Hotels will need to invest a lot in their brand awareness
Stamatis Hatzilazarou
Board Member | Sales Director
H Hotels Collection
Going back three months ago, no one would have thought that in the next days, weeks, months, we would experience such an unprecedented situation. Global economy has come to a halt, markets have seen some of their biggest drops in history, oil prices have plummeted to, first time in history, lows, whole countries have been in total or partial lockdown, schools have closed and life as we knew it, simply stopped.
It takes time to “digest” such radical changes; even more time is needed to adapt our body, mind and soul to the present but most importantly to the future that lies ahead, be it short, medium or long term. And while every human being is currently trying to cope with the above situation, as an existence on this planet, businesses need to adapt as well. Humans and businesses are interconnected though and depended on each other, so, the faster humans understand what is going on and manage to adapt, the sooner they will manage to prepare and organize their new “business as usual”.
Tourism is not the only one but certainly one of the sectors most badly hit by the spread of the corona virus. Thousands of hotels have been closed, almost two-thirds of the world’s 26,000 aircrafts have been grounded and approximately 25 million people working in the tourism sector are currently either unemployed or partially employed but definitely uncertain about their future in this sector. IATA has warned that carriers face a $314 billion shortfall in ticket sales this year, and half of them face bankruptcy in two to three months without government help*
The financial damage that this sector is still experiencing, could only be compared to a soldier very badly wounded who undoubtedly will not survive without any help. But this soldier needs to be rescued, receive any help possible until he stands on his feet and then he must be given instructions on how to fight in the new battle field and of course he must be given the proper weapons in order to do so successfully. His experience before and after the incident will prepare him for the next battle. But let’s assume this soldier has been rescued somehow and he is back on his feet and on his duties. He is definitely carrying his scars which remind him of what happened and will always be present in every decision he makes. Let’s see how tourism will manage to cope in the medium and long term.
First of all, we need to stress that normality will not exist as we knew it until before the pandemic appeared; at least not before a proper vaccine or treatment is available to every human being on this planet and this, according to the medical experts’ opinion, is not expected to happen before the second half of year 2021. But still, after the vaccine is there, people will need some time until they forget and return back to old habits. For the purpose of this article let’s assume that life is back to normal, everyone is vaccinated and the danger named covid19 belongs to the past.
New technology will certainly be introduced in the business of tourism at a much faster pace than expected
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Challenges
First thing we need to expect is a series of measures that will ensure better hygiene procedures everywhere, from airports and aircrafts, to means of transport and hotels. This will logically lead to higher operational costs and a greater need for qualified and trained staff. Our estimation is that the tourism sector in the medium term will face a big shortage of staff who will probably try to change profession under the pressure of uncertainty which they now experience. In the long run the numbers will increase, as also the salaries should increase due to supply and demand dynamics.
Hotels will need to create and organize or reorganize and upgrade their own training departments, in order to properly train new staff and keep their current staff updated according to the new measures imposed. More staff will be needed in order to cope with the upgraded hygiene standards. Hotels might need to change their product in the medium term; MICE for example will take longer to recover as the ban of people gathering in closed rooms will continue. So, hotels whose main business was focused in this market will need to seek for other markets.
Tourism businesses will need to control their financial situation very well, as this will be a choppy ride for at least 2 to 3 years. New Investments will probably stop for a while and give more space to M&As, as companies already focus on keeping as much cash as possible and this seems to be their strategy for the next few years at least.
New technology will certainly be introduced in the business of tourism at a much faster pace than expected. More and more things will be done remotely and most of them will be available to everyone’s smart phone. Fast online check-in, and check-out, faster and more technologically advanced security checks, high tech cameras controlling people’s temperature, movements, gatherings in public areas are only some of the developments that will take place in a matter of months. And hotels will also need to adapt to this very fast.
Hotels might also need to change their way of operation if the buffets for example are banned from their restaurants. More staff to cope with the need to serve guests on their table, more staff in the housekeeping department to cope with the high standards of cleaning and disinfecting the rooms are only the beginning of a series of changes to take place.
Taking into account current trends concerning the climate, the food industry, the high rise in the number of people having allergies, the global production of food and the probably new client mix, our estimation is that hotels in particular will change the way they produce and o er food to their guests. More personalized services will take place and the one who does it better, he will get his market share for sure.
In relation to the above, more, greener policies, adapted and executed by hotels is a current trend and no one doubts that this will be the future. Climate will be our number one subject of discussion and concern globally and hotels will definitely not escape from this. They will need to reduce their footprint to the lowest level possible.
Destination brands at the moment and in the future will be more important than hotel brands in the short and medium term
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Business Survival
Quite some number of M&As will take place in the global market of tourism as well as many companies will seize their operations due to the damage done during the pandemic and due to the higher operational costs incurred after that. Businesses that will make it through this situation will have done so, probably with the help of a loan, so they will have to face a future with increased costs until these loans are paid in full. Some of them will “bend” under the pressure of loans and hoteliers for example will probably prefer to sell their properties to big hotel chains. This means that the market will change in the medium term and financially healthier group of hotels will emerge stronger after this crisis.
Travel Dynamics
The first people expected to travel will be of lower average age but in the long run, everyone will get back to travelling again. Slow pace of bookings is expected in the medium term, even with attractive offers by hoteliers, airline companies and Tour operators but this will slowly start to change and the financial losses will be replaced by profits
not long after people start to feel safe and companies manage to increase their prices accordingly.
The average length of stay is expected to increase in the medium term as people will prefer to travel less (reducing the risk of contamination during the trip) but stay longer in the destination. We are not sure if this will change soon but if technology in transportation in the next decade manages to evolve at the level that the time of travelling is reduced to 1/3 or even more (according to experts’ estimations), then people will be traveling much more often but stay for shorter period of time at a destination.
Destination brands at the moment and in the future will be more important than hotel brands in the short and medium term. A destination’s brand however will keep playing a very important role in the tourism development of any region. People will prefer to travel to destinations where they feel safe and where there is proper infrastructure. The marketing and promotion of the destination will be of crucial importance as the competition will be fierce.
A huge campaign focusing on gaining the trust of the travelers will need to start immediately and keep investing in this for at least 2 to 3 years, until people really trust that they will not be in danger while traveling.
Hotels will need to invest a lot in their brand awareness and their sales and marketing departments will need to adapt to new trends of attracting guests and increase their sales.
Online sales will probably increase in the medium and long run, but this will greatly depend on how safely the airline industry will get out of this pandemic. If the global number of airplanes provided by independent companies is reduced a lot due to bankruptcies and the supply of seats is not enough, then the tour operators will be the big winners. If, however, the opposite happens and Tour Operators are the ones who do not survive the pandemic, then more people will need to learn on how to book their holidays online, with or without the help of a travel agent.
All of the above might sound catastrophic to some ears; Tourism however has been present for a long time and being one of the most sensitive sectors, it has learned how to adapt
to changes. Let’s not forget that tourism is changing and reshaping constantly. In the eyes of the experts, this is another evolution of the sector. When this battle is over and the next one comes, everything will be just a memory, and tourism will still be there. People are not going to stop traveling. On the contrary, global traveling is expected to increase in the future. Companies will need to keep evolving and adapting to new realities; they will keep facing small or big crises, maybe even more frequently but they will be there.
Last but not least, when I am in trouble, I like to say that every obstacle comes for a good reason. Big events lead to big changes. Tourism is no exception.
*Information from The Blomberg magazine. How Coronavirus Will Forever Change Airlines andthe Way We Fly https://www.bloomberg.com/news/ features/2020-04-24/coronavirus-travel-covid-19-will- change-airlines-and-how-we- y
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