Author: Rafael Gómez / 5 minutes read.
It is clear that we are in a unique tourist situation in our history. At RevenueResort we consider 3 key stages in the process. We comment them:
When we recently talked about the hotel reopening, no one could imagine the current situation, where due to the incidence of COVID-19, traveling to Spain is not recommended. In addition, some of the main markets impose a strict quarantine to their citizens after returning from Spain. Although the Corporate Business segment is suffering from the lack of internal business, it is the holiday Resorts the ones most negatively impacted by the measures imposed by these countries.
The high season in the Mediterranean coast shows the worst results in history, where some hotels have closed their facilities earlier due to the lack of foreign business, mainly British. Now the concern is for the Canary Islands as it starts there the winter high season as of October.
We have an unpredictable situation, where every day we wake up with news that are not positive. Some hotels that planned to open their doors again in August have delayed their opening to avoid a GOP difficult to digest. September will be the worst in history and the hotels are looking with concern what could be done to “save” the high season.
Since the UK is the main market with a special stronger impact on certain islands, the Spanish situation is further aggravated in view of the fact that UK cancellations do not cease after the confinement order. TUI and Jet2 have already recently communicated that they will not operate in the Canary Islands until mid-September, and this situation could continue. What can we expect then?
Tour Operators are putting pressure to UK government. Although, during the month of August, Jet2 for example relocated flights to Greece. With the arrival of the winter season, everything indicates that the only option with good weather is the Canary Islands.
Therefore, the main factor is “concern” due to the news that reaches us for the short term impacting hotels expectation.
Undoubtedly we have a new reality that is not going to change in the short term, and therefore it is essential to adapt the new situation, with occupancy estimations around 30-40% for the short term. Hotels will need to adapt the staff looking for the desired break even point, which we already analyzed when we talked in previous posts about how to face the Hotel reopening.
Not only we have to adapt the new safety and hygiene measures and update them, but also hotels need to keep market position, which will help future recovery.
It is true that prices reduce from the moment where the unconstrained demand is lower than the total hotel availability line. Although it is always said that reducing prices does not stimulate the low demand (which is true because of the inelasticity of hotel demand), the truth is that you always see a price drop in the Marketplace in times of low demand.
The impact on the GOP is impacted by the double factor, driven by the lower volume and the lower ADR. In the same way, in good demand moments, it pushes and helps to increase occupancy and prices if the correct strategy is in place.
What can we do?
This lack of revenues cannot have an impact on the hotel’s reputation, probably due to possible facilities closure, limitation of essential amenities in the room, charges for services that were not charged before, etc. The contingency plans of some hotels should never impact the customer, because it damages the reputation and positioning in the market.
Additional services with added values are a plus, for example, parking or High speed internet. If we go further, special agreements with car rental companies that are also suffering from a lack of demand, will help offering special conditions or packages to customers.
It must be considered in a positive way that in the medium-long term, the Canary Islands will continue to be a preferred destination, mainly due to its unique weather.
Adapting the properties and continuing offering a quality customer experience is the key to recover earlier than our competitors.
Finally, it should be noted that a new beginning always brings new opportunities, which involves showing the hotel as never before from the quality and safety perspective. After having the Hotels closed, we can only grow.
Opportunities may come from the hand of new market niches not considered before, changes in the segmentation mix or new segments, increase in volume from other countries, drastic changes in the hotel’s strategy by season, etc.
From the perspective of Revenue Management, not losing position is not only a future opportunity when we talk about “pricing”, but also from the most internal part of social marketing. Avoiding a negative review is also synonymous of future opportunity. In one of our courses we show what to do and how to manage positive reviews, and especially how to handle a negative review to convert it into a positive future experience.
In conclusion, we highlight these 3 factors: concern about the hotel financial situation for the short and medium term (that I hope that it can be supported by the Hotels), adaptation as a way to face the moment and look for the opportunities that were always there and probably not considered before.
We can be sure that we will shine again!