Technology is vital to business revival in hospitality

Xavier Mongin

June 11, 2020

Business continuity and digital transformation are fundamental to the resurgence of the hospitality industry in this post-health crisis era.

The travel and tourism industry has been widely and significantly impacted by today’s unprecedented health crisis. For the first time ever, more than 70% of the worldwide hospitality sector has been shut down. Though it is very difficult to predict when the hospitality industry will return to pre-pandemic levels, I believe there will be two phases in the recovery process.

Phase 1: During phase 1 business travel will be very limited as most companies will not want to put their employees at risk. Reduced travel will result in drastically cut expenses. In addition many businesses will adopt communication platforms to facilitate business continuity.

As we begin to see an increase in demand for holiday stays within home countries will see an increase in ’staycation’ and ‘daycation’ offers that encourage people to stay local.

Phase 2: Phase 2 will begin as corporate business travel and events ramp up. In addition, international travel, exhibitions, and personal events including celebrations and weddings will enable the hospitality sector to gradually resume business.

First, however, we will need to face the financial fallout from today’s global health crisis. Whatever the next crisis going forward is, the key learning for the travel industry will be to be better prepared for the future based on our experience in 2020.

2020 hospitality industry insights

As reopening unfolds I see four major challenges that operators will need to navigate to address the changes in the hospitality industry.

• Performance indicators: Today, all of the hospitality industry performance indicators; average daily rate (ADR), occupancy rate, and Revenue per available room (RevPAR) have plunged below profitability, so the first challenge is to bring them back to breakeven.

• New regulations: Most country and tourism authorities will implement new rules that will require compliance (such as max occupancy, closure of facilities, social distancing, and room sanitization). Though new regulations will be important for guests to feel safe and secure.

• Staycation and daycation: These initiatives will be critical for hotels to redefine their portfolio and offer innovative proposals, especially for those whose business was previously focused on international travelers.

• New face of the competition: During the last two decades the competition landscape has evolved with the introduction of online travel agencies (OTAs) such as Booking.com, and Expedia, as well as peer-to-peer platforms such as Airbnb and HomeAway. This new post-health crisis environment will see additional changes as hotels declare bankruptcy, change owners, change categories (X stars), adopt new technologies, invent new offers, and seal new partnership deals.

The new digital opportunity

While these changes may initially unleash chaos, I prefer to focus on the opportunities. Travelers will benefit from new competitive offers and unique experiences worth paying more for. Hotels will benefit from new benchmarking, improving attractiveness, revisiting reservation performance, addressing guest satisfaction and improving guest loyalty and referral.

However, I believe it is digital transformation that can most significantly contribute to the revival of the hospitality industry in the following three ways:

• Low occupancy opportunity: Now is a perfect time for a technical upgrade, pulling cables, installing new Wi-Fi, or making other changes to the network. Hotels that can afford to invest in a renovation or technical refresh should do it now so that they are 100 % operational when business picks up. If not, they risk lagging behind the competition when reopen happens.

• Personal safety and hygiene: The move to paperless rooms and digital interactions must be a technology priority for the hospitality industry. For example:

• A kiosk for check-in/out reduces line-ups and interactions at the front desk

• A door lock application on a smartphone reduces touch points

• The use of tablets and touch screen phones makes cleaning easier 

• BYOD turn guests’ smartphones into a room phone or hotel application 

• Business Model Agility: An OPEX consumption-based model can provide the flexibility hotels need. Further, a cloud-based offering can provide multiple solutions including voice communications, collaboration, network management, Wi-Fi, digital applications and support for BYOD. Technology also creates an opportunity for owners to convert hotels into mixed-use developments including offices, service units, or apartments. Mixed-use complexes can host independent landlords, or tenants each with their own service provider subscription, telephone line, and Wi-Fi.

As in any crisis, this is a time for learning, adapting and anticipating. We will see new visionary concepts emerge. There will be instability from acquisitions and consolidations. There will be changes in on-going and announced projects, as well as renegotiation between owners and operators. However, I believe that a critical lesson from our current situation is that technology and digital transformation will be vital for success in the hospitality industry in the new post-health crisis era.