As I write this from my home in Las Vegas, the Bellagio fountain has turned back on and the zipliners are once again hovering over Fremont Street. Casinos are taking temperatures, recommending masks and shutting down every other machine to maintain distance, but they’re back in operation after nearly 80 days of shutdown.
As states in the U.S. begin the slow, phased process of reopening, there are positive signs of returning demand in hospitality. Just remember, while we have passed through the initial crisis phase, we are still in a time of great uncertainty, of “business unusual.” It will still take some time for things to stabilize into the “new normal.”
As the figure below illustrates, the initial rebound will be volatile, so you’ll need to carefully track trends and be ready to pivot. As the environment stabilizes, you’ll start to get a picture of what the future holds.
As an organization, you could follow the path of incremental adaption, where you catch up to current conditions and adapt to what it will take to operate in the new normal, or you could consider this recovery period a moment for disruption, inventing a whole new go-to-market strategy or pivoting your offerings to serve a completely new market segment. Either strategy will get you through this next phase. It’s up to your organization which you choose to pursue.
Regardless of whether you incrementally adapt or disrupt, here are five truths to keep in mind as you implement your recovery strategy.
1. The customer journey is broken. When, how and why we communicate with guests has been upended by the pandemic. Organizations halted marketing efforts, or revised and limited messaging, and are just beginning to reopen communication. Every stage of the customer journey must now be reevaluated. Traditional market segments are changing their behavior (their reasons for travel and the desire to travel are changing), and the traditional business mix will not reappear any time soon. Therefore, the right messaging, through the right channels and in the right sequence will be crucial to reengaging appropriately with guests.
For the incremental adapters, focus on health and safety messages. Be clear about what your opening plans are, focusing on messaging to drive-in and leisure markets, and communicating cohesively and consistently through all channels. Keep an eye on which segments return and on their booking behavior. Track that information as demand stabilizes and then ramps up, focusing your messaging on the segments that return. For the disruptors, it’s time to reinvent yourself. Market segments have shifted, so shift your offering to meet new needs and behaviors. For example, families that once looked to vacations to have quality time together might need a vacation from each other. Can you offer activities that distract the kids for a while, or appeal to different family members separately? At every step of the customer journey, think about what the “new” traveler is looking for, and how you can deliver that in a unique way.
2. National is now local. Every market will recover differently based on specific regulations, locations, reopening plans and market segments, so your go-to-market strategy in every market must also be different. This will be challenging for corporate entities operating in multiple diverse markets but it’s the reality, and likely to be so for a while.
For the incremental adapters, follow local regulations and opening plans, balancing the cost of opening versus the cost of staying closed. The safe bets are in heavy drive-in markets that traditionally served leisure segments. Be purposeful about your ramp-up decisions. Do a thorough breakeven analysis before you open new properties, floors or outlets. For the disruptors, design a radical new offering for each market based on the early signs of return and local regulations. Maybe open your rooftop bar before the hotel is ready to reopen. Pivot from family-oriented amenities to offerings for single people. You may fail in some markets, but you should hit a few home runs that make up for the rest.
3. The hotel company that returns must be different. The environments that hotels operate in will be different. Traditional demand drivers like festivals, concerts or sporting events may not return immediately. Demand patterns will look different, market segments will behave differently and the business mix will change. We can’t count on the same strategies we counted on before, which means that teams can’t work the way they worked before. With layoffs and furloughs, the commercial organization in hotels will be doing more with less, and they will be doing it in new ways. You’ll have to reevaluate every assumption, every process, every standard operating procedure. You will also need to understand the skill sets of the remaining team members, and how to mitigate any gaps.
For the adapters, you are making only a few tweaks to your traditional structure to drive efficiencies and adapt to current market conditions. Think about centralizing revenue management or marketing functions or redeploying sales resources from group to transient segments. For the disruptors, hopefully you already took time during the crisis to establish the foundation to reinvent yourself. Now’s the time to rip apart the old organizational charts and reimagine the commercial function of the future. Break down silos between sales, marketing and revenue management by creating commercial pods whose goals are aligned with overall enterprise profitability. Automate routine tasks, freeing your limited resources to think strategically and manage exceptions. Rethink how you deploy your sales force. Put a stake in the ground now, and have the courage to iterate over the next few years. Prepare your teams to embrace the uncomfortable.
4. Digital transformation is in full force. During this crisis, shopping, dining, entertainment, work and social lives all went online. Even our elderly parents and grandparents are setting up and participating in Zoom calls. The world was already heading this way, but now these behaviors are ingrained. For incremental adapters, don’t pull back on your existing digital investments if you can help it. You’ll likely have to invest in some technology to support touchless interactions, so think about how those investments fit into your previous plans. For the disrupters, don’t follow your previous digital road map. Question it. Anticipate what guests will need throughout the customer journey from a digital standpoint and incorporate this into your reinvention. If local attractions (museums or concert series) are not available yet, can you offer a digital or augmented reality experience so guests don’t miss out? How can you bring personalized service into a contactless experience?
5. Industry dynamics are shifting. In the midst of uncertainty about the return of consumer confidence as well as corporate and large group travel, traditional and emerging industry players are reevaluating their business models and the competitive dynamics of the market. Will consumers prefer the relative privacy associated with a short-term rental such as an Airbnb or be more comfortable with the hygiene standards offered by a traditional hotel? Expedia and Google were going head to head before the pandemic, but each has backed off and focused on delivering more value to their partners. Which model will be more successful? Hotels went all in on direct booking campaigns in the last few years, but when times are tough, OTAs can drive greater reach through their marketing spend. Will hotels look to OTAs for a different level of partnership? Large group hotels, particularly those in urban centers, were extremely profitable, but it’s now clear that this demand will be last to return. What bets will developers make over the next few years if the profit dynamics of hotel types and locations have shifted?
The purpose of this article is not to predict where all of this will land. Power will shift and organizations need to be prepared. For incremental adapters, keep an eye on the trends and discuss how you will react. For example, host a brainstorming session about how your organization would respond if consumers are gravitating more toward short-term rentals. Investigate how third parties are supporting their industry partners and see if there are new programs you can take advantage of. The main thing is to stay neutral and follow trends. As long as you aren’t caught by surprise, you should be fine.
For disruptors, now’s the time to take a risk and place some bets. Will you shift your channel strategy based on the new dynamics between meta and traditional OTAs? Do you want to completely pivot your development pipeline? In past recessions, the hotel industry has let things happen to it rather than taking control of new opportunities. This could be the time to get ahead and stay ahead.
The hotel industry, like the rest of the economy, will emerge into a different world than we left it in March. Many organizations won’t survive the crisis phase. For those that do, and adopt an incremental adapter approach, this could be a game of follow the leader for a while, and that’s OK. The disruptors need to have an appetite for risk and the willingness to make a few bad bets as they find the best ones. With every challenging time comes opportunity, and organizations with a plan to change their outlook and operations will likely not just survive but come out of this crisis even stronger.