Time for more thought-provoking insights from our Leading Hospitality Through Turbulent Times series. Journalist Stuart Pallister reports on a session devoted to how hotels can manage their way through the present crisis successfully.
Are there signs of life in the hospitality sector, given that travel has been severely impacted by the COVID-19 outbreak globally? For two revenue leaders who took part in a panel discussion for our Leading Hospitality Through Turbulent Times series, the answer was positive – albeit with some concerns.
Bob Thye, who heads up revenue management for the Apple Leisure Group (ALG), said that although all of its 58 hotels were currently closed (as of session date of 19 May), some of these are expected to re-open in July, and ALG is already seeing a “surprisingly strong mix of demand for the dates when our hotels are open for sale, although on a much lower overall volume”.
ALG is the parent company of an integrated tour company in North America, which owns and operates all-inclusive hotels in the Caribbean and Latin America. It also has a 500,000-plus seat charter operation, and both traditional and online tour companies like CheapCaribbean.com, Apple Vacations and Mark Travel. The company managed the vacations of more than three million passengers end-to-end in 2019.
Bob added, “We’re now seeing as much demand for July (traditionally a peak month) as we see for September, October or November. When we do open, we will have at least some pent-up demand for partial re-openings.”
This would mean that for, say, a 500-room hotel, the strategy will likely be to open only 120 rooms or so, as people start to return to hotels for staycations.
Softness with spikes
For Raul Moronta, senior vice president of revenue management at Crescent Hotels & Resorts, which operates about 90 hotels in North America, “there have been very soft periods, with very small spikes of business that we now need to manage”.
At the time of the discussion, Raul noted that about a third of the company’s hotels were closed. However, he added, “We need to manage an environment where our clients still want to have great deals. Because there’s so much available inventory, we have to move quickly and close deals before someone else offers a better deal. So that has been quite interesting and we’re actually very busy. I didn’t think we’d be busy in a 10% occupancy environment, but we are – and in a sense that’s the business we’re in.”
With regard to booking patterns, at the date of the session Crescent was seeing spikes and increases in bookings in markets such as Georgia, Florida and Texas. “Interestingly enough, the highest booking lead time right now is under two days. So we’re getting a significant amount of bookings in the day, for the day. People are tired of being at home and we think short-term leisure is going to come back first. Corporate travel is going to take a little more time and group travel is going to be tricky.
“We think that, in September and October, we’re going to get back to some level of consistent occupancy. And then, in November and December, the question is going to be whether the virus comes back,” Raul said, adding that bookings for the winter are probably going to be “timid”.
Park that forecasting model
“We spend most of our time looking for future-demand clues; looking at what segments are showing signs of life,” Bob noted. “Traditional demand-forecasting methodologies don’t work. Every sort of model that you have, park it for now.”
Although ALG’s hotels were closed at the time of the discussion, Bob added that the company is taking bookings for future dates. “What’s the new booking curve? Clearly there’s a fairly short window for pent-up demand.”
As its hotels in the Caribbean, Latin America, Europe and elsewhere require air transportation for most guests, ALG is working closely with its airline partners to ensure it can “capture demand” when markets start to open again.
“We’re working hard to prime the pump to get passenger volume flowing into destinations, so that hotels feel comfortable opening. Our current focus is looking forward and trying to get this machine moving again; and identifying those demand clues of where that will be most effective,” said Bob.
In order to gain the confidence of travelers in this environment, sanitation and cleanliness will be key factors. ALG has rolled out new sanitation processes in its resorts, Bob said, and has implemented a comprehensive communication plan, with webinars being held for tour operator partners to outline the new procedures. The processes are also highlighted on ALG’s websites for consumers so they can “confidently book, knowing what the experience will be on the property”.
Is ‘safe’ the new ‘luxury’?
For Raul, “the perception of cleanliness” is going to be very important. He cited a recent trip to Boston and his stay in a hotel with a sanitation station “every 10 feet” and the person at check-in wearing gloves. “That was probably the extreme. That’s going to change a little bit, but the perception of cleanliness is going to be very important moving forward.”
Currently, rooms are not being cleaned for two days after check-out, he said, “because there’s an assumption that if there’s a virus in the room, it is going to die in 48 hours”. There may be some enhanced procedures involving, among other things, replacing pillows after check-out or putting them in a dryer for 20 minutes to kill bacteria.
“So there are a significant amount of enhancement procedures that we have to put in place that we wouldn’t have thought of before. The majority of these are probably going to stay. The more drastic ones, the face covering and gloves, would probably go away eventually in a normal setting. But for now, they’re probably there for the next four to five months. Guests are also going to be expecting it, so we need to be conscious of that.”
The value of insurance
Travel insurance is likely to be a lasting change as we enter the ‘new’ or ‘next’ normal, Bob said, adding, “One of the most significant challenges for our travel agent partners has been the whole refund process.” ALG sells 100% cash-back insurance and its products include pre-departure cancellation and in-destination medical cover.
“People will think about travel insurance very differently in the future and see the value of it far more than previously,” he said, adding that ALG had seen travel insurance ‘skyrocket’ for new and repeat bookings.
According to Bob, when the Covid-19 crisis began to unfold in the US, the first indication that ALG’s business would be hit was when Jamaica began to talk in mid-March about quarantining passengers for 14 days. “At that moment, we knew we had to shut our hotels down. Going on vacation and being quarantined for 14 days is not good for a beach, all-inclusive vacation. That began the domino effect, with other Caribbean destinations closing their doors. Within two weeks, we shut down 58 hotels.”
ALG is now focusing on trying to retain customers and preserve cash to “make sure our operation is as solid as we can be”. Some three-quarters of staff were on furlough, with the rest on reduced salaries, Bob said.
Crescent is also looking to preserve cash, in this case, to help owners “stay fluid”. Raul pointed out it was also providing as much information as possible to hotel associates “to be able to survive and start planning for the recovery”.
For Raul, the first realization that the outbreak was going to affect Crescent’s business was when his son called in late February to say his upcoming graduation had been cancelled. “The month of May is very important for us, for our revenues, because there are a lot of graduations which bring a lot of high-end customers and high rates. Knowing that there was a possibility of international travel disappearing and of graduations being cancelled, was a very big deal for us. Things went pretty quick after that – within two to three weeks.”
Crescent’s CEO decided not to furlough a single associate, Raul said, adding this was both a conscious and strategic decision. “We work on behalf of others and felt we needed to have as many touchpoints as possible with our owners and help them in whatever way we could to survive. We also felt that, coming out of this, we were going to be stronger for it.”
And, finally, some careers advice
Raul Moronta: “A year from now we’re going to be looking at a very different environment. Technology is obviously going to continue to play a big part in what we do, but hotels cannot run themselves. You cannot automate excitement, enthusiasm, strategy or direction. Hospitality is still an industry of people serving people and providing experiences. Somebody needs to create the leadership to be able to take the hotel, or whatever business you’re in, to the next level.”
Bob Thye: (who was working at American Airlines at the time of the 9/11 terror attacks, when no planes flew for several days afterwards) “In a very long career, you will remember this time and marvel at this short-term issue. Travel is here to stay; and people will travel again. We’ll get back to growth and providing amazing experiences for people, because travel is the lifeblood of human need and that will never die. Just don’t let this daunt your career aspirations.”
- Thanks to Scott Dahl, Program Director for our Master’s in Hospitality Strategy and Digital Transformation, for hosting this session. You can find out more about this world-first Master’s here.