May 18, 2020

Interview with Felix Laboy, Executive Chairman of NextGuest, on the Impact of COVID-19 on the Hospitality Industry

What are your top concerns for the immediate impact on the hospitality industry, and what are some strategies you recommend to mitigate these concerns?

The hospitality industry is being hit hard by the COVID-19 outbreak. We’re currently looking at a projection from STR and Tourism Economics that shows significant declines across demand, occupancy, ADR, and revenue per available room (RevPar) through the end of 2020 and beyond. Additional research from CBRE predicts that it will take approximately 6-10 months for US hotel demand to recover and 12-16 months for ADR and RevPar to return to normal levels.

A major concern is the impact on business from groups, meetings, and events, which makes up about 30-40% of business for many hotels. Post COVID-19, many people will continue to meet virtually, so we need to be mindful of how this will shape the future of the industry. Hotels need to think a bit differently about their inventory and perhaps market their venues to locals who can book in hourly increments. Many companies (Breather, Peerspace, WeWork, TechNexus, Impact Hub, Workbar, etc.) are already taking advantage of this demand. If you’re struggling for group bookings, consider working with platforms that will help. We also have a product called FleXi that can make meeting and coworking space bookable on your brand hotel website.

In terms of strategy, we recommend building a month-to-month marketing plan that progressively builds with the rise in travel demand, allowing you to fuel the booking funnel and maximize revenue. If your hotel has closed, plan to start your marketing one month prior to reopening, and continue to shift from upper-funnel to lower-funnel targeting as you move from month to month.

What are your concerns regarding the impact on the hospitality industry long-term? What are some strategies hotels can keep top of mind?

Some forecast scenarios currently circulating around the industry (CBRE) don’t show occupancy recovering to pre-COVID-19 levels until 2023, so unfortunately there is a high likelihood that the industry will experience the negative impact of this pandemic beyond 2020.

In light of this, I believe non-refundable rates and packages will be a thing of the past. Hotel brands will need to maintain flexible cancellation policies to give potential guests the confidence to book. Airline bookings have already revealed that when those companies loosened their cancellation policies, they saw an immediate increase in flight bookings. Your marketing and revenue management team should align on a frequent basis to discuss rate parity, book-direct perks, packages, cancellation policies, and shifts in strategy as this will be one of the most critical factors to your long-term success.

In turbulent times such as these, hoteliers need to pay even closer attention to all live marketing and digital strategies to draw insights from data and define success in this new environment. Use this as an opportunity to reset your marketing: See which audiences are engaging online with your property and are willing to book and use A/B testing to determine which imagery, messaging, and strategies are resonating most with potential guests. This will help you optimize future campaigns and better allocate your marketing budget.

As hoteliers need to get the most out of each guest, CRM is also a crucial tool in your arsenal. Repeat guests and loyalty members who already have a relationship with the brand provide a foundation of recurring revenue that is critical to ensuring long-term success.

Lastly, there are a lot of long-term operational considerations hoteliers need to keep top of mind in a post-COVID-19 world. For instance, will hotel employees always wear masks and gloves? Will valet service be discontinued? How can hotels make hands-free check-in available for guests? What changes will housekeeping need to make?

Even little things like contactless menus at the property restaurant so guests can avoid germs before they dine will make a big difference to the guest experience.

How do you think the impact of COVID-19 will impact luxury and midscale hotels differently?

Post COVID-19, people will be hungry for unique experiences to make up for lost time. Therefore, there is an opportunity for luxury hotels to create unique experiential packages and property activations that will really resonate with travelers. These hotels should revisit the core values and USPs (Unique Selling Points) of their brand and brainstorm experiences for guests that bring these attributes to life. For example, if a USP of a luxury brand is capturing the local experience, it’s now more critical than ever to include unique local experiences that transport guests to the road less traveled.

While unique packages and special offers will grab the attention of potential guests, luxury brands need to be strategic when setting rates to avoid dramatic cuts that could negatively impact brand positioning.

On the other hand, midscale hotels also need to be mindful of maintaining rates, but there will be less detriment to brand perception if they embrace special offers and discounts. However, midscale hotels can get creative with their upgrades and add-ons to provide added value and appeal to budget-minded guests without over-compromising rates.

How should hotels be communicating with guests during this difficult time?

Safety is the biggest barrier to booking right now, so hotels must first focus on transparent communication and reassure potential customers that the proper measures have been taken on property to maintain the safety of their staff and guests. To further support this, hotels should provide an FAQ section on their website regarding COVID-19 and clearly communicate flexible cancellation policies in order to give potential guests the confidence to book.

In terms of ongoing communication, any messaging used now needs to be sensitive. Avoid hard selling at this time, and instead create useful and meaningful content that adds value to people’s everyday lives, especially during social distancing. We’ve been working with our clients on some creative ideas such as Zoom backgrounds that show off your destination, coloring pages people can print for their kids, and at-home recipes, spa therapies, and workout routines from the hotel’s chefs, spa therapists, and fitness trainers.

What is the most important thing hoteliers should keep top of mind throughout the journey to recovery from COVID-19?

First and foremost, remember that this too shall pass. There is so much we can learn from each other in this difficult time, and the more we collaborate on our recovery efforts, the faster we can turn this situation around. This is a time for everyone in the industry to come together and share insights, collaborate on strategy, and simply be a helpful resource to their peers. Even in difficult times, there is a lot to look forward to in our industry and where we will take the future of travel. The world will travel again, and our hope is that the hospitality industry will come out of this even stronger.

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About NextGuest:

NextGuest provides hoteliers with everything they need to thrive in the digital world, with bespoke technology solutions developed to meet the needs of luxury hotel clients coupled with elegant design capabilities that bring brands to life. We marry the power of data with brand discovery to uncover unique strategies that apply to everything from website design, content marketing, CRM, and more, helping the world’s top hotel brands maximize ROI as they acquire, convert, and retain guests throughout the travel planning journey. While each of our services is available on its own, the integrated technologies, marketing, and consulting offerings work together to increase digital engagement and generate revenue for hoteliers, allowing them to focus on what matters most — serving their guests.

www.nextguest.com | (800) 649-5076 | hello@nextguest.com

 

Editorial Contact:

Margaret Mastrogiacomo
EVP, Strategy
Phone: (212) 782-3764
Email: margaret@nextguest.com