4 Points: Continuing the Discussion on Coronavirus Impacts

By Timothy Wiersma, Founder and Principal, Revenue Generation LLC, and chair of HSMAI’s Revenue Optimization Advisory Board

As the COVID-19 situation evolves daily, current events don’t stay current for long. HSMAI’s Revenue Optimization Advisory Board discussed the latest developments on a call on April 1, including how members’ positions have changed over the four weeks since the previous ROAB call. This was an opportunity for the group to discuss their greatest concerns and frustrations but also their thoughts about the very uncertain future ahead. We only had a short time to deliberate this but I get the sense we could have spent hours discussing this topic. Regardless here are a few takeaways from their discussion:

1. Corporate support: Several ROAB members at the corporate level mentioned struggling with how to handle giving troubled individual hotels under their brand additional help — financial or otherwise — because many of the properties have left consolidated centers for which they pay monthly in order to cut costs. “It gets to be a slippery slope, where we were in effect rewarding owners who have made the decision to cut ties with other resources by giving them support,” one ROAB member said. “But at the same time, we have a shared best interest in coming out of this optimally. It’s something we’re struggling with philosophically but also practically.”

Another member added: “We’ve looked at potentially getting owners to sign something where we take on risks that they’ll never pay us back for the service if they don’t reopen. But if they do reopen, they agree to basically pay us for the work that we do up until that point.”

Another member discussed the possibility of giving hotels a discount and reduced services if they want to stop paying for consolidated support. “I think when you’re making these decisions, you’ve got to think about what price points you’re going to need to come back into to get them back on service versus what it’s going to cost you to provide skeletal service to them now for free,” the member said. “To carry them for two or three months versus having to pay to get them back on a very expensive RSP plan is something that a lot of people are looking at right now.”

“I think in those scenarios, you’re making the decision that the company balance sheet or the brand balance sheet is making that commitment for the hotel owner,” another ROAB member said. “It’s an interesting dilemma.”

2. China’s model: At this point, it’s fairly clear that nobody has a solid idea of what will happen in the next 12 months or how the hospitality industry and the economy as a whole will be impacted. While China is starting to ease restrictions, several ROAB members said they don’t see this happening as quickly in the United States. China is perhaps not the greatest sample to follow but we do not have many data points to follow yet.

“They’re starting to book and loosening restrictions in Wuhan,” one ROAB member said. “But every time someone shows me that, I keep pointing out the fact that when this happened, they were totally locked down and we still haven’t done that. In the United States, there are still places not practicing social distancing. I’m really skeptical to believe anything in North America is going to follow the same pattern you’re seeing in China.”

Another member added: “We’re not going to be China. I’m not a guesser, I’m an analyst, and I think that China is a really terrible example for us.”

3. Economic concerns: Obviously, the economy is a major concern right now. “If this becomes a depression, there’ll be less money out there for people to go do this stuff,” a member said. “I’m not concerned about the virus, it’s the overall damage to the economy and how far this goes on. If things ease up and you get things lifted by the middle of May, it’s one thing. If it goes through July, then it’s probably a depression. There’s a lot of different things.”

“It’s impossible to forecast,” another ROAB member said. “Governments don’t know. Hotel strategy people like ourselves are being asked this question on a daily basis and I don’t think it’s fair. I have no idea when this is going to recover. All I can do is follow local legislation.”

4. Planning for the future: “Any strategy you put in now can get blown up in about two seconds,” one ROAB member said.

Another member added: “I’ve had a lot of thoughts about how I want to strategize revenue-wise into the future for what is the now, what is the recovery, and what is the after. But every time I get a great idea, something happens in the next 24 hours that makes that idea not even feasible.”

“You have this opportunity that you’re a brand-new company,” an ROAB member said. “If you’re going to reopen as a new company, how would you set it up? Would you do something materially different? You might not, but I think those are the questions you can have now and see what’s possible.”

The dialogue will certainly continue through the form of white papers, webinars, and leadership forums as we continue to navigate through this storm. All agree that now is not the time to panic but to show leadership and collectively share best practices to make it through to the other side and facilitate a recovery.

For additional information, insights, and tools, visit HSMAI’s Global Coronavirus Resources hub.

Categories: Revenue Management
Insight Type: Articles