The hospitality industry is going through tough times. Knee deep in the consequences of  the  credit crunch and the economical crisis, many hotel management teams and property owners are still worried about the short term, and focused on this year's result. That is why it is good, every now and then, to sit down and remenber that we not only have a present, but a future as well. Travolon has pinpointed 5 strategic trends that will shape this year' result. For the best of the class.  

  Hotel owners and operators are concentrating on improving efficiencies, productivity and cost savings in both capital and operating costs at  corporate and property level. Owners are increasingly concentrating on overhead cost reduction, asset utilization yields, operations, construction-cost efficiencies and limited capital improvements.  Doing everything they can to reach the budgeted results,  the hospitality industry is keeping the boat afloat in the storm . Every captain wants the ship and most of its crew to survive, that is the priority. Getting to a harbour is the dream, it does not matter too much which harbour. 

Everybody knows that eventually, even the most dangerous hurricane storm will come to an end. Every sailor who has been in a tycoon, has prayed for it to end soon. With a crew getting tired, supplies diminishing and morale sinking, you want the wind to stop howling so that life can become normal again.

Today, the hospitality industry is hit by a tycoon. Management and staff are getting tired of lousy forecasts and cost cutting operations, owners see their cash and property value shrinking, and people on the floor are scared of losing their jobs.

Travolon has consulted owners, managers, investors and consultancy companies to come to a global picture of the state of the industry.We relied on existing data and reports, and have completed this with first-hand experience and opinions.  We hope that this analysis will help decision makers to continue coming to the right decisions, allowing them to survive the short term without endangering the longterm.

We have pinpointed 5 essential and strategic items that will shape the hotel industry in the post-crisis years. Those who want to be on  side will have to incorporate these elements in their corporate vision,mission and strategic planning.

1. In search of excellence: bottom line efficiency

Cost cutting is the buzzword in the hospitality companies’ board rooms  these days.  All too often this is an operator-solo exercise, leading to overworked staff and underserved clients.  Bottom line efficiency can be improved by allowing the operator and the owner to work more closely together. Bridging the gap between these two parties can lead to genuine bottom line improving initiatives, including implementing energy efficiency programs, outsourcing business functions and review –not cancel- capital expenditures. Excellence can only be reached if all stakeholders take their responsibilities. In shaky times, owners tend to follow their operators more closely, often helped by third party specialists.

2. Solid is solid, shaky is shaky.

Every company going bust these days is called “a victim of the economical crisis”. Time for a reality-check: solid companies with a robust business model and a seasoned management do not go bust. They suffer, they take harsh measures, their budgets are under pressure, sure: but they do not go bust.  Shaky companies depending on growth and growth alone go bust once external circumstances undermine their growth materialization.

Although every bankruptcy is a drama, it seems like the current crisis will allow our industry to sweat out some bad habits. This is becoming very clear on the investment side of our business. The scarcity of capital has frozen the real estate transaction market  and is delaying new lodging supply. Many capital providers (property owners and other parties) are buying … time. Today,risk capital only goes to high-quality, well positioned properties in strong markets. Cash-flowers. This risk capital is provided at higher interest rates,stricter loan covenants and increased debt-service coverage ratios than during the real estate boom of 2004 – 2007.

A stricter, more severe environment will benefit again to the solid players, and will prevent third rate property from entering the market and infecting the market with opportunistic price levels.

3.  The internet:death of a salesman.

The power of global Online Travel Agencies like Expedia is huge, because of the strength of their brand and their strong one to one communication with their database. Hotel companies are entering the online game themselves, however. They are leveraging their brand and using relatively cheap cutting edge technology to claim brand space in the virtual space. The combination of a strong brand, a clever use of social media like Twitter, Facebook and Linkedin and a radical choice for advertisement-based  search engines such as Kayak and Sidestep could very well eliminate the need for commission-based models of third-party wholesale travel websites. This would give profitability a boost, leading to more  brand building investment opportunities.

4. Going green out of self-interest

Forget the “we respect nature so we ask you to re-use your towels” signs: hotels will have to really go green.  Governments will be the first driving force in the green developments. Not only are they offering tax credits and capital allowances for energy-saving equipment and proven smaller carbon footprints, but they will mandate that their employees travel green. In government and international institutions driven markets (Brussels, Geneva, Strasbourg) hotels embedding green renovations into their strategy will develop strong competitive advantages. 

The ecological aspect of the hospitality business has left the gimmick cupboard to  position itself in the boardroom.

5. The leisure market: a strategic, high yield segment

For many business travel-focused hotels, the leisure market remains an off-peak, low yield and “property-alien” segment. To many hotel managers leisure clients have mother in law status: to be avoided whenever possible, but sometimes comes in handy.

The leisure market is the fastest growing segment  in all mature markets. The value proposition that most hotels do for this segment, is poor. Research around the desired client benefits of the leisure client will no doubt lead to mind blowing insights, which in turn will be the basis for leisure dedicated investments in hardware (rooms types, meeting rooms converted into kids play grounds) and software  (F & B concepts, client profile-oriented local information).

If well serviced and catered for, the leisure segment will turn out to be business vital and yield essential.  

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Gianluigi Cuccureddu said:

... According to you, which of the 5 strategic items will have the most impact and benefit? If there is one market / industry that can benefit from the Experience Economy it is the leisure market, I'd say number 4 and 5 as positioning and new models/propositions will definately create a gap between the forefront and the rest. Nr. 3 has become a neccesity. The first two long for a cry to Operational Excellence, which serves as a basis to keep costs on the level it is acceptable. Best regards, Gianluigi Cuccureddu

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juni 04, 2009
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