Published by Kris Glabinski
Yesterday, 6th of May 2020 I was invited by Bidroom to participate in their webinar.
Bidroom.com is an innovative OTA platform that eliminates commissions in exchange for access to a closed community of users, who want special benefits and guaranteed lower prices. And because there isn’t any commission, hotels don’t have to pad their prices — ensuring travelers get the best possible price, up to 25% lower than what they’d find on popular booking platforms today.
The subject of the webinar was “Technology and the future of hospitality”.
Our sub-subject was in line with our concept “Reinvent for tomorrow’s logic”
The concept has been taken from a quote from Mr. Peter Drucker and paraphrased to match the todays covid19 situation. The #tomorrowslogic concept takes us beyond standard and traditional thinking to open for new situation, new ideas to challenge the unknown.
As we look into the future we must summarize the todays situation. As things change on the daily basis, we have made a quick summary of the covid19 lockdown situation in various European countries:
As different countries were faced by pandemic at different times, the release of lockdowns is varied across Europe. The most hit countries: Italy, Spain and France took heavy restriction methods while Central and East Europe could observe easier consequences of the virus.
Therefore in East Europe we see lockdowns already being lifted and hotels reopening.
Mediterranean countries approach with more caution, assuming reopening of hotel in June July.
Aside the government restrictions there are also economic restrictions, which make hotels think about the actual reopening dates.
Many hotels, especially from the touristic destinations make profits from international travelling customers. Ban on flights and restrictions for travelling cross borders will make such hotels continue to be closed in many cases.
What this means that hotels have been suffering from the covid19 situation very heavily.
The below is an example of one of hotels 2020 performance versus budget. The green bars is what hotel has planned to achieve this year per month. Notice that some of those bars reach the levels of almost 500k revenues.
The blue bars is what hotels actually achieved. The beginning of the year in January and February was realistic to recover, but since March the revenue has vanished.
Even if we observe some booking coming in for the Q3, Q4 part of the year, we can visually see that the blue will never achieve the green levels of any month.
In fact if we take the fast pace of negative effect of covid19 on revenue in the first 6 months, and we mirror it to assume demand will recover in the same speed in the next 6 months,
we can see that even fast recovery will not make significant shift.
The area marked below in red is the loss that this hotel, as well as many other will face.
This means we will have a yearlong gap in performance. As this is something that we have not experienced before, as the hotels are planned to reopen, we need to start thinking now what the New Tomorrow will be.
It is impossible now to predict what will happen. We, as well as the governments are not sure how things will turn out to be. What we do know is how human brain works.
Our brains have two types of spheres: the emotional part and the logic part.
The emotional part of the brain, will say “ if we can let’s open!”, “let’s end this madness, lockdown and let’s go back to normal”.
But then the logic brain will kick in and say “ if there is no demand, it’s better to stay closed”. The same way the brain works for customers.
The emotional part will shout: “we can be free, let’s go back to travelling!”. And as much as customers would like to do so, there is the logic brain that will question few things: “is it wise to travel now? Shouldn’t I be saving cash as much as I can?”
And the just as post terrorist crisis, security was number one priority, safety and hygiene will be number one priority post covid19.
And as much as emotionally we may say “of the governments say it is safe to travel it must be so”, the logic brain will say “hold on, first the governments said masks are not necessary, now they say they are… so what if it is not safe to travel yet?”.
And so each one of us, in every country creates own philosophy about travelling. Making each one of us unique. Even within the country or even the region of the country.
But one thing that is certain in these circumstances is that whatever we thought about revenue management yesterday, in the next months will not be applicable.
When hotels are missing one year worth of revenue, bringing back profitability becomes the key. And as demand is not there, cost management becomes critical.
When customers become very unique, old customer behaviors will not be applicable either. New demand segments will form. And with all the logic driven customers, safety affirmations will be crucial. Not only in the way rooms will be disinfected, but also in the way they book their travel, change it or refund it.
And along these new key aspects, new ideas will have to appear on how to manage the business in new tomorrow.
One thing will be common for all the ideas. We will not be able to accept more risks than we did so far.
So any idea, move and action will be critical to business.
And the first symptom of risk is going to be thinking with yesterday’s logic to plan post turbulence future. As Mr. Drucker said.
So hoteliers, revenue managers will need to reinvent what they have been doing so far.
Let’s take an example of some of the traditional work Revenue Managers used to do.
Earlier in 2019 we have made a survey asking revenue managers how they works.
According to their replies, they spend 75% of their time on collecting and analyzing the data. Their roles are quite analytical, quality of data is not perfect and the more sources of data the more complex it gets.
Having said that, this leaves only 25% of their time to work on actual price actions. And as revenue is created by price actions, not analysis, the less the actions, the less revenue optimization.
In the new tomorrow this will have to change. A). there is no data to analyze, B). the market is going to be changing so quick in the next few months until it stabilizes, that no action means no benefit. So the proportions should change to 75% actions and 25% data analysis.
Another traditional approach to work, was application of rules on calculations. Since 75% of time was about analysis, lots of data needed to be organized and managed. The most effective way to do so was through the application of rules. So that actions could be automated. For example, if my occupancy is50% I would apply this price. If it drops below 80% I should apply another price.
In the new tomorrow, rules will have to go, as rules can be applied in the stable economy markets.
What we have also found out in the survey was that although revenue managers applied rules on their data to be able to manage their actions smoothly, they would still override their calculations with their feeling of the right price. That feeling was a mixture of intuition, experience and knowledge of the things that analyzed data was not able to calculate in.
But in new tomorrow, these most common practices will not take place. They will not be effective anymore. The uncertainty will not be manageable with rules or intuition.
Will reinventing be possible at all? Not without the help of new technology.
First of all, the new technology will have to be real time. When customer is driven by emotions or logic, the unpredictability of his behaviors, when it comes to travel will be very high. Any pricing that is not in real time, will not address customer behavior changes.
Second of all, the new technology will be about Big Data. As we already have worked with big data, this time we need to consider the new sources of data, to complement the lack of historical information from PMSes. Also, data focused on demand (demand centric data) will be much faster to address dynamics of the current demand, than statistical analysis of the past.
The third characteristic of new technology is now inevitable. When we talk about real time, more data and more different data, we need to apply Artificial intelligence to process it.
Because the number of calculations needed, the number of conditions and correlations between the data will be too big for traditional statistical methods.
AI changes the way calculations are made. We add the data, set the required results and the machine learning creates such calculations to come up with the result. The approach is statistical. For example, if 95% of times suggested price will be OK, then it is as good as it gets. Unlike with traditional calculations approach, where the suggested price will be wither good, or not. 50% chance.
So as the future of hospitality will change into the unknown format, the known part of reinventing for tomorrows logic is that technology become critical.
As real time, big data and AI were buzzwords before, in the new tomorrow they will become the key for selecting the right technology. So we should get ready to understand deeper the real meaning of them.