COVID-19’s challenges can lead to long-term profitability

COVID-19 has introduced tremendous operating challenges to businesses — many of which were already competing against high operating costs, constantly changing customer demand, and ever-shrinking margins. The hospitality industry is no exception.

In 2020, the way hotels operate was turned upside down with new travel restrictions, stay-at-home orders, social distancing practices, and increased standards for cleanliness. Hotels were abruptly forced to operate with decreased revenue and expenses. In this new world, the importance of finding efficiencies has become vital to a businesses’ survival. Given all of this, it can feel difficult to envision a future state. However, upon closer look, opportunity can be found.

Service Delivery
Operators have been forced to evaluate service offerings and the staffing required to carry out those services to match reduced guest demand. In advance of business volumes rebounding, it is important for hoteliers to evaluate what service offerings are restored or changed, and consequently what staffing requirements are needed to fulfill those needs.

A service model that has largely been made up of siloed roles with numerous hand-offs, should now be refocused to provide a seamless service delivery model based on what customers are mostly likely to value as oppose to simply back-filling historical roles. Read more about how Carpedia Hospitality helped a client identify a 10% improvement to their profit margins at branded hotel that was planning to reopen their food & beverage offerings during the pandemic.

The strategy of cross-utilizing colleagues across job functions and the broader consolidation of roles that is temporarily being deployed should not be abandoned once more stable or increasing volumes return. This strategic deployment of colleagues will not only increase efficiencies in productivity but will promote better ownership of the service delivery and customer experience, resulting in better value for guests.

For multi-property operators, deploying a macro portfolio approach will allow for improved efficiencies in both revenue and non-revenue generating areas. Carpedia Hospitality’s methodology helps operators shed light on these opportunities and develop programs to implement measured improvements that are designed to self-sustain.

Technological Advances
Technology for the hospitality industry is constantly being developed, improved, and expanded to affect various components of an operation, e.g. mobile check-in’s, QR code menus, restaurant order/payment apps, etc. Nonetheless, hoteliers have been justly characterized as slow adopters of these advancements when compared to other industries. The implementation of digital service offerings has, however, been fast-tracked recently due to the serendipitous nature of our contactless COVID-19 reality. Using this period as the impetus has effectively led to a significant reduction in operating costs all while enhancing the guest experience.

For example, the implementation of an in-restaurant order-taking app can provide a more seamless dining experience for guests, limit order entry errors, and reduce excess table touches.

But what does that actually mean for the bottom-line? Simple technology solutions are often underestimated in terms of the operational efficiencies they provide and overestimated in terms of their associated costs. Carpedia Hospitality has been helping operators to both implement technology to enhance their operational processes, but also effectively forecast its true ROI before installation. Taking an operationally holistic approach to examining the merits of technology-based solution continues to make Carpedia Hospitality a preferred resource for our clients during this period.

Customer Behavior

The desire to maintain social distance has resulted in a number of changes to what had been deemed as common customer behaviors. One of the most prevalent and mutually beneficial to both the guest and hotel operators has been the decreased demand for housekeeping service.

Hotels are seeing a sizable increase in refused service rates compared to pre-pandemic levels. As guest behavior changes, hotel staffing models must follow to capitalize more broadly on the opportunity associated with the lighter guest touch reality going forward.

In addition to labor cost, a shift in a department’s key drivers of activities will have a correlated impact on a number of P&L line items, such as material and supply expenses, or alternatively, an opportunity to drive incremental revenue. New standards must be incorporated into the planning, executing, and reporting elements of the business to ensure the impact of these changes are effectively captured and able to be measured against.  HOW INACCURATE LABOR STANDARDS IMPACT BUDGETS AND HOTEL PROFITABILITY

Conclusion

The operations and construct of a hotel has long been defined as containing certain characteristics (job functions, departments, amenities), which generate a near consistent experience and expectation for a guest – not to mention, a similar financial performance when guest mix and volume remains consistent. However, does the current model truly reflect what guests desire? And what happens when mix or volume changes?

Operators, brands, and their owners have a rare opportunity to leverage this period to net long lasting efficiencies in their operations. Doing so with Carpedia Hospitality will generate the temporary horsepower, rigor, and experience needed to maximize on this period.

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