Among all the voices in the hospitality industry, it’s rare that we hear directly from portfolio hotel owners.
Managing cash flow, fighting legal battles, constantly adjusting strategies, negotiating with creditors, maintaining staff motivation and navigating the latest government advice – these are some of the priorities that owners are dealing with behind the scenes during the crisis.
In the third of The Growth Works Network’s Thoughts on Thursday discussions, Mihir Thacker, an owner of hotels with Accor, Hilton, Novotel and Taj, gave some fascinating insight into the owner perspective during the crisis and looking towards the recovery.
The long term foundations of the industry remain attractive for owners and investors. The group was encouraged to stay positive about the recovery and focus on rebuilding trust with our guests, who want to travel again when it is safe to do so.
You can watch Mihir’s presentation below.
After the presentation, The Growth Works Network, a panel of hospitality mentors and mentees from brands such as Fairmont, Selina, and Les Roches, engaged in an exclusive discussion on the areas of investment hotels need to focus on to win occupancy back as we move towards the recovery phase.
Our next weekly discussion, led by James Lemon, Founder and CEO of The Growth Works, will focus on Sustainability on June 18th. Thoughts on Thursday is exclusively for members of The Growth Works Network. Our mentoring programme and discussion series are free for individuals, and if you’d like to participate as either a mentor or a mentee, sign up here.
Responding to COVID-19
During his presentation, Mihir highlighted three top-tier issues that he tackled as an owner responding to the pandemic.
Mitigation Plans were necessary to prevent downside risk and minimise expenses.
Cash Flow Management was needed to fulfil payment obligations.
And decisions were taken around operating processes and team members to ensure Efficiency going forward.
These three fundamental issues informed all future decisions.
Phased Leadership Action Plan
Mihir moved incredibly fast to protect cash, teams and operations. Faced with an unprecedented and constantly evolving situation, he created a phased 20-point action plan. It was necessary to expect the best but plan for the worst to protect the business.
When news of the virus spread in February, initial measures were taken to mitigate risk (hiring put on hold, internal travel plans cancelled, credit terms evaluated).
By March, it was clear that global demand was stuttering, so leadership took more decisive action to manage cash flow and efficiencies (froze CAPEX, closed leisure facilities, closed entire wings and floors).
In response to a huge drop in occupancy from 78%-23% in April and May, it became apparent that profound changes were needed to protect the business (payroll reduced, outsourced services terminated, partial or full suspension of operations).
Compounding the demanding challenge, owners around the world are facing specific challenges related to the many different government sanctions and support measures. It’s fascinating to hear the different lengths they’re going to in order to keep their businesses afloat.
Managing a portfolio located in India, Mihir has had to contend with minimal government support for the tourism industry. Hotels have been forced to close but are banned from making staff redundant or reducing wages. While the risk of default has been heightened by a lack of flexibility on the part of Indian banks.
Mihir explained how he worked closely with internal teams and management to accelerate cash collection, rework payment terms and make cautious forecasts to help manage cash flow.
In response to draconian government measures, he joined a Hotel Association to file an injunction to the Supreme Court of India to allow businesses to make independent decisions regarding employment. It was simply not sustainable to pay all staff in full at a time when hotels were forced to shut their doors due to government sanctions.
To avoid defaulting on loans, he attempted to defer mortgage payments and spoke with investors to recapitalise assets and shore up balance sheets.
All the while, Mihir understood the need to keep hotel staff in the loop. Resonating with advice from our webinar on Staff Engagement (watch here), he focussed on creating a clear and constant communication channel to share business outlook and plans with the team.
Planning for the Recovery
Having outlined decisive action taken to stabilise the business, Mihir explained how he plans to manage the recovery and build trust over the coming months.
- Establish and constantly review a six-month business plan
- Work with management to determine new modes of operation
- Prepare a retrenchment plan appropriate to significant drops in occupancy
- Devise a communication strategy for team members
- Focus PR and marketing tactics on the local community to build a domestic base
- Continue extensive in-house training to keep staff engaged
- Introduce new cleaning protocols and distancing measures, making safety a priority for all stakeholders
- Build moments of trust by being transparent
As an owner, he believes nurturing trust between team members is vital for a smooth transition to new modes of operating and building trust with customers is absolutely key to winning back occupancy.
Changes Going Forward
The pandemic has forced owners to re-examine almost every aspect of the business. These are some of the changes Mihir intends to make going forward.
- Explore third-party food delivery partnerships
- Renewed focus on team building activities
- Re-examine supply chains and supplier partnerships
- Review management contracts and fee structure
- Look at moving from managed to franchised model
- Redefine force majeure and performance clauses
- Evaluate exit and acquisition opportunities to redeploy capital
Mihir concluded his presentation by highlighting the need to sort out the fundamentals, focus on communication and nurture trust: “Build a path towards recovery, own the narrative and keep staff motivated.”
Post-Pandemic Investment to Win Back Occupancy
Following Mihir’s presentation, The Growth Works Network discussed the most important areas of investment that could help win back occupancy.
Angelo Vassalo, F&B Director at Fairmont, asked are there any areas of CAPEX that you plan to invest in to gain a strategic or competitive advantage going forward?
Mihir Thacker replied that if investments have an immediate positive impact on operating cash flow then they will go ahead. If they do not, they will be deferred. All technology investment has been deferred.
James Lemon, Founder of The Growth Works, asked whether we would see a reduction in hotel renovations over the next few years?
Mihir Thacker said that massive CAPEX refurbs will not happen over the next year and suggested that we might see some soft refurbs next year. He added that flexibility and pragmatism were required and that certain brand standards have been waived in response to reduced demand.
Erik Eklund, Founder of Connecting Humans, asked what are the three most important areas that owners and hoteliers should invest right now?
Mihir Thacker said owners are not compromising on maintenance as it’s important to manage and maintain the value of the asset. He added that investing money, time and training in finding ways to engage with team members was vital for the resumption of service. And suggested that it would be wise to invest in ways to reach out to the local market.
The Future of Hospitality
Gibran Crismatt, Global Sales Manager at Selina, asked how do hoteliers strategise post-COVID?
Mihir Thacker advised against cutting rates. People won’t resume travel because it’s cheap, they’ll resume travel because it’s safe. Travel plans will depend on government advice, rates will not influence decisions.
James Lemon added will the relationship between direct bookings and OTAs change?
Mihir Thacker argued that booking policies will be the most influential factor. Guests will choose the channel that gives them the most flexibility around their booking.
Sabah Mehta, a student at Les Roches, asked what is the future of hotel real estate? Will banks change their opinion of hospitality?
Mihir Thacker said that it will depend on different markets, giving India as an example of a market where profitability from hotel construction is lower than other locations, such as Singapore.
Erik Eklund asked when will people start travelling again?
Mihir Thacker concluded that humans are made for social interaction. Travel will rebound but it will depend on vaccine progress and government advice. The need to quarantine, perhaps on arrival and upon returning from a trip, will act as a major deterrent. Business trips may be reduced, but the need for human touch will ensure that travel won’t stop.
This makes it all the more important to create leadership action plans aimed at building trust to win back occupancy when demand returns.
The Growth Works Network is hosting four more Thoughts on Thursday webinars over the coming weeks. Sign up here to join our community to broaden your network, gain expert insight and participate in the debate.