Keeping the doors open: How the hospitality industry is staying afloat
by Tim Cordon. Six things hotels and the hospitality industry are doing to stay open for business.Tuesday, 13 Apr 2021
by Tim Cordon. The hospitality sector has been among the worst hit by the pandemic – and the struggle continues. An industry built on positivity and friendliness has, however, found myriad ways in which to remain operational. As the sector continues grappling with the impact of successive waves of the virus, and weathers an onslaught of changing restrictions, the greatest challenge is liquidity and how to achieve it. We have seen hotels step up in many ways to counter this hurdle. Here are six measures hotels and the hospitality industry have implemented to assist with cash flow.
1. New financing options
Banks are acutely aware that hospitality businesses may not be able to meet their ongoing financial obligations when tourism numbers are at an all-time low. Despite most banks instituting moratoriums on principal debt and capitalising interest payments due, they are also encouraging hoteliers to source new equity partners to help reduce debt. Since most loan tenures in this market are for between seven and 10 years, banks are also, in some cases, extending tenures for a further average of two years in a bid to reduce loan instalments. Additionally, loan price restructuring is an option. With bank moratoriums coming to an end, and if the travel and tourism trade doesn’t improve, this could well be when we see hotels become distressed, and lenders taking control of ownership and placing assets on the market in search of fresh equity. Our strategy during this time will be to monitor the market and keep open the lines of communication with banks and brokers to help identify partners which are also willing to work with us.
2. New affiliations
Independently owned and operated hotels are finding it particularly difficult to negotiate with funders and tour operators alike, due to a number of factors, including their relatively small size and limited bargaining power. Many are turning to new affiliations, including with large hotel brands, to get them through. For instance, Radisson Hotel Group has launched a new brand, Radisson Individuals, as a commercial response to the pandemic. This brand allows hotels to maintain their individuality and their autonomy, while still becoming members of the Radisson Hotel Group global family, which boasts more than 120 million loyalty members following the acquisition of Radisson by Jing Jian International in early 2019.
Purely an affiliation brand, it aims to help upscale independently owned and operated hotels with an existing management platform in place. For a period of three years, Radisson Individuals connects independent hotels with Radisson’s global network and distribution systems, sales and marketing initiatives, economies of scale, and bargaining power with online travel agencies and procurement. The goal is to specifically boost revenue during this challenging time. No property improvement plan is required, and hotels that join can either keep the brand or use the additional revenue earned during the initial term to switch to one of Radisson’s core brands. The brand opens the door to hotel owners who want to join the Group, but do not have the liquidity to meet brand standards. This way, they join the Radisson international network while boosting liquidity during the pandemic.
3. New safety standards
Like everyone else, hotels have had to focus on health and safety standards in a new way. Gone are the incidentals that were considered a given in a hotel room, as management teams work hard to reduce touchpoints in rooms. Everything from the door knob to the television remote suddenly has to be safe to touch to reduce the risk of spreading the virus, and hotels have found this an additional expense. For smaller hotels, in particular, tapping into the resources, planning and procurement of a larger group has proven to be the way to easily achieve COVID-19 safety for their staff and guests. For instance, Radisson Hotel Group has made the safety and hygiene protocols of SGS, the Group’s hygiene protocol partner, available to all hotels in the group. This ensures that the health, safety and security of guests, team members and partners worldwide is prioritised. Such commitments boost confidence in the brand, so also boosting liquidity.
4. New product offerings
What do you do if you’re not allowed to fill your meeting rooms, or host big events? For hotels, this is often a major source of income, and having those big banquet rooms stand empty certainly doesn’t contribute to a positive cash flow. To circumvent this, hotels have found new, intelligent ways to use the spaces, which are often also more sustainable. Radisson Hotel Group, for instance, has started offering curated intimate hybrid events in local areas. The demand for hybrid meetings has increased exponentially over the past months, and is a great solution for many companies as attendees can join from other countries, their homes, or even their local coffee shop. The hybrid format also provides a great opportunity for any organisation to further its sustainability mission, significantly reducing its carbon footprint without completely eliminating true human connection.
5. Extended stays and staycations
Even prior to the onset of COVID-19, extended hotel stays were a no-brainer for corporates seeking to squeeze the most out of their travel budgets, as well as digital nomads who could work from anywhere in the world. Today, while a totally different market may well be the target for hoteliers working hard to attract guests in the face of lockdowns and travel bans, its purpose remains unchanged – and doesn’t apply to only extended-stay hotels or aparthotels either. Many hospitality establishments have, for example, found new markets in travellers forced to quarantine for 14 days or more, who are suddenly comparing extended stay offers. We have recorded a marked increase in these numbers, along with the increased responsibility in respect of safety and administration. We have many guests who escaped lockdown in Europe and have been with us for four or five months now. Since they can work from anywhere, South Africa allows them to enjoy a somewhat normal life with most businesses still open, and our strict and thorough Radisson Hotels Safety Protocols alleviating their COVID-19 concerns.
Conversely, and partly as a result of our no-fly status, South Africans are staying closer to home and taking shorter vacations. And while the trend can certainly be linked to the COVID-19 pandemic and the recession, it’s a shift that’s been years in the making. For many “staycationers”, checking in to a nearby hotel also, of course, offers a safe, comfortable escape from their day-to-day routine. Generally very pocket-friendly, staycation deals provide the luxe mini-break many locals feel they deserve after extended lockdowns and social distancing. Family staycations are also on the rise, and many hotels have tailored their offerings to create family-friendly moments, such as popcorn welcome stations, kiddies’ activity packs and breakfast menus, as well as highlighting family-friendly and COVID-safe activities in the vicinity.
6. Contactless service options
Another way in which hotels have been accounting for the fears of travellers, is to offer contactless service options. This includes innovations such as JEEVES, Radisson Blu Hotel at Zurich Airport’s new service robot, which is delighting guests as an extension to the hotel’s operations with contactless deliveries of drinks, snacks, and dining options such as burgers and pizzas, to guests‘ room doors. JEEVES ensures all deliveries and daily tasks are completed in a safe, efficient, and secure manner. While the robot is only available in one of our hotels currently, the choice of this service robot by Radisson Hotel Group highlights the increasing relevance of digital transformation and innovation in the day-to-day-operations of the international hotel industry.
Main image credit: Radisson Blu, Cape Town.
Tim Cordon is Senior Area Vice President for Middle East & Africa at Radisson Hotel Group.
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