In a hospitality industry rocked by the Covid-19 pandemic, there are new ideas and innovations that need to be adopted for organisation to survive.
We’re a cyclical industry, and experienced operators know the routines for cutting back on costs and getting back to basics, and they have dusted off their manuals. Is this enough, given the depth of this crisis? Does the industry need to do more to adapt to the current environment, future growth and customer needs?
Working alongside hotel chains, owner groups and across the hospitality ecosystem of tech companies and start-ups, we’re convinced the time is right for a better approach to innovation, and have a few suggestions of where to start.
Capturing New Demand & Looking Beyond Occupancy
In seeking the path back to profit, one avenue hoteliers must move towards is embracing total revenues, not just being satisfied with rooms revenue & RevPAR maximisation. Non-room revenues sources account for 40-50% of revenues in the luxury sector and a surprising 25-35% of revenue in midscale operators and brands, embracing innovative new revenue strategies and ideas can bring in much needed cash at this critical time.
As international travel faces restrictions and consumers are wary to book international stays, the local market immediately around the hotel is emerging as a major and often untapped revenue source. Capturing this demand often requires embracing innovative solutions at the local level and facilitating the expansion of revenue streams.
For brands that were previously focused on the international sector and primarily room occupancy, capturing the local market will involve getting to know this segment in some new ways. Marketing teams should focus on analysing consumer trends and customer profiles to create packages and offers that are desirable to the local community. We’re seeing creative ideas like food hampers and breakfast on the lawn, food delivery, private neighbourhood tours finishing in the hotel bar and offering up bedrooms and meeting rooms to those in need of an escape from improvised home offices.
The idea of launching non-accommodation-based activities and being active within the local community are strategies being led by independents and faster moving regional chains. Global hotel chains are moving a little slower – perhaps because their franchise fees are based on room revenues – but plenty of new concepts are in the works.
Innovation takes time, and new ideas won’t make up for lost room revenues. However, promoting on social media ways that properties and organisations are connecting with and supporting the local community can help to maintain relevance in the minds of consumers, grow loyalty within the local sector, and keep the hotel team creative and engaged.
The Need for a Rapid Response- Empowering Front Line Leaders
A luxury that no one in the hospitality industry currently has is time. Key to recovery is rapid response. In teams that are facing reduced staff numbers and funding, this rapid response has required innovation from all levels.
Creating a flatter company structure and empowering leaders at all levels of the organisation to make decisions relevant to their area, facilitates a system in which ideas can be created, trialled and implemented at an increased rate, allowing organisations to better compete in the market. As upper-management’s knowledge of local cities and markets is often low, and knowing the options for each hotel becomes impossible, it becomes the responsibility of frontline leaders and their teams to create these innovative whole revenue strategies. Central teams can help by sharing what works, and helping integrate successful projects into systems and processes.
Collaboration and training across teams are essential tactics that frontline leaders must adopt to better enable rapid responses and promote innovation. With reduced staff sizes, cross training of staff creates better flexibility in the organisation that helps to foster much needed innovation and rapid responses from all levels. Cross training also better facilitates employees to identify and exploit opportunities or gaps in the market that can be used to create whole revenue streams.
Through enabling communication and multi-functional teams, innovative strategies arise that are well thought out from a cross-departmental view, lowering the risk of failure when trialling new ideas.
Ultimately, it will be down to the teams on the ground to see where gaps in the market are occurring and to find the solutions to fill these gaps, creating new revenue streams for the organisation that focus on more than occupancy rates.
A Culture of Learning and Innovation is Needed at Every Level
In the current hospitality climate, innovation cannot come from just upper management but must be promoted and facilitated at all levels of the organisation. Solutions found through innovation must be a key focus of hotel teams at all levels to find the right solutions to current problems. How do you know you have a good idea? It should benefit the customer, be feasible for the team and it should grow revenues or reduce costs fast.
Organisations should analyse the target market and search for ways consumers’ needs can be met. As travelling rates dropped, Time Hotels created food delivery kits, creating a new revenue stream within the local market while room occupancy was low. As restaurants have reported signs of recovery in many areas, hotels promoting dining deals to both in house and external guests also offers an alternative revenue opportunity.
In a complicated travel environment, package deals are another way to increase desirability for consumers that want to simplify the travel experience, whether this is incorporating in house experiences like restaurant deals or external travel experiences such as transfers and attraction bookings.
Gift and travel vouchers are a way to remain relevant in the minds of consumers and to promote travel when the market begins to reopen, while adapting spaces to cater to changing market needs is something that is being considered.
Co-working spaces are one such consideration. As it is forecast that remote working will remain at increased levels even after Covid-19 has ended, hotels are in a unique position to capitalise on this demand. Some organisations have already started to trial co-working spaces, with Zoku in Amsterdam incorporating a co-working model into their hotel strategy.
An Innovative Mindset – Dare to Try New Things
When trialling any new strategy there is the risk of failure. Peruvian chain, Casa Andina has embraced this idea, promoting the mindset that discarding perfection to empower leaders and teams to make decisions and trial strategies allows the right solutions to be found.
As upper management’s primary focus is often on filling rooms, employees at all levels have the opportunity to find innovative solutions in other areas. These areas may involve exploring gaps in the local market, or like Zuko finding areas in other industries that hospitality establishments can expand into.
When testing new strategies, trialling a small sample can help to uncover what areas may have been missed or what other partners may be needed.
In 2017 Accor announced plans to implement co-working spaces. To do this they partnered with Bouygeus Immobilier, recognizing that by themselves Accor did not have the expertise in this area, they found the solution in a partnership agreement. This agreement helped to grow their augmented hospitality experience and allowed them to become relevant to the everyday, working market.
To keep things on brand while fostering innovation, return to the core values. This is a strategy that Bartle Hall in the UK embraces, simplifying their values to care, more and happy, then using these values as a grounding point to build strategies on top of.
Everyone in the company has the responsibility to do all they can to increase revenue, whether this means working in flexible roles across departments, exploring new markets that can be expanded into or pitching new strategies to grow revenue streams. Companies that will exceed must be agile and innovative at all levels.
Through facilitating an environment that explores whole revenue streams and embraces innovation, organisations will find the solutions to foster in a new and vibrant time for the hospitality sector.