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08 Mar 20

How can you Hotel counter the Impact of Corona Virus / COVID 2019 | Hotel Management School

Question - How Does Corona Virus Impact Hotels?

Answer - Occupancies are down, mass gatherings have been canceled and tourist arrivals have dropped.

Hotels are impacted by Corona Virus in many ways.

  1. Hotels located in cities where coronavirus has an outbreak are directly impacted as inbound travel would drop to the lowest level. Peoples are generally scared to travel to such cities, Travel Advisories are issued and Insurance companies deny any medical or life insurance claims. Public companies would restrict the travel of their executives to such cities.
  2. Hotels Located in other countries but the Major source of guests coming from countries where outbreak happened is impacted due to the usual travel ban by countries to avoid the spread of infections. Since business in the country of outbreaks is also significantly impacted, it creates low levels of income and spending ability to travel in short to mid-term.
  3. Hotels which neither are in the country of infection nor have major guests coming from countries of the major outbreak are also impacted by general fear and avoiding not-necessary travel. Even though it may not affect significant business it will cause a drop in business levels necessitating cost control measures.

 

Question - How should hotels respond to the current coronavirus situation?

Answer -

Let us agree on one thing, impact of Corona Virus or any other similar outbreak such as SARS or MERS, etc are unavoidable, we may not be able to avoid impact of large scale crisis like this (Especially from large feeder market such as China, Europe), however, as a prudent business manager, you must be ready to pivot and minimize the impact as swiftly as possible.

Now What to do since the crisis has already hit. Whenever Crisis hits there is always an overall impact. Your hotel may or may not have Chinese guests however due to the ongoing spread of virus global travel would get a hit. You can tackle the problem with two strategies.

What not to DO – Let us discuss what not do first before we discuss what we should do.

  1. Don’t panic: Do not panic. Do not compare downturn periods with previous good periods. Think more in terms of long term decisions. Historical trends after various outbreaks suggest business turnaround gradually even stronger. Being cautious is good however there is no reason for panic as it does not help with any business results but may lead to wrong decisions.
  2. Don’t carry out broad-scale discounting to attract customers: No one would travel to specifically for availing deep discounts you would offering in general. It would take years to recover from the discounting hotels would be offering by reducing rate. Hotels should drop their public/retail rates. However, use the retail rate as the benchmark for discount rate programs and fence these discounts appropriately.  Consider this to attract the local business you may launch a special B2B offer or locals-only offer valid for a specific period and subject to specific conditions. In this way, hotel would not be diluting its rates but would be able to remove these when situation improves.
  3. Don’t cut your marketing budget: In the time of crisis, hotels may want to need to keep current guests and to develop packages and promotions that both attracted current and potential guests. If you cut your marketing budget, this won’t be possible. However be aware of spending your marketing dollars, instead of just continuing pouring money into segments that won't produce a focus on new markets and also postpone to adjust timing when the market is expected to bounce back. Hotels may continue to keep touch with the existing customer base by way of digital media or email marketing to share current situations, training, and social activities to keep brand value alive.

 

Now let us dive into a bot more details on what hotel should be doing in order to counter Crisis.

  1. Short Term Strategies
    1. Short term strategies include finding additional revenue opportunities and Expenses Management.
    2. Try to target the local market by offering to create special offers that serve market needs. Depending on the level on spreading infections of viability to travel, Few examples may be
      1. Staff Parties and Excursions
      2. School Holiday Promotions.
      3. Local guest experience packages
      4. Upsell existing customers coming to the property.

Important here is however to understandability and willingness to pay for such packages. Paying ability may not be the same as regular corporates.

    1. Cost Saving Measure. The traditional and time-tested measure may include
      1. Reducing hotel operations to the level of consistent occupancy and adjust duty rosters for employees to clear pending leaves.
      2. Energy Saving Drives
      3. Review of purchasing orders and stock positions.
    2. Maintain service levels: we have discussed cutting costs and managing costs however hotels need to ensure that cost-cutting are placed in areas of the hotel that have the least impact on customer service and the hotel image.
      1. don't reduce standards but add added value; guests are very sensitive to changes. Bad time is not forever and it could take a longer time to recover if you cut corners to save a buck!” If customer satisfaction and service quality are negatively affected, it will be more difficult to both maintain your current guests and attract new guests after the recession is over.  
  1. Long Term strategies to avoid a crisis or minimize their impact on hospitality

Now it is easier said than done – how do we avoid over-reliance on a huge market source such as china.

    1. Targeting Multiple Business Segments from different geographic regions.
      1. Instead of relying on one-two business sources or geography, hotel managers can think about how to transform solutions and services that may appeal to different customers. By adding little personalized touches different geographical guests can be targeted without modifying core facilities in the hotel.. Such as a translated menu, amenities
    2. Understanding the needs of all possible markets and develop an ability to target them in a balanced way
    3. The flexibility of Amenities offered with technological solutions.
    4. Translated collaterals
    5. Outsourcing of guest service centers for foreign guests.
      1. Maintain a healthy mix of fixed and variable expenses

Don’t put all your eggs in one basket - Most impacted businesses from coronavirus would be those relying heavily on Chinese travelers. When we rely on one market source heavily our business is always susceptible to disruption, it may be caused by a virus , economic slowdown, political crisis or any other situation alike.

Consider marketing approaches: Respondents felt that the development of smaller, less price-sensitive market segments worked as well.  Explore new market segments and new ways of promotions. Try not to drop down rates for all market segments, there are some of them that do not so price sensitive. We have to identify these guests and work hard to attract them to our property.”

Develop other new revenue streams (such as food and beverage or spa) within the hotel. We just have to diversify our business rather than relying too heavily on a particular business and geographic segment. At the same time, more emphasis has to be put on how to optimize revenue conversion from all revenue streams be it major or minor, which will ultimately help to improve bottom-line.

Keep these in mind as you plan and execute your strategy for getting through this. Don’t panic, think clearly and plan strategically. You’ll be fine!