By Laura Kusto, Global Hotel Practice Leader
It’s the question on everyone’s mind. What does COVID-19 mean for managed hotel programs? Are hotels open? If they are, is someone available to negotiate rates? Instead of sourcing, should we consider extending our rates indefinitely? What other things can be done to manage hotel spend during this time of uncertainty?
We’ve talked to hotel chain transient sales teams, our client base, and colleagues to get their views on all of these questions. And as we’ve formulated a strategy for an industry hungry for answers, we’ve considered those views as well as our deep consulting expertise and the data we continue to gather on market trends.
As far as those views, it’s very much a mixed bag. The chains all say they will support a client’s RFP when the company is certain travel bookings are going to be resuming. But as far as supporting interim negotiations outside of that, the response is inconsistent. Some chains will support. Others will not.
In speaking with our clients, opinions are varied and all clients are looking for a reasonable path forward. They see both sides of the situation and don’t want their RFP to be an unnecessary burden on an already overwhelmed industry. But at the same time, they don’t want to be accused of not being proactive or unprepared.
Of course, the data tell an interesting story. As early as January and February, we were seeing steep declines in APAC – up to 50% drops year-over-year in some markets. And by April the rest of the world was in a similar situation. In New York, the epicenter of the outbreak in the US, April 2020 rates were down 40-45% vs. April 2019. No one knows what will happen next, but those rate declines mean static negotiated rates are no longer competitive.
And then there are the new aspects of hotel programs that have gained exponential attention in the last two weeks – hotel cleanliness, traveler safety and duty of care. Concerns around these aspects have always been present, but now they are just as important as price. If travel is to resume, travelers need to feel safe. Hotel chains clearly see this and are responding with a vast array of cleanliness programs, protocols and partnerships. This now has to be a key cornerstone of any hotel category management strategy. But it lacks a universal standard due to the quick escalation in importance and quick but varied hotel response – making it hard for travel managers to create guidelines for travelers.
Our strategy for the new future of hotel programs
Even now when there is nearly no business travel taking place, remaining stagnant and doing nothing to prepare your program is not a winning strategy. But what do you do? Taking all the facts into consideration, we think there are several key things travel managers can do right now and we have built a strategy that takes us from where we are today into a post-COVID-19 travel era. To help guide everyone in the hotel industry on the path towards recovery, we’re sharing the framework of this strategy in this five-part blog series.
The path we’ve outlined is certainly not the only path – but we believe it is the best path for several reasons. It encompasses everything from sourcing to traveler well-being, how to create a booking process that drives smart buying decisions, and duty of care. The strategy gives ample consideration to the time and resource limitations present for hoteliers but also allows for companies to take an active role in managing their hotel programs – beginning today. We all need to continue to work together throughout this crisis and if we do that thoughtfully, we will all come out stronger.
Here are the five steps of our strategy for managing hotel programs in today’s changing landscape.
We will cover each one of these topics in-depth over the next several weeks, and you can read Part One: Update your OBT and add Rate Targets today.