, because there wasn’t a lot of information available. So when a consumer had the option to book a Hilton or an independent hotel at the same location and for the same price, the majority would have picked the Hilton hotel because it’s a famous brand and they knew they could expect a certain level of quality.

The rise of the internet, OTA’s and review sites changed this, and competition became more dynamic. All information - reviews - HD photos - facilities - pricing - … are  now so easily accessible to consumers. With just a few clicks they can now compare several hotels and make a booking.

Today, if a customer has the option to choose between a Hilton hotel or an independent hotel, with the same location, same pricing, etc., then the customer will likely look online at facilities/review scores. If the independent hotel has a much higher review score, they will most likely go with the independent hotel. Competition has increased thanks to the transparency of the internet.

Nevertheless hotels still had some key segments which they would focus on (hotels with many meeting rooms or close to a convention center would focus on corporate and MICE business, while hotels in the middle of a city center or at a beach would probably focus more on leisure). In a way there was a distinction between hotels mainly focussing on corporate versus hotels focussing on transient business.

The pandemic has had a huge impact on this and with corporate and meetings down, suddenly everyone is competing for leisure and domestic business. This creates pressure on pricing. Hotels today are competing with everyone, in markets that are open and visible online to everyone, anywhere, anytime.

Perhaps now is a good time to step away from traditional compsets and start comparing yourself with your five traditional competitors. Important KPIs like occupancy should be measured versus the market, knowing everyone's competing for the same business. This is something we are currently working on at OTA Insight. We want to help hoteliers by offering these insights free of charge, as we believe it will be crucial information to help understand what is going on and key in helping hotels with the recovery phase.

To quickly summarise - I believe that the following factors are important for hoteliers to understand, hoteliers who grasp this will be better equipped for the recovery phase that is coming:

• Customer and booking behaviour has changed significantly
• Historical patterns and demand drivers are irrelevant, and we should focus on forward looking data
• More competition from hotels that have had corporate and MICE as key segments
• More competition from alternative accommodations
• Everyone will be competing for the same customers/business (OTA’s - hotels - chains - tour operators - other 3rd party websites)
• Travel will come back, but it will take some time to get back to pre-COVID levels. In the meantime, it will be survival of the fittest. The companies that understand their customers best will be successful
• More needs to be done with less, so now is a great opportunity to review and demo new technology and automation in order to help you make data-driven decisions
• You are no longer competing against your traditional competitors. You’re now competing against the entire market.

Today, OTA Insight is helping more than 55,000 hotels during the recovery. If you are interested in learning more or want to see how we can help you to prepare for the rebound , please feel free to contact us at: [email protected]