Experts estimate it might take more than a year for the hospitality industry to recover from the monstrous effects of COVID-19. Many hotel managers are utilising this downtime to deep clean the entire venue and revise projects that are otherwise impossible to do when hotels are full.
While the demand on international flights is at an all-time low and countries still enforce tight restrictions on border controls and mandatory centralised quarantine, domestic markets are seeing things in a different light.
In Deloitte’s latest study released in May 2020, experts believe that the hospitality and travelling industry will soon accept that the reduced business and international travel is the new normal10. On the bright side, hotels can expect the number of solo and family guests to rise, but they will display different behaviours and expectations post-pandemic.
McKinsey’s August research on respondents in eight Chinese cities, all of whom had travelled domestically or abroad in the past year, also reveals similar findings – people of all ages are willing to travel again11.
The rise of domestic bookings
The result from the McKinsey study unveils that hotel-occupancy rates and numbers of domestic flight passengers in China experienced a remarkable rebound, almost reaching 90 per cent of 2019 level by the end of August. Railway travel also exhibited positive figures. China's robust market, swift recovery, and distinct experience leaves the world with many valuable lessons to learn from.
As countries are still in various stages of local lockdowns, domestic travel may not be possible everywhere. However, in zero-case-first markets (low risk, low transmission rate and high confidence in travellers), destinations that offer outdoor leisure activities will become popular as people start travelling again.
In the same McKinsey study, regional urban leisure trips, short/ long haul as well as business travels increased significantly from 54 per cent to 73 per cent in approximately three months.
The most notable insights obtained from the study was the booming occupancy rates at high-end hotels at the end of August surpassed 85 per cent of the pre-pandemic figures.
Additionally, the average price of five-star brands on leading online travel agency (OTA) platforms was up 10 to 15 per cent year over year for trips during Chinese's National Day holiday in October. Leisure trips to Western China and Hainan Province, destinations famous for their beautiful scenery, outdoor activities, and beach resorts, also received immense growth.
Thus, hotels can return to its pre-pandemic stage and figures. Hoteliers need to take advantage of the growing demands and confidence levels to promote bundle products, upsell and cross-sell as well as explore opportunities to capture new non-room revenue streams.
In addition to promoting local destinations, delicacies, outdoor excursions, this is also a fantastic period for hotels to try out multiple digital initiatives to attract young, affluent, and tech-savvy travellers such as leveraging guests' online touchpoints and offering digital tours, live streaming via social media channels, or as innovative as hotels desire.
The often overlooked non-room services
Non-room revenue can account for up to 50 per cent of the total revenue. As such, the modern revenue management system today has evolved into a more holistic approach that requires collaboration from all functions within the hotel instead of each department operating independently. This approach is known as total revenue management.
The concept of total revenue management encourages hotels to find the most profitable combination of room and non-room activities based on the overall value. For example, guests that stay at the hotel during a business trip would likely visit the hotel’s bar or restaurant to meet up with clients or request a private meeting room.
Non-room service requests can happen at any level, at the reception area where guests check-in and out, on the phone where guests order room service, or online. A few areas that hotels can consider while evaluating their strategies to increase their non-room revenue can be:
1. Food and Beverages
Demands for food delivery services have been through the roof during the pandemic. It is expected these services to remain stable even after the crisis ends.
Setting up a food delivery service caters for households and small businesses out of the hotel's kitchen can bring in additional revenue. For instance, dim sum has been in very high demand during the pandemic as various five-star hotels in Shanghai decided to launch delivery services.
However, it can be quite tricky. First and foremost, hotels' menu offerings and pricings are not delivery-friendly. Secondly, other obstacles such as marketing, packaging, distribution channel, etc. could potentially delay the launch of the new food delivery service to weeks or even months.
2. Parking lot, kid centre, pet services
These services make use of the underutilised facilities, such as secure parking lots, which tend to be difficult to find in the city centres. For instance, people are willing to pay a higher price for parking if the space is secure and in the city centres.
The same goes for the demand for a babysitter and a pet sitter. These two services may seem like out of place but can work wonders for hotel guests or the locals. Having a full-blown pet grooming centre is not within hotel capabilities? How about having someone to walk guests' dogs? Hotels can be as creative as they want when advertising these services to the public.
3. Workspaces for the "work-from-anywhere" era
Renting out empty spaces to remote workers is a feasible solution that hotels can consider in the attempt to attract guests after reopening. What’s not to like about hotel rooms anyway? They provide a private, clean, comfortable environment plus complimentary amenities and food that can help remote workers to get away from the noise and distractions at home, and help them to take a breather by changing the scenery.
Thus, hotels should take advantage of this increasingly popular remote working trend to obtain an additional sustainable revenue stream by:
- Rearranging room layouts to accommodate business purposes.
- Offering a variety of food and beverage options.
- Promoting meeting spaces, conference rooms and utilities for video conferencing or in-person meetings when applicable.
You have come to the end of Part 4 of our multiple parts series about "Unmasking the New Face of Hospitality" where we will discuss in-depth the various contactless technologies and opportunities of establishing new revenue models. Stay tuned to our upcoming parts by subscribing to our TRG Blog today!
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