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Operating In Uncertain Times

February 18, 2020 | Philip Niemann, Group Vice President - APAC

I am on my way back home to Singapore after being in San Francisco for our annual company conference and cannot help but think about what is on everyone else’s mind in the city state and region: Coronavirus.

Hotels in the region are struggling, with many properties in China reporting occupancies in the single digits. Our data shows a 29% increase in cancellations in January 2020 compared to figures from the same time last year. Our partner hotels in China have also seen a decline in pace with rooms booked in January for stays in February, March and April down more than 75%.

The world press are naturally drawing parallels to the SARS epidemic which swept through the region and had global impact throughout 2003.

I was working in F&B in Singapore at the height of SARS. However, if anything the events of today refresh thoughts of my experience working in Bangkok from 2008 to 2013, navigating through a week-long airport closure and escalating protests that eventually saw the city centre shut down. At the height of the protests,thoughts around temporarily closing the hotel like the internationally branded five-star properties down the road were not uncommon.

While the circumstances are different, there were things we learnt that I hope others can benefit from in this time of crisis.

Revenues and expenses

Chances are that most properties impacted by Coronavirus will have already put measures in place to curb costs. Clearing annual leave should be the first thing on the list to create some ease on the balance sheet. Reducing perishable amenities (as long as this does not impact guest experience), practicing effective FIFO inventory management, offering a la carte instead of buffet and managing energy costs (do you really need to have six elevators active?) and closing floors to streamline rooms assignment are some of the things we put in place in Bangkok.

Other Revenue Strategies to consider:

Discounting room rates will not work 

I will state what has been reiterated by many others: dropping your rates will not increase demand. If people don’t need to travel, they will not book. “Buying business” may help you in the short term, but you are hurting your ability to increase profitability in the long run.

Know your walkaway rates - and give them integrity

Stand firm on what you believe is the lowest you should go from a pricing perspective, especially on your public channels.

Driving revenues via F&B and the local market

In Bangkok we had eight F&B outlets on site; we decided to go the route of selling dining vouchers to only the local audience at preferential rates but with some fences (e.g. minimum value / number of people, buffet only - if available, specific validity period and days of week, etc.). Corporate clients, in particular those in the building next door, were very receptive to this. We even had a bit of competition amongst the team, to see who could sell the most. While this advice is clearly not intended for hotels in China, there are many other markets worldwide feeling the ripple effect of coronavirus and looking for alternative revenue streams to rooms.

When confidence returns, I have seen the domestic market react faster than any other: people may not feel comfortable to travel overseas, so give them a good reason for a staycation or to travel from another city within the country.

Human Capital

In some cases you may be in a working environment where the teams are slightly on edge. Everyone is nervous about the present, to many it looks like there is no end in sight. Empathy is powerful, but this is also a good opportunity for you to:

Get to know your colleagues: Not many of us have the luxury to sit down with our team and get to know them a little better. These times often bring with them a bout of honesty that you may not see during your bi-annual reviews - we can be a little more ‘human’ yet still maintain a professional relationship.

Cross / re-train: As challenging as it may be, the lull would also give you an opportunity to do some cross-training for individuals that wish to change departments or re-train on areas that you believe don’t get enough attention. This may be especially beneficial from a revenue standpoint. Why not get your revenue teams talking to other departments and showing them how everyone can have an impact on the bottom line. Time is precious - use it wisely.

Cross-exposure: The hotels industry is a close network. Larger companies or multi-property groups outside of China may find some hotels are faring better than others. For staff willing to travel or temporarily relocate this could prove a great opportunity to work in a new environment.

Additional thoughts

A few other things you may want to consider, especially during low occupancies:

Special Projects: Remember the room refresh program that you had been meaning to commence? Or how about that training program that you were working on? Now could be the perfect time to get started.

Renovations: One of our partners indicated that they will be pulling forward their intended renovation dates and shut down the hotel. While this is not going to be common, if you had plans in the wings and renderings ready, now will be a good time to execute on them.

Systems / technology: After almost 15 years in revenue management, with the last few years working on the vendor side, it would be remiss of me not to reiterate that a system is there to help you. In a high-demand market, an RMS is there to help you grow faster than the comp set - when things go south, it is designed to mitigate the decline.

A good system will be able to help you even when things are tough, and I am sure that regardless of the vendor your customer success team will be willing to help you make the most of the app.

As Singapore’s Prime Minister recently said: “Fear can do more harm than the virus itself.” We have experienced crises and hard times before, and I know that we will come out of this stronger than ever.

If you operate a hotel in the Asia-Pacific region and would like advice from our customer success team on how to navigate through the challenges ahead please feel free to get in touch here.

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