May 26, 2020, By Whit Chiles
There are staggering metrics coming out of the hospitality industry: hotel occupancy hovering at 20-30%, RevPAR down 75% YTD[i], and more than two in three hotels operating at less than 50 percent of pre-COVID staffing levels[ii]. While the short-term outlook is undeniably formidable, hospitality is showing signs of recovery as countries and states reopen. From China to Germany, Florida to Texas, reopening markets have proved that people’s desire to travel has not disappeared. In fact, in a recent survey, one-third of Americans said they hope to travel within three months after stay-at-home restrictions lift[iii], and in the first weekend after reopening, domestic ‘drive-up’ leisure travel submarkets like Galveston, Texas and Daytona Beach, Florida, saw 25-30% week-over-week occupancy gains[iv].
While recovery is going to be staggered and asymmetric across markets, hospitality companies around the world are facing a similar set of core operational questions as they contemplate reopening: how are we going to keep customers and staff safe, and how are we going to source and procure the PPE and cleaning chemicals necessary to do so? With staffing levels expected to stay low, how are we going to operate efficiently without sacrificing great service to our guests? How do we prepare for a possible ‘second wave’? And, critically, how do we clamp down on cost and accelerate the return to profitability?
In an upcoming series of posts, BirchStreet will address three areas that we and our brand and independent management company partners consider central to planning and executing a successful reopening:
Our partners in the hotel, casino, and managed food service space helped shape the vision of this series, and we sincerely thank them for sharing their perspectives. We hope the insights presented will help our industry navigate the current crisis and emerge better prepared for the challenges ahead.
Insight Post #1: Leverage data to position yourself for success
With RevPAR depressed, the pressure from owners on their management companies to contain cost is more intense than ever. Because supply chains have been disrupted and category spend is shifting rapidly, using like-for-like projections of pre-COVID spend to anticipate post-COVID spend is not likely to yield meaningful insights: the categories and items that you spent money on historically are not going to line-up exactly with what you will spend money on moving forward.
In our first blog post in this series, we will use recent BirchStreet data to measure shifts in spend. By analyzing how buyers in reopening markets have adapted to meet the challenges of reopening, we can help you better prepare for volatile demand patterns over the foreseeable future.
Insight Post #2: Embrace automation and become touchless
Broader trends in the industry were already driving companies toward digital transformation initiatives, but post-COVID, tackling automation is no longer a question of ‘if’ but ‘when,’ and increasingly the answer to ‘when’ is ‘now.’
Do you know how many AP people you need on-property and at head office processing invoices? If it is no longer prudent to pass pieces of paper around properties for wet signature, what should your new approval process be? What about inventory and stock taking: can you safely use paper to document and authorize requisitions from storeroom to outlets?
Our second blog post will identify operational areas that can be automated, focusing on manual processes that have multiple physical touch-points and unnecessarily bog down valuable resources’ time.
Insight Post #3: Build flexibility into your capability and capacity plans
Recovery is not going to be a straight line. As you think through bringing staff off furlough, are you retooling your organization to be more automated and agile, and your workforce more flexible? With unpredictable demand and the possibility of lockdowns being reinstated market-by-market, transitioning from fixed to variable costs wherever possible is paramount. How will you flex costs based upon your forecasted occupancy levels?
Our final post will help you right-size operations and ensure your organization is ready for what comes next.
Editor’s Note: Please feel free to contact us for a personalized session to discuss how BirchStreet can help your business emerge successfully by controlling costs and improving operational efficiencies. www.birchstreet.net
[i] https://str.com/press-release/str-us-hotel-results-week-ending-9-may [ii]https://lodgingmagazine.com/survey-most-ahla-members-expect-hotel-staffing-levels-to-remain-low-through-2020/ [iii]https://skift.com/2020/04/21/a-third-of-americans-want-to-travel-again-shortly-after-pandemic-is-contained-skift-researchs-latest-travel-tracker/ [iv]https://str.com/press-release/str-florida-texas-lead-weekend-hotel-occupancy-gains
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