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The Challenges of Coronavirus in RM Strategies

By Rudi Azevedo, CEO & Founder of RM HUB


The impact of Coronavirus on the global economy is constantly “mutating” as the number of confirmed cases and deaths continues to increase and governments and companies around the world take steps to fight the pandemic.
As the impact of COVID-19 spreads around the world, it is impacting all branches of tourism, from hospitality to airline companies, from cruises to travel agencies, and tour operators in general.
Although the final result is still unknown, it is obvious that the economic impact will be significant.

Immediate Effects
In early February 2020, the organizers of the Mobile World Congress, an annual fair in Barcelona that attracts more than 100,000 attendees, cancelled the event and justified their decision with the following argument, and I quote "global concern about the outbreak coronavirus, travel and other circumstances, making it impossible for the GSMA to hold the event ".
Hilton closed about 150 hotels, representing 33,000 rooms in China. Hilton CEO and President Chris Nassetta said that "an impact of 25 to 50 million euros on EBITDA in December 2020 is expected" and a 1% drop in RevPAR - that is, if the outbreak lasts " about three to six months, with an additional recovery period of three to six months. "
Nearly two dozen airlines, including American, United, Delta, Air France and British Airways, have canceled all flights to mainland China and many are continually postponing the date when flights will resume.
IATA reports that, based on air traffic data from the past one week after the start of the Chinese New Year holiday, this year “daily passenger volumes were about 40% lower compared to what was predicted. "
And the cruise industry has captured much of the global coverage as passengers have been quarantined and ships kept out of ports. In reporting results for the full year 2019, Royal Caribbean Cruises says, "If these restrictions and travel concerns during the outbreak continue for a long period of time, they can have a devastating impact on the company's overall financial performance."
Carnival Corporation says the same: "As a result of the Coronavirus, the company believes that the impact on its global bookings and cancelled trips will have a substantial impact on its financial results, which was not anticipated in the company's previous earnings guidelines for 2020”.

Strategic Solutions
From the RM's point of view, including prices and forecasts, Coronavirus is a huge challenge for the tourism industry - affecting both the relevance of historical data, the ability to predict the future and the need to address cancellations in the present.
Without a known end to the outbreak or even when travel restrictions will increase - along with the expectation that fear will have a long-term effect afterwards - RM HUB is continually changing the now much shorter-term forecasts of just a few weeks ahead for hotel customers in China and Hong Kong and advising them to reduce their revenue forecasts by the end of the second quarter.
In China there were increases of 29% in cancellations of hotel stays for the month of January compared to 2019 and a decline of 75% in the rooms reserved in January for stays in February, March, and April. And the impact is notorious at the global level. In a joint analysis with Climber RMS, we noticed that in Portugal the impact from 1 to 19 March and whose impact was felt until the end of 2020, was a 60% drop in hotel revenues, 38.6% in the increase in cancellations and drop of 28.4% in terms of occupation.
One strategy that we do not recommend is to lower prices dramatically, as it may take months or even years to return to pre-crisis rates once demand is resuming. The demand simply does not exist. People do not travel to a region if they think there is a risk, even if the price is very attractive, they seek security and flexibility.
There should be a focus on domestic markets that are expected to regain confidence, albeit moderately, and define campaigns for the summer months.
Due to the increase in air travel restrictions in the national TOP 10 markets, we must guarantee maximum exposure to the domestic market, concentrating more budget and directing e-commerce actions, namely “metasearch” and “re-targeting” campaigns, where there is still an established audience with a strong intention to book.
Customers are not necessarily looking for price right now, but flexibility and security, so consider not using non-refundable rates, consider changing the penalty policies for cancellations and consider a realistic pricing strategy in view of your competitive market.
Consider allowing customers to change their reservations to a new date if they wish (also reassuring new customers). Make the word "flexibility" one of your main marketing messages and even try changing the name of the BAR fare to "Super Flexible". Send a clear message of safety to customers and highlight the actions in force, for example constant cleaning with disinfectants and many other measures that the official entities recommended.