The Impact of COVID-19 on Hospitality – Some Data and Actions – Climber RMS & RM HUB
By Rudi Azevedo, CEO & Founder of RM HUB
COVID-19 is drastically impacting the global economy, but in this opinion piece we will focus our analysis on the national tourism and hospitality industry. Leveraging the existing partnership and synergies between Climber RMS and RM HUB, we examine current trends and make some key recommendations to mitigate the impact on your business.
Some analysts predict that the effect on the global hotel industry for 2020 (source Skift) will be a decline in profit (EBITDA) of 11% to 29% this year. However, it is noted that the scenario includes "an almost complete recovery in 2021", showing once again the resilience of the hotel industry.
In this analysis, we used a sample of 4 and 5 star hotels in Portugal and subdivided into the following regions: Lisbon, Porto and North, Centro Madeira, Azores and Algarve. It should be noted that we chose to present the results with absolute values because in certain regions the KPI's would be biased by the fact that the hotel sample has a significant variation. We were based on the KPI's for the Accommodation, Occupancy and OTB Revenue (on the books) and for the period from March 1 to 19, 2020 and with impact until December 2020.
In Portugal, we recorded a 60% drop in room revenue in the period under review, a 38.6% drop in OTB and a 28.4% drop in occupancy.
When we compare data up to December using our hotel comparison tool, we predict an obviously negative scenario for all destinations, however, when we evaluate the results from March 1 to 19, we can see that much of the annual impact is reflected in March , April and May, with signs of recovery in the last quarter, but still negative.
This could be an indicator that people are still doing hotel searches, but may not have the confidence to book in the coming months. Tools such as Climber are fundamental for us to be able to face unexpected situations such as COVID-19, interpreting the data that comes to us and how it comes to us. SAccording to Mário Mouraz, CEO of Climber RMS “we always intend to provide the best data for decision-making by the hotelier, managing to capitalize and, in situations like the one we are experiencing, try to minimize the impact that a negative situation such as COVID- 19 can have”.
Given the uncertainty of the evolution of the health and economic crisis, RM HUB and Climber make some recommendations:
• Focus on domestic markets that should 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 ensure 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 at this time, but rather flexibility and security, so consider not using non-refundable rates, consider changing penalty policies for cancellations, and consider a realistic pricing strategy in your competitive market;
• Consider allowing customers to change their reservations to a new date if they wish (reassuring new customers as well). Make the word "flexibility" one of your main marketing messages and even try changing the name of the BAR rate to "Super Flexible".
• Send a clear safety message to customers and highlight the actions in place, for example, constant cleaning withdisinfectants and many other measures that official entities have recommended.
In operational terms, we are recommending many of RM HUB's customers who have multi-properties in nearby locations, to concentrate operations in a single unit, and if necessary using only a few floors of the units, thus minimizing the negative impact on a financial level, reusing resources, give the option of security to HR, selling products with limited validity, or even activating the lay-off option. Other practices that we have recommended include renegotiation with suppliers, credit institutions, among others, in order to negotiate grace periods, thus alleviating treasury difficulties.In terms of cancellations of non-refundable rates or even flexible rates, but which are already in a penalty period, we are recommending caution on the one hand with refunds, because we have noticed many dubious situations, and on the other hand not to overcharge the treasury. On the other hand, we recommend that you try to negotiate with all holders of reservations to use them in a certain period with the attribution of a voucher, and in the case of groups, to give the option to rebook on future dates.
The tourism and hospitality sector has historically been a resilient and rapidly adapting sector and we expect that, once the situation improves, the demand curve will re-establish itself again albeit gradually.
Let's believe that 2021 will be the year of recovery, that economies will start a new upward cycle and that COVID-19 will remain only in our memory.
In order to seek solutions and listen to hotels, on April 2, at 3 pm, Climber RMS and RM HUB will promote an online round table with hotels from around the world, with the theme – COVID-19, and now? Details of the participation will be disclosed on the companies' social networks.