Group 6
We had the privilege of meeting Prashanth Radhakrishnan, vice president of revenue and strategy at Marriott International and Philip Niemman, managing director of Duetto – a company that provides revenue management software and revenue strategy solution to hotels. We learnt several key takeaways.
- Maintaining Pricing Position
Both emphasized the ineffectiveness of lowering prices in a knee-jerk response to the crisis. Philip experienced the 2008 Thailand political crisis, where hotel occupancy in Thailand dropped to as low as 3%. He mentioned it was pointless to have market promotions, as it was safety concerns and not price that was driving customers away. Prashanth agreed with this view. Currently, Marriott has around 10% occupancy. Nevertheless, they are looking at preserving rates as dropping rates can damage their brand image and would also not be effective in boosting demand.
- Role of Technology
Being a technology provider, our team initially thought that Duetto would be having more customers as people might want to know how to manage their revenue at this downturn. In contrast, low demand has reduced the need for revenue management systems. Duetto, as a tech company, was affected by this. In the crisis, priority shifted to cost-cutting, with revenue management systems being an example of one such cost. A challenge Philip faced was educating clients about the importance of such systems for the recovery. Prashanth agreed, mentioning that some of Marriott’s planned technology projects were put on hold due to insufficient resources to take on new initiatives during this period. Putting off these projects means saving on backend costs, allowing Marriott to focus on maintaining service quality levels.
- Preparing for the Recovery
A meaningful and inspiring message that not only Philip and Prashanth but all the industry leaders had, was that “things will recover”. Both mentioned the importance of being prepared for when the crisis is resolved and customers start to come back.
“As soon as there is demand and people are being more comfortable with this situation, you want to make sure to leverage on technology for the upswing” — Phillip Niemman
Philip also mentioned that part of recovery planning was knowing which markets would recover faster. For instance, he suggested that corporate accounts might recover faster due to the need to travel for work.
Prashanth brought up an interesting point regarding Marriott’s loyalty programme. Marriot is making it affordable for members to redeem points at hotels by “not overpricing themselves in terms of points”. In addition to this, Marriott is taking steps to ensure that loyalty members are not penalised for limited travel during this period.
Conclusion
COVID-19 has had a significant impact on both Duetto and Marriott. For example, Marriott is experiencing dropping demand in markets all over the world. Scenario planning done previously was “all wrong by miles” as they initially thought the COVID-19 virus could be contained in China. Regardless, both Prashanth and Philip’s attitude towards dealing with the crisis remain calm, composed and optimistic. Perhaps that is the biggest and most important lesson we should take away from this Roundtable discussion.
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Group 7
Our group had the pleasure to speak with Rachel Grier (IDeaS Revenue Solutions) and Sharad Kapur (Hyatt International) regarding the impact of the Covid-19 outbreak on hotel chains and some measures they have implemented to manage the crisis.
How has Covid-19 impacted your businesses?
After a round of introductions, our discussions with Rachel and Sharad centered on Covid-19’s impact on businesses around the region. Somewhat expectedly, Sharad shared that at Hyatt the Asia Pacific region bore the brunt of the decline in business as the epicenter of the outbreak in early 2020. However, with recent outbreaks in Korea and Italy, cancellation rates have started to spike. In contrast, Rachel shared that IDeaS is experiencing an increase in business demand as hotels begin to seek advice during this period of time. Both concurred that most hotels are utilizing this downtime as an opportunity to implement systems to prepare themselves for the upswing.
Next, the discussion shifted to drawing comparisons between SARS and Covid-19. Our experts shared that they expect a similar trend of recovery as SARS with business expected to pick up a few months after the peak of the outbreak. However, the biggest difference between SARS and Covid-19 is the degree of connectivity between businesses. Rachel suggests that this increase in connectivity between businesses, media, and people is a double-edged sword. Information, when conveyed transparently, can improve the situation while fake news or incoherent messages can spread fear and panic which has led to a stark decrease in occupancy.
How should hotels adjust their strategies in light of the covid-19 situation?
When asked what strategies they have employed to cope with these impacts, both agreed that the hotels can focus on the domestic market– “Holiday in the home country”. Rachel also suggested focusing on other sources of revenue such as in-house experiences, F&B, etc. She asserted that hotels should not drop rates as this may not create new demand but should instead focus on loyalty programs to protect the brand image of the hotels. She also shared that her data on 15,000 hotels showed that most of the hotels are holding their rates, an encouraging piece of information. With regard to the challenges of implementing these strategies, Rachel expressed concerns that many hotels may start choosing the profit protection route, which means employees will experience salary cuts and are encouraged to go on unpaid leave. She believes that while it is tempting to take this route, it could be costly when this crisis is over. For example, the cost of retraining employees and bringing the hotel back to the same service level in the future may be more costly than it is to save costs now. She succinctly summarized this with the phrase “a dollar saved now is not necessarily a dollar saved tomorrow”. Hence, it is important to look at the long term picture.
In essence, there is no way to predict when the Covid-19 crisis will end. Therefore, hotels need to remain calm, think long-term and employ strategies that will help them pull through this crisis.
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Group 8
The hotel industry is in a difficult situation, due to the COVID-19 outbreak. Our team was given the opportunity to speak with Mr Tarandeep Singh, Senior Director of Revenue Management for IHG. From his sharing, we learnt that IHG is heavily affected by the pandemic.
Being based in Dubai, Mr Tarandeep helped to shed light on the situation of IHG in the UAE. One of the key implications he raised was that IHG was forecasting negative reservation numbers within the next month, due to countless cancellations. Uncertainty in the global travel outlook has also reduced bookings for the rest of the year, including peak seasons and holidays. Some of his hotels have even been converted into quarantined areas, making operations impossible.
Not only business is disrupted but workers’ daily lives are also affected, as the UAE government has enforced travel sanctions, school closures and banning gatherings of crowds with more than 25 members. However, according to Mr Tarandeep, such proactive response is a wise move compared to the reactive response shown in the previous outbreaks of MERS and SARS.
To face this serious pandemic, IHG is adopting the “wait and watch” strategy. As the disease brings a lot of uncertainty, IHG will not actively craft a massive campaign, but will focus on maintaining its high-quality standards; and keeping guests’ welfare and satisfaction levels high. For one, Mr Tarandeep spoke about the generous cancellation waiver policy IHG is offering to customers. He also pointed out IHG is offering more loyalty benefits like extra loyalty points and perks. Should an IHG hotel be locked down for quarantine, guests are transferred to another hotel, and continue to enjoy benefits of IHG loyalty programme, even if it is not another IHG hotel. Although it might hurt their revenue temporarily, a good image is long-lasting and he believes it will keep the guests coming back.
In UAE, individual hotels that use the standard Revenue Management system are inter-affected in terms of room rates. For example, if a hotel decides to drop price, the system will automatically recommend all other hotels to drop their price to the same level. Thankfully, IHG utilises their own Revenue Management system, so they are not affected by this “domino effect”.
According to Mr Tarandeep, a lot of revenue managers may face the risk of putting too much focus on the “top-line indicators”, like RevPAR and occupancy rate, when in fact, most owners care more about profitability. IHG is aware of this issue, and does not plan to blindly reduce their rates just to bring in more guests, as a reduction in room rates will not guarantee more rooms sold nor more profit. He also emphasised that when the whole industry is not performing well, it is still important to ensure that IHG performs better than competitors in terms of Revenue Generation Index.
While emergencies like this can be rare, it is unavoidable. When it happens, we must be able to remain calm and focus on planning for the long-term.
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Group 9
Group 9 Reflection – Impact on Hotels
Guests Speaker: Vivek from Expedia Group & Vikram from Zuzu Hospitality
In the first session of the roundtable, our group spoke to Vivek from Expedia Group and Vikram from Zuzu Hospitality about their companies’ response to COVID-19. Through our discussion, we have 3 main takeaways. Firstly, the impact of the situation depends on the size of the hotel. Second, the importance of diversifying the customer profile. Lastly, both believed that the focus should be on the rebound after the epidemic instead of attempting to boost sales during COVID-19. Each point will be elaborated in detail.
First, we learnt that the impact that COVID-19 has on hotels is positively correlated to the size of the hotel. Larger hotels with more than 100 rooms (e.g. Marriott, Ritz Carlton) saw a decrease in their revenue by more than 30%, whereas smaller hotels (e.g. M Social and Naumi Hotel) saw a 15-20% revenue decrease. One reason why larger hotels are more adversely affected is due to a dramatic decrease in group demand for business conferences, a result of the cancellations of business events to limit the spread of the virus. In addition, tourists were also cancelling their trips. This impact did not affect smaller hotels as much as smaller hotels catered more to locals who travelled domestically, which was not as seriously impacted compared to international travel.
Secondly, we learnt about the importance of diversifying the customer profile for hotel businesses. Both Vivek and Vikram shared with us that hotels located near tourist areas suffer huge losses due to their over-reliance on Chinese tourists. In fact, some hotels only partner with Chinese tour agencies as their source of customer acquisition. When the epidemic first hit China, the significant drop in the number of Chinese tourists led to a plunge in revenue for these hotels. To prevent this, the two experts suggest that hotels should reach out for partnership opportunities with tour agencies from different countries, to diversify their customer flows from different parts of the world in the event of a drop in tourists from a specific country.
Lastly, we learnt that the main focus for hoteliers is to rebound after the COVID-19 epidemic rather than attempt to boost the demand for hotel rooms amidst the outbreak. This surprised us as we thought that the hotels would prioritise increasing revenue streams to maintain their profitability. However, Vivek highlighted increasing revenue via promotions will be futile as the majority of their customers are restricted by travel bans. Hence, hotels focus on the rebound instead as positioning will be vital for them to thrive after the epidemic.
In conclusion, when hotels encounter an epidemic situation like this, they should adjust strategy and expectations based on their sizes, diversify customer profiles by accepting customers from different countries and focus on the rebound. Lastly, the golden rule when hotels run into an economic downturn is not to panic. Hotels should calmly analyse the situation and focus on increasing the quality of service. The downturn will end eventually and successful hotels should be prepared for a rebound following the disaster.
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