The hospitality industry has deeply evolved during the last decade. The end of 2019 marked an incredible decade since the US travel industry emerged from the economic recession and the hospitality industry approached ten straight years of growth. In 2009, the first hotel and airline apps were just hitting the market and soon we would see social media platforms such as Facebook and Instagram, fuel the growth of travel to heightened levels with hotels coming online as well. This led to average occupancy rates peaking at 65.5% in 2015, holding relatively steady while revenue grew annually to reach a peak of $189.5 billion in 2019. The industry was expected to slow down a bit going into 2020, however, the pandemic sure did accelerate everyone’s predictions.
We already talked about the impact of coronavirus on the travel industry as a whole. Today, we're diving deep into what will happen to hotels after coronavirus.
Monthly hotel occupancy rates from 2018 to 2020, by region by Statista
As the first market to notice the early signs of recovery, APAC region is the only one where there's no decrease in hotel occupancy rates from March to April 2020 observed. As of April 20th, 2020, the highest monthly hotel occupancy rates are seen in Asia Pacific (28%), Middle East and Africa (26.5%), followed by Americas (23.5%) and Europe (11.1%).
How Has the COVID-19 Pandemic Affected Hotels
Unfortunately but expectedly, hotels were one of the first industries affected by the pandemic. The American Hotel & Lodging Association released new data showing that as of May 28, 2020, nearly 6 out of 10 open hotel rooms were empty across the US per STR, not to count the thousands of hotels that have permanently shut down.
It’s becoming increasingly clear that Covid 19 is having a profoundly negative impact on the hospitality industry as forecasted occupancy rates for 2020 are hitting record lows, worse than rates in 1933 during the Great Depression. In fact, the hotel industry has been hit so hard that traditional tracking methods of how well a specific hotel or market performs, usually by revenue per available room (RevPAR), no longer conveyed the true picture of how hotels are performing.
Global hospitality data from STR shows that in early March, compared to 2019 figures, occupancy was down as much as 96% in Italy, 68% in China, 67% in the UK, 48% in Singapore, and by 59% in the US. In Europe specifically, the rate fell by 61.6% to 26.3% on average - the biggest drop since WWII. The highest rates on a global scale were seen in Sydney with 48.5%, Los Angeles with 42.5% and New York with 34.5% in March.
Many hotels are still temporarily closed due to travel restrictions and shelter in place orders but countries in the APAC region like China are beginning to relax restrictions. The survival of many hotels, just like airlines, will depend on where they’re located and how much government assistance they can receive. Skift reports that as of April 27, IHG had 10% of it’s U.S. portfolio temporarily closed compared to 50% in Europe, Middle East, Africa and Asia (excluding China). Branded hotels typically need between 30-40% occupancy rates to break even on operational costs.
What Will Happen to Hotels After COVID-19?
With travel coming to a halt and people scared and hesitant to leave their homes and comfortable surroundings, hotels are having to make urgent adjustments in their strategies as they try to quickly generate revenue. Just like most other industries, the hospitality industry will be at the forefront of having to ensure that they are adhering to the highest levels of cleanliness and taking sanitation seriously.
The American Hotel & Lodging Association released its new “Safe Stay” guidelines aiming to elevate the standards of the hotel business’ best cleaning practices and operation protocols in response to the pandemic. The new recommendations follow guidelines from the Centre for Disease Control (CDC) and were released in partnership with major hotel chains such as Hilton, Marriott International, Hyatt Hotels Corp, and more. Additionally, there will be many other measures implemented, at least in the near term, such as more hand sanitizer dispensers, and monitoring high foot traffic areas for adequate physical distancing. The question lies in how long these strict measures will stay in place.
Revenue management and marketing will be other key elements for hotels on their path towards recovery. Prior to the crisis, many hotels may not have even realized that it was only 3 months away from running out of cash. Many hotels will learn that there needs to be contingency planning and will look to cut costs, whether that’s in their day to day operations and automating mundane tasks, or better cash flow forecasting.
New Technologies & Startups To Help Hotels After COVID-19
Technologies that can help hotels deal with the COVID and post-COVID world will be prioritized. We see this happening in 3 different categories: cleaning and sanitation, contactless solutions, and ancillary services.
Cleaning and Sanitation
- Whispr: Whispr is transforming frontline services delivery with a simple and scalable voice guidance platform accessed via a mobile app. Built on Natural Language Processing and Artificial Intelligence, Whispr literally whispers voice-guidance and on-demand expertise into workers’ ears to guide them through their jobs.
- STAYmyway: Staymyway is a mobile key and digital check-in solution for hospitality to provide guests’ the ability to go directly to their rooms, skipping the line at the reception desk, access the hotel, spa, and other hotel services from their mobile device.
- Daycation: Daycation is an online booking platform and marketing tool for hotel amenity day access. It allows anyone to enjoy a curated network of on-demand hotel amenities that one can reserve and unlock via the platform.
- Portier: Revolutionizes the way in which hotels generate incremental revenue from their guests via an all-in-one 4G-connected device that is placed in hotel rooms. Guests staying at a Portier partner hotels have access to all amenities with one simple click, and take advantage of city-related experiences that are current, exclusive, and available at the push of a button. The Portier Platform is designed to promote ‘contactless engagement’, making hotel staff available at all times, without the need for face-to-face interactions.
- Kitch: Hotels and restaurants have a significant unused supply of kitchen space in central locations. Kitch is a web platform where commercial kitchen owners can market their space to food businesses for food delivery, commissary, manufacturing, and catering.
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