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Finding Opportunity When Every Day is Groundhog Day

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October 24, 2020
Trevor Warner - trevorwarner@warnerconsultinggroup.com

Failure is only the opportunity more intelligently to begin again. - Henry Ford

Thanks to COVID-19, circumstances in the current industry landscape are out of our control. For six months, the common response to questions like “What’s going to happen?” or “What should we do?” has been “We don’t know.” Every time we come up with a plan, a strategy, or mine the data to make a decision, things change (usually the next day). Is there an end to this Groundhog Day scenario? Likely not as soon as we all hope.

A July 2020 article from The New York Times titled “Best Guess on When Business Travel Will Recover,” quotes airline analyst Michael Derchin as saying it took major airlines 7 years to recover from the 2008 recession. He adds that “10% of the airlines business travelers account for 50% of the airlines’ profits,” and that, “business travel alone is 55-75% of major airlines’ profits worldwide.” There’s a direct correlation between airlines and hospitality. While there’s optimism over current U.S. travel numbers, it’s important to note that this is just leisure travel and it will drop off. The same Times article also quotes Robin Farley, a leisure analyst for UBS. “Business travelers generate 70% of Marriott and Hilton’s global revenue,” she says. In other words, hotels are propped up financially by business and group travel, which unfortunately isn’t coming anytime soon. That’s because corporate America isn’t bringing employees back to the office anytime soon.

Here in Columbus, Ohio, Cardinal Health announced a return to the office in the second quarter of 2021. Google announced July 2021 for its employees. Nationwide Insurance started a slow introduction back to the workplace that was immediately halted and tabled to be discussed again at the end of 2020. Business travel is on a parallel track. Companies are unwilling to take on the risk associated with sending employees back out during a pandemic. It isn’t that people are unwilling to travel; it’s that no company is willing to take the risk of sending them out there. In addition, companies have saved billions of dollars by not traveling. They will try and save that money for as long as they can. And if no one is in the office, who would employees be traveling to meet with? No business travel also means no conferences. While leisure travel arficially inflates hopes of a rebound, it’s important to note that business and group travel is not following behind. The initial COVID-19 shutdown resulted in significant furloughs and layoffs industrywide, from executives at large hospitality companies to hourly employees at individual hotels. Even information technology departments (IT), which were already thin, got trimmed. 

Hotels aren’t just suffering, they’re starving. In an already low margin business, it may take many years for those that do survive to recover. Some analysts have predicted occupancy recovery by 2023, but revenue per available room will lag behind. With a slow recovery, there’s no money to rehire talent. Displaced staffers will be forced to find jobs in new industries or start new careers.

While much of the focus has been on building consumer confidence, there’s a concern that guest-focused technology may not drive additional business. As owners review the options, they struggle to understand the impact of short-term technology investment. And they wonder if that investment will still be relevant once “normal” travel resumes. Decision-makers continue to evaluate without committing, but we still have problems to solve -- foremost of which is the lack of resources. The hospitality vendor community has an opportunity. We’re seeing a shift in thinking from using technology to influence the guest to using technology to keep the hotel(s)/industry alive.

An article in The Wall Street Journal published August 5, 2020, quoted Red Lion Hotels Corporation CIO John Edwards as saying, “We’ve prioritized anything that has to do with automation.” Red Lion’s focus is on technology that fills the void those lost staffers left behind. The article points out that Red Lion has built software to automate invoicing and worked with another cloud communications provider to add AI to answer questions from hotel customers. Red Lion is finding ways to overcome its lost resources. “As we’ve dug into the details surrounding the ‘why’ and ‘how’ for these items, we uncovered more opportunities for automation or consolidation of tasks allowing our teams more time for better analysis or decision making,” Edwards told the Wall Street Journal.

Mobile key was originally introduced to allow consumers the option to bypass the front desk. Adoption was low at first. The technology was primarily used by high level loyalty members in single occupancy rooms. But now it serves two purposes. First, it raises consumer confidence with regard to safety during COVID-19. Second, hotels that use it can pair it with technologies like seamless precheck-in, on-property digital communication and kiosk technology. This means they can rethink their need for guest facing staff. I recently worked with a company that was able to automate its fire extinguisher maintenance checks and pool monitoring, documentation processes that were previously done by hand and cost time and labor. They also added F&B IoT devices to monitor temperature in refrigerators or freezers. Another company is looking at bringing artificial intelligence to the night audit, potentially eliminating the need for a dedicated person staffing the front desk. Ideas like this add up. “Saving me an hour doesn’t save me on labor but saving me 8 hours does,” said Touchdown Hospitality’s Jeff Parker.

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