Monday, 16 March 2020

Hoteliers View on Covid-19


I met with Patrick O’Flaherty last week and asked him how hotels should deal with Covid-19. These are his thoughts.

Aró Digital Strategy have worked closely with Patrick and the team at Ballynahinch Castle. Together, as a joint team, over the past 5 years, we have succeeded in increasing their direct bookings from under 25% to over 50% through a progressive Book Direct strategy.


As hoteliers consider what the impact of the escalating covid-19 pandemic will be on their business the stark reality is that the immediate impact will be dramatic. The collapse of international visitor numbers this summer will result in significant losses for a hotel industry that is dependant on high yielding overseas visitors in the spring and summer. Those reliant on corporate and conference markets without a greater mix of business will suffer even more. The corporate market has moved faster than governments in banning work-related travel.

In attempting to forecast the effect of decisions in our main feeder markets to introduce travel bans we have the advantage of examining the effect on those markets first effected by the virus. In Asia the destinations reliant on traffic from China saw an immediate and dramatic impact on occupancies. According to STR, destinations such as Singapore and Thailand, which would normally enjoy occupancies of 80% and 90% in January and February suffered drops to between 20% and 40% occupancy.

It is not possible to yet say if Ireland will suffer similar fall off in occupancy and neither can we say how long this may last. There are historical trends that we can examine. Following the financial collapse of 2008, the hotel industry in Ireland struggled for many years, resulting in significant losses and many closures. In time this improved and by mid-2011 we saw a gradual improvement in trade. This was, however, a global economic downturn and by its very nature it took a long time for business to rebuild.

The current crisis may be more comparable to the SARS epidemic of 2002 – 2003. This epidemic effected 26 countries, predominantly in Asia, although it also had a significant impact in Canada. The hotel industry in these markets suffered a similar downturn to that being experienced in Asia today. The good news, if one can call it such, was that the downturn tracked the life of the epidemic. While the virus took hold, the industry suffered significantly and this lasted for 3 months, however the occupancies had largely recovered their pre-epidemic levels within three months of the crisis passing.

While this cannot be used as a model for forecasting, given that the SARS epidemic was restricted in its reach and we are now in the grip of a pandemic, it does offer some hope. The question is; What do we do now?

Don’t Panic

Hoteliers should try to take the long view. Hopefully the very strong performance of the sector in Ireland over the past number of years has provided the industry with a cushion to ride out the storm in the short term. All decisions should be taken with a view to the long-term health of the business. While there is an obvious temptation to get in business at any price, such a strategy can have a long-lasting negative impact on the business. It is very difficult to rebuild your rate once you have reduced it.

Advertise & Go Digital

Now is not the time to stop spending on marketing and advertising. What is important is that the spend is in the right place and are sending out the right message. Right now, people are not moving around, shops are quiet and the public are not behaving in a normal manner. Digital Marketing spend should now be focussed on those that we know are available to travel. There is little point in trying to generate new business or access new markets at this time.

Discuss your demographics with your digital marketing team, ensure that your targeted digital advertising is in regions that guests can travel from. If air capacity has been cut from a traditionally strong market, there is no point in pitching a book now campaign there. Concentrate on advertising where it can be proven there is still a market and a desire to travel.

Go Domestic

Assuming people do not travel abroad there is going to be tremendous competition for the domestic market. While the public will delay making decisions about travel, they do want to and will travel again. In communicating with your clients, it is important that you address their immediate concerns and needs.

Staycations will be up this year, but the decision process will have changed. They need to know that:

  1. You care about their health and can demonstrate that you are proactive in protecting them.
  2. You appreciate that they do not want to lose their deposit or suffer cancellation fees and so will operate a 100% refund policy.
  3. Allow the transfer of deposits to a future date at no cost.

Loyalty

How you engage with your existing and most valuable clients is more important than ever. Many hoteliers will have spent the last decade building close emotional relationships with their regular guests. This is a time when that relationship must be seen as supportive and empathetic. This applies to both domestic and international guests.

Hoteliers and Tourism Ireland have spent millions of Euro over the past 10 years creating strong relationships with overseas markets, consumers and wholesalers. Carefully nuanced digital advertising and communication with these markets, even when they cannot travel, will ensure a speedier recovery when the crisis passes.

Value for Money

Although there should not be a dumping down of rates, bookers will be aware that good value should exist in the market. Without reducing rates to levels that are difficult to come back from consider obscuring the rate in value-added packages. Add an element at no extra cost and internally deduct the cost from the room revenue if necessary. This can be presented as a gift or reward to your valued clients. Waiving cancellation fees and flexibility around deposits will also demonstrate a sense of shared risk which will be much appreciated, particularly by regular guests. Ensure that your OTA rates maintain parity with your own channels, you need to direct as much business to your own booking channel as possible. Talk to your provider about digital campaigns that will drive this traffic.

Prepare for Recovery

There will be a recovery, a bounce back as it is termed. Be ready for this by implementing a planned digital marketing / communication plan. Switching off the lights and breaking off contact with your clients at this time will make you much more vulnerable to customer switching when the bounce back occurs.

In the face of this unprecedented event it is those who are proactive in advertising and PR campaigns that will do best. Ezines, advance offers, social media advertising all, with the right cadence and message will all keep you fresh and relevant when the bookings start again.


Patrick is an experienced luxury hotelier with a career spanning the UK, Middle East, Russia and Ireland. Working with luxury hotel companies, opening resorts and iconic city hotels he was appointed Revenue Director for Marco Polo Hotels in the former Soviet Union where he concentrated on the delivery of optimum sales and revenue strategies. Patrick returned to Ireland in 1987 to take up the position of General Manager of Ballynahinch Castle Hotel & Estate in Connemara, Co Galway. Ballynahinch Castle is today one of the most successful boutique luxury hotels in Europe. Patrick has recently exited Ballynahinch Castle to establish his own business providing Revenue Management advice and strategies to the hotel Industry.