Coronavirus is the worst public health crisis in over a generation. On the 11th March, the World Health Organisation (WHO) declared a global pandemic, only the third in 100 years (H1N1, HIV Aids and the 1918 Influenza pandemics being the previous concerns on such a scale). COVID-19 is set to have a significant impact on tourism generally, most recently with the cancellation of ITB, the world’s largest travel forum, never before cancelled in its 54-year history. The consequences of the virus spreading are already being felt by the global economy with stock markets recording the largest drops these past couple of weeks since the 2008 financial crisis. The main question being: will the impact be felt from a mortality spike or an economic depression – or both.
During an economic downturn, independent hotels face challenges that are hard to predict, and, more often than not, there is a smaller cushion to help avoid disaster. It is often not very possible to prepare for the impact of reduced local and international travel and with a health issue to contend with such as coronavirus, it is not possible to know what the impact will mean for tourism in the short to medium term, let alone thereafter. It is imperative to ensure that every opportunity to capture new business is taken both while it is available and when it picks up again.
A look back at critical developments in recent history
With the world so connected, there is only one recorded incident in our lifetimes to compare with concerning a virus that had such an impact on global tourism: SARS in 2003. A similar-sounding (to a non-medical professional) respiratory virus that caused death in the most severe cases and was easily transmitted between humans. Malaysia recorded a drop in tourist arrivals of around 20% throughout 2003 compared with the previous year, and China suffered a 37% decrease over the same period. The arrivals for 2004 rose by 46% on 2003 (1) and so the question arises, will a year be enough to contain the impact of coronavirus and of having less tourism visiting independent hotels? Let’s hope for less and expect the same while preparing for more.
In New York after 9/11, most hotels except the Four Seasons dropped their rates and spent the next seven to eight years trying to return to the price-point that they were at prior to the attacks – dropping rates does not increase demand, it simply sends a message that the product was originally overpriced (2).
The reality of the hospitality industry in 2020
One aspect about tourism today compared with 2003 and indeed the H1N1 virus in 2009 is that travel industry bookings and the business of tourism generally behaves differently in 2020. Previously, one or two sources of business were depended on, exclusivity with Thomas Cook or the entire inventory being available on booking.com as an example. September 2019 and the collapse of Thomas Cook proved that depending on one source of business is a very risky strategy. Most hotels were left exposed to their risk and have since understood that it is imperative to have a visibility on a maximum number of places to increase opportunities.
For 2020 and beyond, it is essential to open the channels of business. Booking.com could be considered one channel, Expedia another, but of course the most important is the hotel’s own channel (the one for which there are no commission payments), which is dependent on the hotel website. Channel managers, such as Cubilis, developed in 1998 or Siteminder, developed in 2006, enabled hotels to manage their room inventory, effectively taking back control and offering the different room categories in the correct quantity for sales at the right time – taking away the risk of overbooking. The hotel website functionality is absolutely crucial in ensuring that visibility and performance match esthetics. Websites should be updated throughout the year and where possible redesigned annually to ensure they are up to date.
An independent hotel should have around 20 – 30 channels to stand a favourable chance of increasing profitability in the modern hospitality landscape. It is important to develop a mix of direct and contracted bookings that are bookable online while creating the feeling of an experience during the booking process that is the key to attracting dependable new business. Large tour operators such as the former Thomas Cook have seen a different style of travel evolving to their cost as they were unable to adapt – the rise of the self-booker. Online Travel Agencies have had a major impact on individual self-made hotel bookings and more and more people are creating their own holidays themselves.
Navigating crisis with RegiÔtels
Economic shocks will happen, demand can dry up temporarily and the abyss may appear to be close, but the important thing is to be prepared the moment the market rebounds and the only way to prepare oneself is a through a coherent sales and pricing strategy that is marketed accordingly and easily bookable. In short, a digital presentation of the company that can be spread far and wide – this is one of the reasons for the creation of RegiÔtels and where we can add the most value at this terrible time.
The impact of this crisis is beginning to take its toll, countries are being closed, Schengen is essentially temporarily on hold with the border to Italy closed, between the Czech Republic and Austria closed and a new hotspot declared in the Grand Est. Schools are closing throughout Europe.
It is difficult to see an end to such a crisis when the arrival was so swift and brutal. There is good news however, this is not Brexit and will not go on for years. With the arrival of Spring, there are forecast to be temperatures hot enough to kill the virus naturally or so they say and while there is much to be worried about in the interim, RegiÔtels will be on hand to assist with any questions or concerns that you may have.
Governments have taken swift action to assist the small and medium enterprises and assistance such as deferring VAT payments has been allowed in most EU states and beyond. There are a whole host of other measures and if you would like more information, RegiÔtels would be delighted to assist in researching them with you on these topics. We have a local representative on hand and available in 24 countries around the world and may be able to help you obtain relevant information where you are.
In the meantime, please ensure that your teams are safe, that your families are safe and ensure that you follow the health guidelines set forth by the WHO.