Recovery from the COVID-19 Pandemic – What Should the Industry Expect?

By Trevor Stuart-Hill and William P. Perry, Jr.

Summary of Current Situation

The World Health Organization (WHO) issued the first situation report on January 21, 2020, noting 282 reported cases with 3 deaths. 91.5% of these cases were found in the Hubei Province in China (World Health Organization, 2020).   Just 66 days later, as of March 27, 2020, the global cases had risen to 509,164 with 23,335 deaths and 10 days after that more than doubled to 1.21 Million cases and 67,840 deaths. The United States currently represents 25% of the total global cases up from less than 5% in the past 10 days (World Health Organization, 2020).  US experts anticipate the total number of infected patients and deaths to continue to grow exponentially in the coming weeks.

According to CBRE’s Senior Managing Economist, Jamie Lane, the lodging industry will face two significant headwinds: the continued need for social distancing and a contraction in overall economic activity.  CBRE estimates that overall RevPAR will decline by 37% in 2020, driven by a contraction of more than 60% in Q2.  Prior to the COVID-19 pandemic, CBRE had forecasted a 0.1% in overall RevPAR decline (Lane, 2020).

Changes in annual RevPAR are expected to be worse in 2020 than the economy experienced in 2001 and 2009 combined.  However, according to CBRE, the economy should rebound quickly and more strongly due to a resiliency in travel demand and a strong hotel revenue recovery plan.  Further, CBRE estimates RevPAR could recover stronger than prerecession levels by 2021 (Lane, 2020).

Source: CBRE Hotels Research, STR, March 2020

CBRE concludes that as the pandemic slows down, hotels should start to stabilize in the third and fourth quarter of 2020, with estimated growth for 2021.

While the start of a recovery in the third quarter is encouraging, it should be noted, there is concern by some industry leaders that US hotel occupancy did not fall as quickly as it did in other countries, which means a lot of people were still traveling.  This movement of people could continue to spread the virus and prolong the pandemic, thus delaying the start of a recovery (Sorrells, 2020).  The continued monitoring of US travel patterns and rate of new infections will be important to understanding the pace of the virus. It is still difficult to pinpoint exactly when the recovery would start with any degree of accuracy; however, this isn’t the first shock the hospitality and tourism industry has experienced, so understanding what has happened in the past may allow us to draw some conclusions around what may happen during this crisis.

Summary of Historical Demand Shocks

SARS:

In November 2002, the first case of SARS was reported in Guangdong, China. By March 2003, a global alert for China, Singapore and Vietnam was issued.  WHO announced SARS had been contained by July 2003, approximately nine months from the start of the crisis to containment (Smith Travel Research, 2020).   The following chart illustrates the ADR and Occupancy as a result of the outbreak with the lowest occupancy month being May 2003 at approximately 18%.  It is important to note how quickly ADR and Occupancy recovered once the virus was contained.

Note that October occupancy performance year over year (YOY) was almost the same as pre-SARS, and ADR grew the following year (Smith Travel Research, 2020).

Additionally, the data indicates that recovery can occur quickly if a pandemic is well contained and public fears can be put at ease.   If the COVID-19 follows the SARS history, it would mean the hotel industry could be re-stabilized, albeit at a lower level than 2019 prior to the end of 2020.  We view this “V” shaped recovery as a best-case scenario.

Mainland China Hotel Performance (pre- and post-SARS Outbreak)

2002-2004 (absolute occupancy, absolute average daily rate)

Source: STR, February 2020

Another example of a pandemic recovery relates to the swine flu outbreak in Mexico City.  According to Deloitte analysis using STR data from 2009 (Travel and Tourism Competitiveness Report, 2015), Mexico City experienced a 50% decline in occupancy levels at the end of April and early May of that year, but was in recovery by early 2010.

September 11, 2001 and September 2008 Financial Crisis Hotel Performance:

According to a study conducted by Cornell University, in cooperation with STR, using data from 34,695 hotels from 2000-09, the researchers analyzed changes in RevPAR for US hotels in the Upper Upscale category from the 9/11 Terrorist Attacks and the September 2008 Financial Crisis (Enz, Kosova, & Lomanno, 2011).

The study found that upper upscale hotels recovered RevPAR within four months from both events.  The study concluded that the terrorist attack had a stronger and immediate negative impact on RevPAR than the financial crisis of 2008.  The authors argue that the financial crisis had a longer duration and there was a sharper decline two months after the event due to the fall of Lehman Brothers.  Both events performed in very different ways (Enz, Kosova, & Lomanno, 2011).

The key in both these situations seems to be uncertainty and lack of consumer confidence.  After 9/11, the US government put additional security measures in place, which helped consumers regain market confidence and accelerated RevPAR growth and stability.  In contrast, there was lingering uncertainty surrounding the 2008 financial crisis, which lead to a continued RevPAR decline after the event, and a slower start to the recovery.  However, once Congress and President Bush introduced a Stimulus package in February 2009, the economy began to turn around.

Based on this analysis, it could be concluded that once the economy starts to recover, with government assistance, RevPAR performance would behave more like the 9/11 economic shock, versus the 2008 Financial Crisis.

The chart below shows the RevPAR changes over time for US upper upscale hotels:

Source: STR, Cornell University, February 2011

In broader terms, CBRE data suggests that demand for the entire US hotel industry (all classes of hotels), starts to realize recovery within seven months from the event (Lane, 2020).  Economy and midscale hotels were slower to recover than upper upscale and luxury hotels (Enz, Kosova, & Lomanno, 2011).

From a macro point of view, considering SARS, 9/11 and the financial crisis of 2008, the data suggests recovery starts at the point consumers feel confident that a crisis is under control.  Further, stabilization and recovery in the hotel industry occurs between 4 to 7 months and is largely tied to GDP performance   (Travel and Tourism Competitiveness Report, 2015).

Conclusion

Once the number of new cases stabilizes or starts to decline (which some experts believe may happen late April, following the peak of the crisis) economic experts believe a recovery may happen relatively quickly.  While we expect to see continued RevPAR declines throughout the month of April, if historical trends hold, the outlook is very encouraging for a late Spring to early Summer rebound.

In terms of market segmentation, we anticipate that leisure segment will recover first in markets with lower population densities (i.e. resort and rural locations) as leisure guests continue to avoid large crowds for a time.  Conversely, we project business travel and small meetings to recover first in urban markets.  Overall industry figures are likely to be skewed toward a steeper group recovery than what is typical following a shock, as many meetings, originally scheduled for March – May, 2020 haven’t cancelled, but have elected to push back to later in the year.

While the potential for a “V” shaped recovery as we head into Summer is encouraging in the short term, it is important to note that the CBRE projection of a 38.3% growth in RevPAR in 2021 followed by a 13.4% growth in RevPAR in 2022 barely gets us back to 2019 levels.  A further erosion of GDP, a false stock market rally that peaks then falls, lack of pricing growth in negotiated corporate rates for 2021, or smaller regional reoccurring COVID-19 outbreaks could provide for additional headwinds towards recovery.  That said, our industry is a resilient one, so undoubtedly, just as we have done following previous demand shocks, we will emerge stronger, more focused and even better prepared to serve our guests in meaningful ways.

 

Trevor Stuart-Hill
Founder/President

Trevor is the founder and president of Revenue Matters. He sets the cultural course, provides the strategic direction and oversees the performance for each of Revenue Matters’ three operating groups.

He co-authored the first college-level textbook on the subject of revenue management that is currently being used for teaching this discipline around the world. He was a founding member of the Hospitality Sales & Marketing Association International’s (HSMAI) Revenue Management Advisory Board and is a former chair of the association’s Digital Marketing Council.  Trevor has been recognized by HSMAI as one of the hospitality industry’s top 25 minds in sales and marketing.

In previous corporate level roles, Trevor defined revenue management strategies, including developing pricing and distribution approaches for both Sage Hospitality Resources and Destination Hotels & Resorts. Prior to forming Revenue Matters in 2009, Trevor was primarily responsible for the account management function for the Americas Region at Sabre Hospitality Solutions.

William P. Perry, Jr.
Director of Revenue Strategy

Will is a seasoned hotel professional whose career spans more than two decades both domestically and internationally with major hotel brands including: Ritz-Carlton, Marriott, Hilton, The St. Regis, Hampton, Conrad, and numerous independent properties. His experience consists of hotel operations, sales, hotel development, asset management and revenue strategy.

He has co-authored several academic papers on hospitality and tourism in both the US and Africa, and was featured in in Joseph Michelli’s book, The New Gold Standard: 5 Leadership Principles for Creating a Legendary Customer Experience Courtesy of the Ritz-Carlton Hotel Company (published by McGraw-Hill).

He holds a BA from Stetson University, an MBA from Georgia College and a Master of Human Resources from Rollins College.

References

Enz, C. A., Kosova, R., & Lomanno, M. (2011). The Impact of Terrorism and Economic Shocks on U.S. Hotels. Cornell University School of Hotel Administration, Ithica, NY. Retrieved March 28, 2020

Lane, J. (2020). An Updated 2020 Outlook Expectations for the Year Ahead. CBRE, Hotels Research. CBRE Research. Retrieved March 25, 2020, from https://www.hotel-online.com/wp-content/uploads/2020/03/CBRE-Updated-2020-Outlook-03272020.pdf

Lee, A. (2020). These states have implemented stay-at-home orders. Here’s what that means for you. Retrieved March 27, 2020, from https://www.cnn.com/2020/03/23/us/coronavirus-which-states-stay-at-home-order-trnd/index.html

Smith Travel Research. (2020). COVID-19 webinar summary: 5 key points on U.S. & Canada (26 March). Retrieved March 27, 2020, from https://str.com/data-insights-blog/covid-19-webinar-summary-5-key-points-us-canada-26-march

Smith Travel Research. (2020). Looking back at the SARS outbreak and hotel performance recovery. Retrieved February 2020, 2020, from https://str.com/data-insights-blog/looking-back-sars-outbreak-and-hotel-performance-recovery

Sorrells, M. (2020). Data shows severe impact of coronavirus on global hospitality industry. Phocuswright. Retrieved March 26, 2020, from https://www.phocuswire.com/str-global-hotel-data-march-21-coronavirus?utm_source=RockCheetah+Hospitality+Update&utm_campaign=41835d0b3c-rhu-242-20200327&utm_medium=email&utm_term=0_f0eb611cba-41835d0b3c-468298221

World Health Organization. (2020). Coronavirus disease 2019 (COVID-19) Situation Report – 67. Retrieved March 27, 2020, from https://www.who.int/docs/default-source/coronaviruse/situation-reports/20200327-sitrep-67-covid-19.pdf?sfvrsn=b65f68eb_4

World Health Organization. (2020). Novel Coronavirus (2019-nCoV) Situation Report – 1. Retrieved March 27, 2020, from https://www.who.int/docs/default-source/coronaviruse/situation-reports/20200121-sitrep-1-2019-ncov.pdf?sfvrsn=20a99c10_4

Travel and Tourism Competitiveness Report (2015). Chapter 1.2 Adapting to Uncertainty – The Global

Hotel Industry. Retrieved April 6, 2020, from https://reports.weforum.org/travel-and-tourism-competitiveness-report-2015/chapter-1-2-adapting-to-uncertainty-the-global-hotel-industry/

Some content originally published by Hotels.

Best Practices for Hotel Management Company CROs Responding to COVID-19

By Kaitlin Dunn, Writer, Hospitality Sales and Marketing Association International (HSMAI)

HSMAI hosted a Hotel Management Company (HMC) Chief Revenue Officer Virtual Roundtable on March 25 that focused on the impact that COVID-19 is having on hotel revenue optimization. In addition to discussing key indicators they are using to track how the hospitality industry is doing, HMC CRO participants shared their best practices, lessons learned, and ideas for preparing to accelerate as quickly as possible. Here are five of their suggestions, presented in their own words:

1) EXPLORE NEW STAFFING MODELS:

  • “We’re lucky enough to still have 90 percent of our corporate team, but completely redeployed our team into a secure division, a support division, and a succeed division. Succeed is focused on ramping back up — procedures, staffing, strategy plans, markets to proceed with, staffing messaging, communicating with properties. It’s been our main focus.”
  • “Our best practice is the way we now engage with each other. We’ve had to become a baseball team like no other. Everyone has a specific role, but we have to toss the ball to each other in a way we haven’t had to before. Our culture is usually to make sure hotels have final say on strategy, but we’ve had to make some across-the-board decisions for all hotels, immediately going to implementation.”
  • “We’ve formed a response team right away that has a representative from each discipline across the company that’s a resource for anyone to come to. It’s worked well across the field.”

2) WORK ACROSS MARKETS:

  • “We have been focused on a solid post-COVID plan, taking as much information across markets as we can to build that. We’re also synergizing our efforts across markets and sharing knowledge across markets. We’ve been heavily focused on our weekly forecast across all markets, so we’ve come up with a market-level focus for each market as well. We are also gathering a lot of digital information and consolidating it on a common forum.”
  • “A lot of hotels have been mandated to close, so what we have done is create more efficiencies to share contacts across different markets. We’re having a daily sales, marketing, revenue, and ecommerce call with everyone. We’ve had to move the call center to remote, and that’s working very well, so that it will probably remain like that instead of moving back to a building.”

3) RECOGNIZE YOUR TEAM MEMBERS’ WORK:

  • “It’s been exciting to see my team in the field step up. They’ve been sharing what trends they’re seeing, leads that come in. We’re trying to focus on the good things we’re seeing.”
  • “The ingenuity I’ve seen from our sales team has been unbelievable. We’ve been able to see who the hunters are. I was blown out of the water a few weeks ago by one of our directors of sales. The ingenuity and the hunting have been phenomenal.”
  • “We had to lay off a lot of employees last week, but those who have remained showed great compassion and empathy toward those who were furloughed. They’re all having to learn different brands that they never thought they would have to know three weeks ago. This is a great time for cross-training, and they are willing and open to learning.”

4) STREAMLINE PROCESSES:

  • “We streamlined our process for responding to leads, so we can respond to them more quickly. Long-term, we are developing several rules as things get rebooked into the second half. We want to make sure we are layering appropriately to avoid displacement.”
  • “Our biggest change has been the multiple versions of forecasts — making a best case, worst case, etc. It’s helped eliminate some of the day-to-day forecasting and saved us time.”
  • “A lot of it is having the team go back and focus on the basics of the business. The only function of the sales department is to go out and find business and sell to them.”

5) FOCUS ON RECOVERY:

  • “Anything that we can put together that’s hopeful or positive looking forward is more important than ever and is better received by employees. I look forward to putting that together for each property.”
  • “Out of every catastrophe comes permanent change. We’re looking at where we’ve cut costs and what we can use as an opportunity to cut savings moving forward.”
  • “We’re focusing on when we are going to reopen and what happens then, instead of focusing on right now when we’re closed. We’re cross-training our revenue team with other departments who can’t work remotely. We’re also making sure we’re educating teams that discounting isn’t the best way to go.”

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

Best Practices for Brand Revenue Professionals Responding to COVID-19

By Kaitlin Dunn, Writer, Hospitality Sales and Marketing Association International (HSMAI)

HSMAI hosted a Brand Chief Revenue Officer Virtual Roundtable on March 24 that focused on the impact that COVID-19 is having on hotel revenue optimization. In addition to discussing key indicators they are using to track how the hospitality industry is doing, brand CRO participants shared their best practices, lessons learned, and ideas for preparing to accelerate as quickly as possible. Here are six of their suggestions, presented in their own words:

1) RETAIN STAFF:

  • “You have to have a date [that hotels are closed/open], but every time the date shifts, you have a lot of work ahead — to cancel reservations, move things around, reconfigure selling strategies — and if you don’t have someone tethered to that property, you’re not going to be able to do that effectively. What we don’t want is a hotel, even one that’s closed, to have no revenue management oversight.”
  • “We’re streamlining the process to respond to local government requests so we can provide rates faster, which requires revenue managers to be on hand at the hotels, so it’s a really good opportunity for revenue managers.”

2) UTILIZE TIME OFF:

  • “We’re encouraging people to make the most of their time to be productive, even if they’re on furlough. There’s lots of online learning resources available. Use the time to get to things you never have time to get to.”
  • “Our situation is unique, but nobody has been furloughed and everyone is on the clock. They all have a laptop, so we have the expectation they will be advancing their training and skillsets. I think we’ll be a lot better equipped when we come back.”

3) CAPTURE EVERY OPPORTUNITY:

  • “We came up with a national healthcare rate for all hotels. It makes it easier for traveling nurses and doctors. Another business we still have is government travel and extended-stay travel, for travelers who can’t go back home.”
  • “We’re looking for areas of opportunity to drive rate in the future, Q4 and 2021 in particular, with all the pent-up demand. There have been so many events canceled, so I think that there is going to be an opportunity to drive more than the traditional year-over-year rate increases.”

4) COMMUNICATE PERSONALLY AND FREQUENTLY:

  • “Our agents sent out 6,000 calls to let customers know that we were closing and offer to rebook them at a later date instead of just sending out a mass email. The feedback was very positive, and it kept our call-center employees employed.”
  • “Early on we set up daily calls with all our teams, to make sure we’re all touching base and giving reassurance to our revenue managers about how we’re supporting our teams. It’s important to go out there consistently and make sure everyone knows what our strategies are.”
  • “We’ve been having town halls with all of our member hotels, showing them the value we have is important, and we’ve had a high level of participation. We’re sharing what our strategies are and what’s happening and giving them some reassurance. We want to show our hotels we have their backs.”

5) HAVE A PLAN:

  • “Have a date and work back from it. Know what you need to do leading up to that, because you do not want to be caught flat-footed coming out of this. I really think that revenue management is going to be a part of the solution and ensuring we come out of this strong.”
  • “We’re sharing best practices with not just the revenue teams but the hotel operators. Discounting does not create demand, so we’re making sure we’re setting ourselves up to come out of this and not digging ourselves into a bigger hole.”

6) CONSOLIDATE AND REASSIGN STAFF:

  • “We’re consolidating revenue management for our closed hotels and using regional teams to cover some of our hotels, because they know the hotels pretty well.”
  • “We’re having directors of sales work the front desk when guests are checking in, so they are selling to those guests. We’re trying to imprint on them that it’s business as usual, you just have a smaller target. They’re driving through town and seeing who is staying in town, so everyone can focus their energy on those targets. They’re still bringing in negotiator rates. It’s old school, but everything is on the table right now.”

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

Key Indicators for Hospitality Marketing Professionals

By Kaitlin Dunn, Writer, Hospitality Sales and Marketing International (HSMAI)

HSMAI hosts regular Executive Roundtable programs for senior hospitality professionals to meet and discuss relevant issues. Typically, these are face-to-face events, but due to the coronavirus, HSMAI hosted a Chief Marketing Officer Virtual Roundtable on March 31 that focused on the impact that COVID-19 is having on hotel marketing. Here are four key indicators that CMO participants said are helping to guide their strategies and future planning:

1. GOOGLE SEARCH TRAFFIC AND BEHAVIOR:

One Virtual Roundtable participant said he’s heard that hotel search traffic is currently down 56 percent from last year. “That really only dropped three weeks ago,” he said. “Consumer sentiment was normal at the beginning of March. Another month from now, a lot will have happened.”

Another participant said that her organization is still seeing online traffic but not bookings. “We see that people are still dreaming,” she said. “We’re seeing impressions, but the demand is not there.” She has also seen a correlation between less traffic and government action — i.e., shelter-in-place orders — rather than a correlation between the traffic drop and confirmed cases of coronavirus in the area.

Another participant cited a travel-intentions survey done by Google in which 76 percent of respondents said they are not likely to travel in the next three months — up 10 percent from the previous week. “We’re all seeing this rapid decline in intent, which is leading to the search volume dropping,” the participant said. “It keeps getting less and less likely that they’re going to travel in the near future.”

2. DATA POINTS:

Several participants mentioned Worldometer, a tool that helps track the spread of COVID-19, to see when it may peak by region. “If you take that data and combine it with sentient data and Google data, you may be able to figure out when you’ll be able to go back to market,” one participant said. “Hopefully we’ll see some signs of life by connecting all these dots.”

3. CVENT LEADS:

One participant said they were surprised to see that pre-coronavirus Cvent predictions weren’t as far off as expected. “We found that our Cvent pipeline in Asia is only showing a deficit of 10 percent,” one participant said. “We’re seeing a tremendous amount of activity in mainland China particularly. We’re taking all those trends and layering them into Europe. It’s been tracking pretty consistently.”

4. RAPID CORONAVIRUS TESTING:

One participant predicted a world in the next 60 days where rapid coronavirus tests are easily accessible — and where people have to have a negative test in order to travel. “My hope is that is the way we get back to business,” the participant said. “Then we hopefully have domestic leisure travel and business travel kicking back in.”

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

Key Indicators for Hospitality Sales Professionals

By Kaitlin Dunn, Writer, Hospitality Sales and Marketing Association International (HSMAI)

HSMAI hosts regular Executive Roundtable programs for senior hospitality professionals to meet and discuss relevant issues. Typically, these are face-to-face events, but due to the coronavirus, HSMAI hosted a Chief Sales Officer Virtual Roundtable on March 26 that focused on the impact that COVID-19 is having on hotel sales. Here are three key indicators that CSO participants said are helping to guide their actions during the pandemic:

1. FLEXIBILITY AND THE OPTION TO CANCEL:

All of the participants agreed that it is important to be flexible with customers right now, allowing them to cancel or rebook easily, because there is so much uncertainty. “We are allowing flexibility as long as it ties to being illegal or impossible,” one Virtual Roundtable participant said. “People are looking for a COVID-19 clause that gives them a level of protection separate from a force majeure clause.”

Several participants said that they are trying to keep long-term clauses in place but being as flexible as possible in the short term. “There’s still so much anxiety in the near term,” one participant said. And several participants also said they are already seeing a number of rebookings — some as early as June.

2. WAIT-AND-SEE APPROACH:

Several participants said they haven’t seen a huge decline in bookings for June yet and are hoping that things will start to turn around then, but acknowledged that so much is still unclear. “March was brutal, April is a disaster, May is going to be rough,” a participant said, “but June is holding.” Another participant added: “They want to have their meetings in June. It’s still wait-and-see, but we’re optimistic.”

However, several participants affiliated with hotels in Las Vegas said they are seeing massive cancellations through June and even into July, a trend that could continue to other regions as well. “If the CDC makes a further recommendation,” one participant said, “I imagine we will see more cancellations into June.”

3. CONFIDENCE THAT BUSINESS WILL RETURN:

While customers are hopeful that they will be able to travel soon, it’s still unclear just how soon that will be. “People want to get back to business, but how quickly they will be able to depends on how this pans out,” one participant said. “It’s really too early to predict.”

Several participants said they believe that it will be leisure travel that returns first, as people will want to get out and travel after being cooped up. One participant has seen that trend already in China, as restrictions are being lifted. “I won’t be surprised if that happens here,” a participant said, “but the challenging part is predicting where and when.”

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

CURATE PRESENTS: How to Be a Hospitality Revenue Leader During COVID-19

By Christopher Durso, Vice President of Content Development, Hospitality Sales & Marketing Association International (HSMAI)

When you’ve been honored with one of HSMAI’s Lifetime Achievement awards, it means that you’ve had a long, accomplished career in hospitality — and that you’ve seen a thing or two. Robert Cross, who received the Vanguard Award for Lifetime Achievement in Revenue Optimization, certainly fits the bill. And the chairman of Revenue Analytics and author of the classic Revenue Management: Hard-Core Tactics for Market Domination, had a lot to share when we recently talked to him about how hospitality revenue professionals should be responding to the coronavirus crisis — a conversation inspired by “Leadership in Changing Times,” which was to have been the theme of our Spring Curate 2020 event until COVID-19 forced its cancellation.

Cross’ main advice for hospitality revenue optimization professionals right now: This is your time.

Does this situation remind you of any previous crises that you’ve experienced in your career in hospitality?

No, I’ve got to say it’s the worst aspect of two that come to mind — 9/11, with the immediate grounding of the airplanes, and then the financial crisis of 2008–2009. You put those two together and then multiply them by pi, I think that’s probably what we’re looking at. It’s got that immediacy effect, plus it’s going to have a long tail. There’s just no doubt about it.

How is coronavirus impacting your business?

About half of our clients are travel and transportation. Half of them are cruise lines and hotels. So, it’s affected us, but nothing like it’s affected them. We’re trying to do what we can for them. We had some big batch reports that we ran weekly for them, so we’ve redone them so they can run daily, because they need daily news of what’s going on. We’ve done a lot of ad hoc reporting, because we have such big databases and because there are questions about, well, what’s happening here in this marketplace? For some of the forecasting models and things like that, we’re resetting parameters and making them more responsive.

So, we’re just trying our best to help out our customers who are absolutely in dire straits. As you know, they’re closing hotels, they’re laying off people, they’re parking cruise ships. It’s horrible, and we’re just trying to help.

What are some of the mistakes that you’re seeing hotel companies make in responding to coronavirus?

I’m not seeing any really big, broad mistakes. You hear anecdotally that some hotels are dropping their rates and there’s some panic pricing, but I haven’t seen that much.

What should hotel companies be doing right now?

The answer is, right now, don’t do anything stupid that’s going to hinder the recovery. Remember, we’re going to get through this, but you’ve got to do the triage. Unquestionably, there’s triage right now that you’re going to have to do, so do that. Take care of the wounded, but remember, we’re going to get through this.

What is the role of hospitality revenue management right now?

They have access to enormous amounts of data — more granular data than probably anybody in the hotel does — and so they can be doing a lot of answering the ad hoc questions: How many floors can we keep open? What kind of staff do we need? They can help answer those kinds of questions, because they have access to all of this real-time data.

If you’ve got any automated pricing, make sure that you’ve updated your price floor, so you’re not dropping the price too deeply. I’ve heard people say, “Oh, don’t drop the price, because people have to travel.” Well, they have to travel, but that doesn’t mean they’re completely price-insensitive. You still have to be aware of the price sensitivity of people who are traveling. It’s all about being smart, being true to your brand.

How far ahead should revenue professionals be looking as they are figuring out their response?

It’s so hard right now for people to look beyond tomorrow, but the truth is, if anybody can really have good visibility beyond two weeks, you’re smarter than I am.

Are there any lessons that we can apply from previous crises such as 9/11 and the 2008 financial crisis?

I’ve got an article coming out about this. This is our time. In revenue management, this is what we’re built for. We deal with uncertainty, right? That’s what we understand. That’s what we deal with day in and day out: uncertain situations. We’re forecasting demand in the future, whether it’s tomorrow or whether it’s a month out or whether it’s a year out. We’re trying to predict what’s happening, and then we’re making decisions based upon uncertain and vague and often conflicting data. And then we have to change our decisions, so we’re recognizing that every decision we make is just a transitory one. We’re making the best decision at the time based upon the data we have, and then we’ve got to make another decision.

That mentality is exactly what is needed right now. The ability to access all this granular, micro-market data is exactly what’s needed right now. This situation is made for people in revenue management.

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

CURATE PRESENTS: How to Be a Hospitality Marketing Leader During COVID-19

By Christopher Durso, Vice President of Content Development, Hospitality Sales & Marketing Association International (HSMAI)

Continuing our series of interviews with HSMAI Lifetime Achievement honorees — with a coronavirus-inspired focus on “Leadership in Changing Times,” the planned theme of our now-canceled Spring Curate 2020 event — we recently talked to Leland Pillsbury, recipient of HSMAI’s Albert E. Koehl Award for Lifetime Achievement in Hospitality Marketing. Today a managing director with Thayer Ventures and a board member for companies such as ADARA, which provides travel intelligence solutions, Pillsbury spent much of his career with Marriott, where he rose to the position of executive vice president in charge of product development and strategy.

His advice for hospitality marketing leaders responding to coronavirus is simple: You have to be straight with people.

Does this crisis remind you of any previous crises that you’ve experienced in your career in hospitality?

When I left Marriott and started my own company [Thayer Lodging Group, in 1991], the first property we bought was in Annapolis, Maryland, right down there at the Naval Academy. We bought it six weeks before the first Gulf War broke out, and all of a sudden, all traffic in Annapolis stopped. So, it looked very much like this. Hotel occupancies dropped to single digits. It was a very, very difficult period of time.

It went on for quite some time, for several months, and this little 132-room hotel ran up about a million dollars in trade payables. We had maybe $50,000 of cash after payroll and we had all these vendors, so we’d sit down — my wife and I and the controller— and we’d say, “Okay, give the bread guy $750.” My wife was the purchasing agent, and so she’d call the bread guy and say, “Hey, Dave, when you bring the bread order over Monday, stop by my office, I’ve got a check for you here.” And he’d say, “Well, how much is the check?” And she’d say, “Well, it’s $750. And he’d say, “Yeah, but you owe me $3,900 and you’re ordering $1,500 worth of bread.” And she’d say, “Dave, if you don’t bring me the bread I can’t give you this 750 bucks, and we really need you to work with us here. My husband and I have everything that we own in this business and we know what we’re doing. This will pass, we’ll get out of this, and we’ll make you whole.” Every single vendor stayed with us and continued to supply us even though our liability to them was getting bigger every week.

So, the lesson there is transparency, communication, honesty. It was an extraordinary lesson to learn in your first couple of months in business: What is the real nature of the problem here? We’ll figure it out, but tell me what you don’t want to tell me. Tell me what I don’t want to hear. After you’ve thought of all the things you’re going to tell me, then tell me what you didn’t put on the list and we can deal with it. The lesson that we learned in Annapolis is, you really have to be very straight with people. If you’re straight with people, they’ll respond and do the right thing.

How is coronavirus impacting your business?

I’m on Zoom meetings probably four or five hours a day with the boards of the companies that we’re involved with and with management teams who are trying to work through contingency plans. Many of our managers have never experienced anything like this and so they don’t know how to deal with it. It’s important that we spend time with them, talking about it and coaching them and helping them develop contingency plans and think through how to move ahead.

What are some of the mistakes you’re seeing hotel companies make in responding to coronavirus?

Not just hotel companies but travel companies in general — my personal hot button is companies trying to manage their cash flow on the backs of consumers who are losing their jobs and who are strained personally. These travel companies are trying to exploit them, take advantage of them, and have them provide a working capital for them to continue on paying their salaries to their headquarters staff.

The number-one example is cancellation policies. We have a trip planned and they’ve closed the border, we can’t get there, and so the [travel] company tells us, “Well, we’re going to allow you to cancel and you can rebook anytime in the next two years. And if you don’t use it, we’ll give you your money back in two years.” All they’re doing is trying to manage their cash flow at my expense. And I’ll remember that. For me, I’m a successful guy, I can survive. But for a lot of people who planned vacations, that is outrageous. I think it’s a disgraceful practice.

What is the role of hospitality marketing right now?

At this moment in time, marketing has a very important role internally in the organization. It has to speak up for the customer and make sure that its voice is not drowned out by the finance people sitting in the back office trying to figure out how to exploit the customers. This is a moment in time when marketing has to say, “Do the harder right, rather than the easier wrong.” This is hugely important, because marketing is the voice of the customer. It speaks to the customer out in the marketplace, but it speaks on behalf of the customer inside the organization, and marketing executives now need to stand up and be heard.

How far ahead should marketing people be looking in terms of planning their messaging?

Well, of course, the degree of uncertainty and the length of uncertainty is hard for any of us to deal with, because we’ve never experienced anything like this before. The financial crisis of 2008 and 9/11 were both for the most part crises on Wall Street. This is a crisis on Main Street. But there is a need for marketing people in particular to be looking as far down the road as possible. I think the best signals right now are coming out of ADARA’s COVID-19 market data, which they’re making available to everybody. It’s shown an uptick in Asia over the past week or so. [Editor’s note: HSMAI talked to Pillsbury on March 25.]

What other indicators are you looking at?

Obviously, the rate of new cases of COVID-19. The minute that peaks and the minute that starts to come down, that’s the signal that the worm has turned. People are pent up in their houses, so I think restaurant demand will come back first, leisure travel will come back ahead of individual business travel, and business travel will come ahead of group.

Are there any lessons that we can apply from previous crises such as 9/11 and the 2008 financial crisis?

The first lesson is, it’s almost impossible to overreact. We’ve seen that with COVID-19. If you went back to January and you saw this outbreak in China, you should’ve sold your airline stocks and all your travel industry stocks in general. We’re deep into it now, so as we start to recover, can you overreact? I don’t think so. Can you get too far out in front of it? I don’t think so.

There’s a level of cautiousness now. People have been burned, if you will, and are shell-shocked with the circumstances that we find ourselves in today. There may be a tendency to be slow on the uptake, to say, “Well, let’s wait until the phones start ringing before we tell the customers we’re open. Let’s watch the airlines fill up before we open the doors to our hotel. Let’s not staff, let’s not launch marketing efforts and campaigns until we are sure all of our guests have forgotten about this COVID stuff.” I think that would be a mistake. I think you will miss the opportunities in the same way that you missed the opportunity on the way down to cut your losses.

You can be too slow, and that’s the big risk — that you miss the recovery, that you get left on the sidelines. Whether you’re a restaurant chain, whether you’re a hotel brand, there will be a recovery. Customers are going to come back. The world is going to return, the sun is still going to come up tomorrow morning. And if you allow your competitors to reengage with the guests before you do, you’ll suffer.

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

What Key Indicators Are Hotel Management Company CROs Tracking?

By Christopher Durso, Vice President of Content Development, Hospitality Sales & Marketing Association International (HSMAI)

When it comes to determining the full scope of the coronavirus effect, hotel management companies are monitoring specific key indicators, as the three dozen participants in HSMAI’s HMC Chief Revenue Officer Virtual Roundtable — presented online on March 25 — shared. Four indicators topped their list:

1. CASH FLOW:

  • Renegotiating vendor agreements — “One of the things that we’re looking at doing as a sort of first line of defense to protect cash flows is, every single vendor agreement we have, we’re either renegotiating or we’re asking to suspend payment for 90 days, even if that means suspending services for 90 days and then adding 90 days back on to the end of the term. In many cases we’re having success with, for example, free-to-guest TV providers, renegotiating contracts based on occupancy levels, which is great for us right now. We’re working through a lot on the vendor side to preserve immediate cash flows with short-term liabilities. We had just gone through a slew of refinancing, so our finance team had just wrapped up about 13 refi’s, but we are going to back to some of those lenders because it is a consideration in your lender docs if you’re allowed to temporarily close or not, which has been a hurdle to clear in a couple of cases.”
  • Waiting on the stimulus — “We’re waiting for that stimulus package to kick in from the Senate here in the U.S., but in Italy and in Greece, where we have some properties, that was a decision that governments made a couple of weeks ago. They’re carrying 80 to 100 percent of the employee payroll, so it was an easier decision to shut down properties.”
  • Stopping the pipeline — “We have a pretty active pipeline of new development, and obviously we’ve put the brakes on all of that. Part of that is not just liquidity but also because construction materials and labor are about to get a whole lot cheaper 60 to 90 days from now, so we’re going to renegotiate contracts on all of our projects as well.”

2. DAILY FORECASTS:

  • Planning for the worst — “We took our business development department and completely redirected all their efforts. The focus is not getting these hotels open; rather it’s trying to keep the others from closing. We did projections with worst-case scenario performance and then layered in different staffing levels — what would it take to be at 10-percent occupancy, 15, 20, 25, up to 30 or 35 percent — and really tried to zero in on where we were going to land. Those types of things have been able to produce a burn report that would be able to help owners make these decisions. It was just a matter of getting everyone in the room and shutting the door — six feet apart, I should say — to get the answers to those questions.”
  • Projecting three scenarios — “We’ve enlisted our business development and real estate team to help tackle a lot of this, usually with three scenarios: a moderate-occupancy scenario, assuming we get some base business; an extremely lean scenario; and a fixed-cost model, assuming we have to temporarily suspend operations.”

3. BUSINESS OPPORTUNITIES:

  • Maintaining light staff — “At the handful of properties where we have temporarily ceased operations, we are keeping those lightly staffed, not leaving the asset unattended, and if we do find a piece of business, we’re able to move almost immediately. We’re trying to keep our hotels ready to go if we do hop on that piece of business.
  • Working around shelter-in-place — “In heavily impacted markets with a shelter-in-place order, like New York, we’re finding that once we do land a significant piece of business, we’re struggling to get employees to want to come back to work when the city is in those circumstances.”

4. SHUTTING DOWN VS. STAYING OPEN:

  • Analyzing cost models — “We did an analysis with our business development team, looking at a cost model of what it would take to keep the hotel open versus closing. We’ve spent a lot of time on those cost models and analyze those about every three days.”
  • Making decisions — “We’ve spent the past three weeks scrambling to produce those models, and unfortunately decision-making started yesterday. It’s like spraying something on a fire ant’s nest. Owners now have a clear notion of what’s before them and are making decisions quickly this week.
  • Prioritizing employee safety — “We, too, did the analysis, but a lot of our discussion had to be around certificates of occupancy and regulation about reopening. In many cases, it’s hard to quantify the value of what it’s going to take to get that stuff done on the flipside. For us, it was also a discussion around the cost of having people in the building to secure the assets, and then certainly to talk about how you can keep your costs at a minimum and still stay open. Most of our owners are choosing to stay open for now, but a lot of it had to do with the safety and security of our employees.”

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

 

Scouting for Key Indicators for Brand Revenue Professionals

By Kaitlin Dunn, Writer, Hospitality Sales and Marketing Association International (HSMAI)

HSMAI hosts regular Executive Roundtable programs for senior hospitality professionals to meet and discuss relevant issues. Typically, these are face-to-face events, but due to the coronavirus, HSMAI hosted a Brand Chief Revenue Officer Virtual Roundtable on March 24 that focused on the impact that COVID-19 is having on hotel revenue optimization.

Here are six key indicators that Roundtable participants said they are seeing domestically and abroad that can be used to determine how the hospitality industry is doing — and what might be ahead!

1. BOOKING PACE IN CHINA:

Several revenue professionals said that they are monitoring their hotels’ booking pace in China, which is in the process of recovering from the coronavirus, while also noting that there are huge differences between the two countries’ responses. “We’re watching our hotels to see when they’re reopening, but the problem I keep pointing to is that China did an extraordinary job of quarantining people and we’re doing a horrible job of that in America,” one Roundtable participant said. “As much of an indicator China may be, I think that our timeline is going to be much further out until there is more of a significant response to these requests to self-quarantine and isolate.”

2. WHITE HOUSE RESPONSE:

One of the biggest indicators noted was how the White House and the rest of the federal government respond to the crisis. “How the White House reacts and the decisions they make,” a participant said, “is going to be a huge impact on how we approach our business.”

3. CUSTOMER SENTIMENTS:

It’s important to hear from customers and know what they are thinking in order to get a better idea of when they will begin to travel again. “The initial sentiments are that they will first start traveling when business opens up, and then think about vacations,” a Roundtable participant who had already surveyed customers said. “They’re looking at dates into June right now. We’re trying to capture these sentiments and make some logical business decisions.”

4. MARKET FLUCTUATIONS:

Market fluctuations and consumer confidence in the economy could offer an early predictor of how soon things may bottom out — with economic impacts possibly lasting far longer than the pandemic itself. “I think the reality is, as much as people say they can’t wait to get back on the road,” one revenue professional said, “the implications of furloughs and layoffs are going to play into people’s disposable incomes and how much they’re going to be able to travel.”

Another Roundtable participant added: “Also, on the business side, even though we see companies asking us to rebook their meetings, when this calms down, companies might look at their balance sheets and they might not be having that meeting.”

A third participant said that the overall unemployment rate will probably be the biggest indicator. “It’s a good read on the overall impact on the economy,” the participant said, “and that’s what’s going to impact business travel.”

5. TRAVEL BANS:

With government-issued shelter-in place orders, bans on gatherings, and closings of nonessential businesses, fewer people are able to travel. But how long will that last? “It’s my fullest expectation that those travel bans are going to continue long past the health portion of this crisis,” one Roundtable participant said. “If that’s an indication on how other companies are thinking, there’s going to be a lingering effect of corporate belt tightening, probably through the end of the year.”

On the opposite end, another revenue professional said they know of a company trying to rent out a restaurant as soon as mid-April, despite many governments issuing stay-at home orders until then. “That blew my mind,” the participant said. “I think for some companies the reality hasn’t sunk in yet.”

6. OTHER INDICATORS:

Roundtable participants touched on several other indicators as well. Specific provisions of any federal stimulus package, for example, could benefit the hospitality industry. The package, which passed on March 26, offers numerous delays on corporate and business taxes and allows the hospitality industry to immediately write off the costs of building improvements.

Another indicator to watch is the airlines, which right now are struggling and not running many flights. If and when airlines begin to run their full fleets again, it will show that people are traveling and will also need hotels.

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

5 Tips for Marketers Today

By Theodore Holloway, CHDM, Vice President of Digital Marketing, Remington Hotels, and member of HSMAI’s Marketing Advisory Board

HSMAI’s Marketing Advisory Board (MAB) met on a call March 19 to discuss how hospitality marketing professional are handling the impacts from the coronavirus now that budgets are being reduced and many people have been laid off or furloughed. Here are key takeaways from our discussion, including what marketers are doing right now — or can be doing — to remain productive.

1. Customer communication is key. Instead of trying to attract visitors to their hotels, many marketers are now forced to contact customers or potential customers about cancelation policies and hotel closings instead. Social media is a great way to update customers on the changing situation, one MAB member said. Another important way to communicate is through an FAQ page that gives customers information regarding what to do when the hotel is closed and what they can do once it is reopened.

One MAB member sent out a mass email to every person in their database — current and past reservations and loyalty guests — letting them know that the hotel would be temporarily suspending its services. Another member added: “I think if you can segment that list and market to them in an appropriate way, you’re building that relationship with them.”

2. Employee communication is also important. When everyone, or close to everyone, is laid off at once, it can lead to a lot of confusion. One MAB member’s hotel set up a hotline for employees to speak to HR directly and a Facebook group for employees to join, stay updated, and have their questions answered. The member also gathered all employees’ personal cellphone and email information, so they could easily contact them once business starts to ramp up again.

Another MAB member said that they are focusing their energy on providing tangible, tactical advice to hotel clients through a podcast for hotel employees and management to take advantage of.

3. Everyone has a different pricing policy. Some hotels, remembering patterns that followed 9/11 or the recession in 2008, are holding firm to their rates, hoping to stay afloat. “Rate is not the reason people are not traveling,” said one MAB member whose hotels experimented with dropping rate. “And we got a lot of local heat from residents saying, ‘How irresponsible of you, trying to encourage people to travel right now.’”

Others said that since this is a different situation, they are dropping their rates, hoping to build loyalty. “This is not the time to optimize your rate,” an MAB member said, “it’s the time to say, ‘We’re here for you. We’re not trying to make money, you shouldn’t travel, but if you need a place to stay, we’re here for you and we’re going to make prices reasonable.’”

4. Explore new options. One MAB member mentioned that they had heard of several hotels working with the government to use the properties as quarantine centers for sick or exposed patients. Another member’s hotels were actively reaching out to hospitals to make their rooms available. If the government or hospital were to take over a hotel, they would pay a per diem rate, typically 100 percent of the market room rate, the member said.

However, several MAB members said they did not agree with this idea, citing staffing concerns and fears about the future. “What does that look like coming out of this?” one member asked. “How do people feel about that? We want to do the right thing for the market, for the property, and for everyone out there, but at the end of the day that hotel is our property that we have to use when all is said and done.”

Another idea that was brought up: Some hotels are offering day rates to people who are working remotely but don’t have a conducive working environment in their homes.

5. Be flexible. Some hotels are still seeing people searching for and booking rooms in late summer and beyond. “It’s lighter than it would be, but it does exist,” an MAB member said. However, as several members pointed out, we still don’t know what the state of the world will look like at that point in time. But if there are flexible cancellation policies in place, customers could book a future stay now that they don’t have to worry about losing money on.

One member’s sales team has been calling everyone scheduled through mid-May to rebook them; the member said that 90 percent of people want to reschedule rather than cancel. “The ones that jumped on being flexible and fair and treating people like people, those are the ones that are reaping the benefits,” another MAB member said. “We’re seeing a lot of guest feedback from social media and email saying, ‘We really appreciate your flexibility. We know you didn’t have to let us cancel without penalty, and next time we book, we’re definitely going to book with you.’”

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