Hoteliers seek to make up revenue losses from COVID-19
 
Hoteliers seek to make up revenue losses from COVID-19
27 MARCH 2020 8:59 AM

Hoteliers are being flexible with individual and group bookings given the coronavirus outbreak and are hoping to make up for lost business later in the year.

REPORT FROM THE U.S.—As the world continues to live with the unknown and constantly changing landscape of the coronavirus (COVID-19) crisis, the hospitality industry is looking to much later in the year to bring back business to any extent.

The numbers released on 17 March by the U.S. Travel Association showed spending on travel in the United States—transportation, overnight accommodations, retail, attractions and restaurants—is projected to plunge by $355 billion for the year, or 31%. That is more than six times the impact of 9/11.

The estimated losses by the travel industry alone are severe enough to push the nation into a protracted recession, with the second quarter of 2020 being the low point, according to projections from the USTA. The projected 4.6 million travel-related jobs lost would, by themselves, nearly double the U.S. unemployment rate.

Radisson Hotels is constantly updating its global cancellation policy to reflect the latest developments related to COVID-19 and to offer guests as much flexibility and planning comfort as possible, said Federico González, president and CEO of Radisson Hospitality AB and chairman of the Global Steering Committee, Radisson Hotel Group, in a prepared statement.

“At the moment, our policy for individual guests allows free modification and free cancellation of all existing and new reservations in all Radisson Hotels worldwide for stays until (30 April) 2020,” he said. “For group reservations, we offer free cancellation for China, South Korea, Japan, Iran, Italy, Belgium, Spain, France, and U.S. inbound and outbound travel until (30 April) 2020. We also grant free cancellation of bookings impacted by government restrictions.”

Prism Hotels & Resorts has identified a list of market segments and industries where there are revenue opportunities in the current environment, said Allison Handy, SVP of sales, marketing, and revenue optimization.

“We are focusing our teams on Q3 and Q4 to make up for as much revenue and profit as we can once this (hopefully) is behind us,” she said.

She added that rampant discounting will not necessarily be the way to go to help eventually stimulate business and bring back guests.

“While many are suggesting ‘America is on sale,’ we know we need to protect the rates we have built since the 2008 financial crisis,” Handy said. “We want to encourage travel when customers are ready to travel, but discounts aren’t going to be the deciding factor for bookings; when people are ready to travel, they are ready to travel—discounts aside.”

At this point, most of the “new” business being booked is re-booked business with event dates heavily impacted by the virus and its fallout, said Greg Duff, co-chairman of Foster Garvey and leader of the law firm’s national Hospitality, Travel & Tourism practice.

Understandably, most hotels are now busy reacting to the wave of cancellation requests. Hotels are generally trying to work with their clients to reach an amicable resolution, which may include payment in full of contract cancellation charges, payment of some percentage of contract cancellation charges, rescheduling the cancelled event at a date later in the year, or outright cancellation without payment of cancellation charges, Duff said.

Hotels are now having to turn to offering resort credits and free spa packages along with reduced rates to try to attract guests, but results are mixed at best, said Drew Olson a partner in BDO’s Forensic Investigation and Litigation Services practice. There is discounting going on as well.

“On average, we are seeing rates drop as much as 45%, and rates have decreased below $100 at hotels around Times Square, which typically go for $300 a night,” Olson said. “However, it is not yielding the results the industry has hoped for. The reality is that travelers are not weighing their health against lower ADR.”

In the long term, there will be pent-up demand, Olson anticipated. Hotels should be in a position to increase rates, as many families that were planning spring break over the next couple of months will be pushing those trips out. For the business travelers, there will likely not be such a recovery.

Hotel sales staff are concerned that the lack of an end-date for the restrictions is reducing the likelihood for rescheduling many of the cancelled events, said Darren Morrison, managing director in the corporate finance practice at Berkeley Research Group.

“They continue to monitor the changes and contact the impacted clients to provide alternatives for when the outbreak has past and the business begins to rebound,” Morrison said.

In the face of so many lost stays and meetings, hotels will be forced to adjust their costs to the extent possible, Morrison added. There will be reduced staffing for cleaning, customer service, and food preparation. Other operational changes seen from clients include closing entire floors and adjustment of temperature controls to reduce utility expenses, he said.

“The hotel chains also have increased the flexibility for cancellations and rebooking to remove the customer concerns about future bookings and the possibility of incurring costs on a canceled trip,” Morrison said. “The increased flexibility even includes pre-paid bookings and packages that are normally more restrictive.”

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