"It's like the board game labyrinth: companies might have a strategy today to plan ahead, but the board is changing every day," he said. For a clearer picture, RLA has reached out to leading industry experts to get their post-pandemic outlook.
Saving lives and preserving the health of people must be the top priority at the moment, but ensuring the survival of business players will be also essential to ease economic pain. For now, even the biggest players, such as Marriott, Hyatt and Hilton, are furloughing workers and cutting staff.
Assistance from governments around the world can hopefully help many resorts survive, but it seems certain that a number of properties will go down. The coronavirus pandemic may prove to be a turning point for most operators, with no return to how they operated before.
Industry players are facing tremendous uncertainties, and the situation is even more difficult as it is yet unknown when the crisis will be over. Remaining positive and preparing for a future market recovery is vital. But what will the resort and destination landscape look like when the epidemic is over? How can owners and operators get ready to start over and offer value to customers?
Customer attitudes change
Many industry experts foresee a 'sanitizing' of the brick and mortar of the sector and also of business strategies. Resorts and destination properties are expected to be more sensitive to the impacts than city hotels, partially as a result of reduced international accessibility of remote locations. International travel could remain limited and more expensive, depending on the recovery of airlines, making resorts reliant primarily on local customers in the short term. Resorts will be also exposed to ongoing changes at society level and the transformation of customer attitudes caused by the financial, social and psychological consequences of the pandemic.
Adapting to a different life situation is already affecting our attitudes and this change may not be reversible. These new attitudes could also change our values for the better and impact our everyday decisions, like selecting a destination or resort in the future. Once the virus is stopped, going on holiday may no longer be about simply ‘getting away’ before running back to work. It will become more 'philosophical', more about how the quality of life can be improved.
People may have a sense of relief after self-isolation is over, but at the same time, they might also seek the possibility to keep social distancing to some extent at hospitality properties. Others may not be willing to travel very far from home. Lifestyles will change, with demand for restaurants potentially remaining low initially, and the popularity of big open spaces, like parks, increasing.
"The addition of the fear factor into travellers' playbook is going to disrupt the hotel industry in ways we never imagined," Bill Barnett, Managing Director at C9 Hotelworks, a hospitality and property consultancy focusing on the Asia Pacific region, said. Among possible changes, he expects hotel room service to "be back in a very big way going forward".
Fears about cleanliness, proximity of guests or sleeping in hotel beds will also impact customer attitudes in the hospitality sector, Frank Reeves, CEO of hotel tech company Avvio, said. He said hotel websites and digital marketing should focus on alleviating these fears and operators could also appoint a chief hygiene officer and give them exposure on social media.
Preparing for the future
Evaluating new customer attitudes and building propositions in alignment with those values should help resorts and destinations prepare for a future market recovery. Re-assessing former market segmentation and doing appropriate adjustments could be key in getting ready.
In terms of market segments, leisure travel is seen to restart first after the crisis, likely to be followed by corporate and group travel. The recovery in the leisure segment is expected to begin with local communities and may be subsequently expanded to long-haul travel. Customers are generally projected to plan shorter trips within closer proximity to their home, although some specific groups, like millennial families on road trips and high-earning couples seeking international destinations, could have different behaviour.
In the hotel market, 'local' occupancy could start the recovery, followed by leisure demand in the economy, luxury and resort segments and eventually corporate and group in all segments. The value proposition of wellness resorts must become more compelling to fight psychological barriers of international travel amongst consumers, according to Achim Schmitt, Associate Dean of Graduate Programs and Full Professor of Strategy at Ecole Hôtelière de Lausanne (EHL).
He said the pandemic is reducing the perceived ease of international travel, making passengers think twice before they jump on a plane. Consumers are also emancipating themselves to make active choices that meet their personal needs. They are becoming active instead of “being served” and learn that services can be organized and delivered virtually from the comfort of their own homes – such as, for example, personalized health and fitness coaching, Schmitt said.
Other factors playing a role in how customers will feel about travel in the future would include the expected economic recession and governments maintaining certain domestic and international travel restrictions as the market reopens, Reeves of Avvio said. New limits could be potentially imposed to cover safe levels of hotel occupancy or restaurants, he added.
Market recovery may be initially slow, and demand could return from the domestic market initially, Reeves agrees. This has important implications for resorts and hotels in terms of distribution, as domestic guests tend to use mobile channels for bookings, rely less on OTAs and favour Google and Metasearch. He said hotels must pay attention to these booking characteristics once the market picks up and carefully select distribution partners in the short term.
The ability of a resort or destination to endure events like the coronavirus-related lockdown, relative to its peer group, will be ever more important for investors in the future, Richard von Kalmar, board member and director of hospitality investments of RLA, said. "Investors and lenders will be far warier when making investment decisions," he said, adding that this would translate into higher credit spreads, increased expectations for returns and more careful evaluations of how resorts can sustain catastrophic events and generate stable earnings.
Projections on how fast tourism and the hotel sector can rebound vary widely as the pandemic continues to unfold. "But ultimately resorts with a tangible concept and value proposition for providing a specific experience will have a better chance of success than those properties that are trying to be everything to all," RLA’s Allen said.
About the author: Roger A. Allen, RLA Group CEO, with great appreciation to the insightful contribution from Achim Schmitt - Associate Dean of Graduate Programs and Full Professor of Strategy, Ecole Hôtelière de Lausanne, Bill Barnett - Managing Director at C9 Hotelworks, Frank Reeves - CEO, Avvio, Dr Richard von Kalmar, board member and director of hospitality investments, RLA.
Roger is the founder of Resources for Leisure Assets (RLA) and brings a no-nonsense approach to the leisure industry, which is based on a proven track record of representing owners and operators best interests. Roger has worked with many of the leading hotel operating brands and most influential hotel owners and real estate developers around the world. Furthermore, successful ongoing engagements with government entities and high net worth individuals keep him fully engaged with the day to day project development responsibilities.