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What are the chances for hospitality businesses in the post-covid world?

What are the chances for hospitality businesses in the post-covid world?

What will reopening in the post-COVID world be like? How do we deal with the idea that last year’s data is not relevant to forecasting next year’s occupancy? The future is uncertain. Although the lightweight globetrotting ways will probably not return any time soon people will still be travelling. Obviously, travelers will seek less crowded spaces, and including social distancing into our daily life will require innovative solutions. Gone is the glory of crowded cafes and overflowing buffets, today people will be more attracted to options like greenhouse-style private booths in this Amsterdam’s restaurant.

Hospitality industry is in for great changes. What was once the sign of luxury – personal touch and human interaction – is now a sign of danger. It means that luxury itself must be reinvented. We are back to basics really: hospitality is about feeling safe and taken care of. This is where measures to reduce human contact and elaborate cleaning protocols come in. Small number of rooms, lack of public space and no spa facilities are not drawbacks anymore. That can be turned into an advantage if you communicate it properly. For once smaller hotels have an unexpected chance to compete with the branded giants on relatively equal terms. There is another big disparity there though. Large hotels can afford what smaller ones cannot – top revenue specialists and online distribution expertise.

What will the demand be after the borders open? How to minimize commission for online distribution and increase direct bookings? What price strategies to pursue? How to optimize staffing and get the most from the market? Small hotels have lots of questions and no answers. The old straightforward models that have been bringing money over the past years of travel boom are not working any more. In the post-COVID world, when tourists are scarce, only the fittest, the leanest and the smartest can survive.

According to Zeev Strutsovski (Venture Faculty), in current crisis times, confused hospitality businesses need to concentrate on such issues as mitigating risk and gaining greater control over compliance questions, improving resilience to stay strong despite market volatility and developing strategies to improve efficiency. Now is the time to fine-tune operational capabilities. How can small non-chain hotels gain access to quality revenue management and proper on-line distribution – the two corner stones of hospitality business that allow to outperform competitors? How to have your pick of best hotel staff while keeping costs at bay? The answer lies in outsourcing those high-cost functions to specialized companies or partnering with other hotels to share costs of hiring, say, a full-scale revenue manager.

Same can be done for several other key positions. For example, the whole reservation department or accounting can work remotely. These services can be shared with other hotels, and they do not even have to be located in the same country if the staff possess required expertise, just like the customer support departments of many IT companies.

Furthermore, in destinations like Riga, where few outsource companies can provide quality service at competitive price, hotels can come together to share housekeeping services. Neighboring hotels can even share a breakfast chef. Make bulk purchases of commonly used goods together to benefit from economy of scales. “Aldeu services” already have successfully used this solution for Relais le Chevalier hotel, Riga, Latvia, and The Faces hotel, Saint Petersburg, Russia.

It often happens that during low season all a hotel really needs is ½ or even 1/4 of a skilled employee. Paying full salary during such period really empties the employer’s pocket. However, the other two common options: cutting your staff based on seasonality or evenly reducing their paid working hours, tend to kill staff motivation and you may end up losing your best people by the time the season picks up again. Why not share some employees between locations with different seasonality without spending money on relocating them? For example, a sea-side hotel and a ski resort would be busy at different times, so if they share a reservations department workload will be distributed more evenly over the year. Even a director of operations may work remotely, oversee several hotels and be reimbursed on performance basis.

Such measures will help to optimize workforce distribution and free funds that can be used to improve the product. More comprehensive cleaning protocols, refurbishment and, of course, incentives to keep the staff happy and engaged. All to keep hotels in good shape for the tourists when they finally come back.

Article prepared by: Polina Shcherbatik and Evgeniy Nahman, “Aldeu services”.