Recovery Mode: Hospitality And Travel Predictions For 2021 And Beyond
Three experts from Horwath HTL discuss how the coronavirus crisis has exposed vulnerabilities in the industry and created opportunities for innovation
The Art of Smart is designed to empower business leaders and improve their decision-making to deliver lasting value. Those operating in the travel and hospitality industry are struggling following a year that has seen planes grounded, hotels forced to close and guests staying away.
To better understand the current trends shaping the road to recovery, The Art of Smart invited three experts, based in three different regions, from Horwath HTL, a leading global hotel, tourism and leisure consultancy, to participate in a 45-minute roundtable discussion.
Many of the topics the three experts cover touch upon The Art of Smart’s four pillars of success in decision-making: growth, diversity, boldness and innovation. Here follows the key takeaways.
Roundtable participants:
James Chappell, Global Business Director (JC)
John Fareed, Managing Director and Chairman, North America (JF)
Robert Hecker, Managing Director, Pacific Asia (RH)
The road to recovery for the industry will be long and winding – all around the world
JC: I have a global remit, but I am based in London and times are very challenging in the UK. Brexit has only just gone through, and while the government has done well with the coronavirus vaccine roll out, there is a dependency on the European Union in terms of travel and work. In terms of opening up borders, you are only as strong as your weakest link, so the UK travel and hotel operators are reliant on vaccine progress elsewhere, and there might be a long wait until we reach 2019 levels. That said, those businesses that pivoted to a staycation model in summer 2020 did well. The UK, France and Germany all had good summers, for example – but because of domestic tourism rather than an international offering. I am confident this coming summer will be similarly successful. The irony is that, under normal circumstances, the hotels that make the most money are in commercially driven city-center locations, and they are not in the best position to take advantage of summer holidays.
JF: From a hospitality, tourism and leisure perspective, the coronavirus crisis has been devastating in North America. The hospitality industry had enjoyed the longest upcycle in its history through 2019, but COVID-19 put a very cold stop to that. Last year, for the first time ever, there were a billion room nights that went unsold, and occupancy has declined to record low levels – worse than post-9/11. From a leisure viewpoint, the summer was good if you owned a resort on a beach or in the mountains. Our National Park Service did very well too. It has been fascinating to see how Americans have adapted. But the travel community has been left in ruins – one hotel owner told me that he is losing US$400,000 a month even though his hotel is closed. Additionally, there have been no furlough schemes to help hotel employees. Most of our larger corporate clients have “no-travel” restrictions. Interestingly, only Delta Airways has not been selling middle seats and they have had the biggest profit of all airlines here, according to the latest quarterly reports, which shows Americans are willing to pay a premium for safety in the air. At best, it is going to be 2023 before things are fully recovered – at least that’s what we are aiming for.
RH: I’m located in Singapore and some might think that we are ahead of the curve, but that’s really only China. Everything outside of China here in Pacific Asia is like Europe and the Americas in terms of strict measures, border controls and essentially no interregional travel. A large swath of the region is still not in recovery at the moment. Now 90 percent of the tourism and hospitality market here is domestic driven, and international travel is limited to just a few major cities and gateways. In China, where the domestic market is large, by the end of 2020, many well-positioned clients were inching close to where they were in terms of occupancies – possibly 15 percent lower. Everywhere else in Asia is still 50 percent, or lower, down on 2019 numbers. It’s tough in somewhere like Singapore, as there is not much of a domestic market.
Prepare for the “mother” of all rebounds – but when will international holidays recommence?
JC: I think it’s clear that we are going to have the mother of all rebounds – it’s just a question of when exactly is that going to come. Will it be this year, next year or even – as John suggests – in 2023? The question for the people who own the physical assets is: can they hang on that long? There are some big trends that have been accelerated, and when the doors do open again the industry will benefit. Also, I predict that over the next couple of years we’ll see people spending a lot more money on holidays. People are going to have fewer holidays, but they are going to be super-high-end, premium trips.
Why physical meetings and conferences are here to stay
JC: When the pandemic hit, those who organize virtual conferences were rubbing their hands together. The thought was: “Nobody wants to go and see each other face-to-face; we can do this all virtually.” Then business leaders attended their very first virtual conference and after two hours everyone thought: “This isn’t working. We can’t do this again.” Videoconferencing technology works well internally, but for meeting or sourcing new clients it is disastrous.
JF: My biggest concern right now remains with the corporate traveler. I’m getting a lot of client calls asking about hybrid meeting solutions. People still want to have meetings, but they want to be able to do them virtually. Some organizations are piping the meeting into guest rooms so that you can just come to the hotel and maybe take a chance on socializing within a small meeting room, as well as seeing the larger conferences from your guest room. While this virtual model is developing, are we trying to reinvent the wheel? Will this be a long-term trend? I would add that leisure is not going to save the industry. Ultimately, we’ve got to get back to traveling as businesspeople.
Future trends: space travel, virtual reality and other technologies
JC: Realistically, the only people who are going to be flying into space in the next 30 years are billionaires. Also, I believe people are so sick of technology and virtual reality – why would anyone want to have a holiday with something strapped to their face? I, for one, hope that VR is not the future.
JF: There’s a human need to interact with others, to see people face to face. And I think that the problem with travel that’s based in VR is the same: you want to smell, you want to taste, you want to see, you want to hear, you want to be there, you want to sit down at that café and experience the whole thing. You’ll never be able to do that with VR. By nature we’re explorers, we’re travelers, and technology has a long way to go to deliver that kind of experience.
Steps to take to speed up recovery
RH: You need to encourage shareholders to keep the faith and invest. Whether it’s an expansion, repositioning, renovation, new technology, and so on, it all costs money. Therefore, that stakeholder support is critical.
JC: The hospitality and the hotel industry, in particular, are very slow adopters of anything. It is not unusual to go into a hotel back office and find people on Windows 95. What we have now is a once-in-a-lifetime opportunity to make a technological leap. More than that, hotels and travel companies need to be a lot more creative in looking at the whole stack and seeing how much of that is their own and they’re able to influence as part of the whole trip, as opposed to being just one sort of component part. I think that will change over the next couple of years.
JF: We are seeing a number of interesting new models. Consider some of the stuff that Michael Levie, CEO of citizenM, is doing around incredibly smart subscription-based corporate packages. For around US$600 a month, clients can enjoy three nights at any of their hotels, three hours of meeting room time, as well as access their lounges, WiFi, and more. Also, their smartphone app is incredible – I don’t know another hotel company that is doing what the citizenM brand is doing in the space. Others should consider following their lead.
To better understand the current trends shaping the road to recovery, The Art of Smart invited three experts, based in three different regions, from Horwath HTL, a leading global hotel, tourism and leisure consultancy, to participate in a 45-minute roundtable discussion.
Many of the topics the three experts cover touch upon The Art of Smart’s four pillars of success in decision-making: growth, diversity, boldness and innovation. Here follows the key takeaways.
Roundtable participants:
James Chappell, Global Business Director (JC)
John Fareed, Managing Director and Chairman, North America (JF)
Robert Hecker, Managing Director, Pacific Asia (RH)
The road to recovery for the industry will be long and winding – all around the world
JC: I have a global remit, but I am based in London and times are very challenging in the UK. Brexit has only just gone through, and while the government has done well with the coronavirus vaccine roll out, there is a dependency on the European Union in terms of travel and work. In terms of opening up borders, you are only as strong as your weakest link, so the UK travel and hotel operators are reliant on vaccine progress elsewhere, and there might be a long wait until we reach 2019 levels. That said, those businesses that pivoted to a staycation model in summer 2020 did well. The UK, France and Germany all had good summers, for example – but because of domestic tourism rather than an international offering. I am confident this coming summer will be similarly successful. The irony is that, under normal circumstances, the hotels that make the most money are in commercially driven city-center locations, and they are not in the best position to take advantage of summer holidays.
JF: From a hospitality, tourism and leisure perspective, the coronavirus crisis has been devastating in North America. The hospitality industry had enjoyed the longest upcycle in its history through 2019, but COVID-19 put a very cold stop to that. Last year, for the first time ever, there were a billion room nights that went unsold, and occupancy has declined to record low levels – worse than post-9/11. From a leisure viewpoint, the summer was good if you owned a resort on a beach or in the mountains. Our National Park Service did very well too. It has been fascinating to see how Americans have adapted. But the travel community has been left in ruins – one hotel owner told me that he is losing US$400,000 a month even though his hotel is closed. Additionally, there have been no furlough schemes to help hotel employees. Most of our larger corporate clients have “no-travel” restrictions. Interestingly, only Delta Airways has not been selling middle seats and they have had the biggest profit of all airlines here, according to the latest quarterly reports, which shows Americans are willing to pay a premium for safety in the air. At best, it is going to be 2023 before things are fully recovered – at least that’s what we are aiming for.
RH: I’m located in Singapore and some might think that we are ahead of the curve, but that’s really only China. Everything outside of China here in Pacific Asia is like Europe and the Americas in terms of strict measures, border controls and essentially no interregional travel. A large swath of the region is still not in recovery at the moment. Now 90 percent of the tourism and hospitality market here is domestic driven, and international travel is limited to just a few major cities and gateways. In China, where the domestic market is large, by the end of 2020, many well-positioned clients were inching close to where they were in terms of occupancies – possibly 15 percent lower. Everywhere else in Asia is still 50 percent, or lower, down on 2019 numbers. It’s tough in somewhere like Singapore, as there is not much of a domestic market.
Prepare for the “mother” of all rebounds – but when will international holidays recommence?
JC: I think it’s clear that we are going to have the mother of all rebounds – it’s just a question of when exactly is that going to come. Will it be this year, next year or even – as John suggests – in 2023? The question for the people who own the physical assets is: can they hang on that long? There are some big trends that have been accelerated, and when the doors do open again the industry will benefit. Also, I predict that over the next couple of years we’ll see people spending a lot more money on holidays. People are going to have fewer holidays, but they are going to be super-high-end, premium trips.
Why physical meetings and conferences are here to stay
JC: When the pandemic hit, those who organize virtual conferences were rubbing their hands together. The thought was: “Nobody wants to go and see each other face-to-face; we can do this all virtually.” Then business leaders attended their very first virtual conference and after two hours everyone thought: “This isn’t working. We can’t do this again.” Videoconferencing technology works well internally, but for meeting or sourcing new clients it is disastrous.
JF: My biggest concern right now remains with the corporate traveler. I’m getting a lot of client calls asking about hybrid meeting solutions. People still want to have meetings, but they want to be able to do them virtually. Some organizations are piping the meeting into guest rooms so that you can just come to the hotel and maybe take a chance on socializing within a small meeting room, as well as seeing the larger conferences from your guest room. While this virtual model is developing, are we trying to reinvent the wheel? Will this be a long-term trend? I would add that leisure is not going to save the industry. Ultimately, we’ve got to get back to traveling as businesspeople.
Future trends: space travel, virtual reality and other technologies
JC: Realistically, the only people who are going to be flying into space in the next 30 years are billionaires. Also, I believe people are so sick of technology and virtual reality – why would anyone want to have a holiday with something strapped to their face? I, for one, hope that VR is not the future.
JF: There’s a human need to interact with others, to see people face to face. And I think that the problem with travel that’s based in VR is the same: you want to smell, you want to taste, you want to see, you want to hear, you want to be there, you want to sit down at that café and experience the whole thing. You’ll never be able to do that with VR. By nature we’re explorers, we’re travelers, and technology has a long way to go to deliver that kind of experience.
Steps to take to speed up recovery
RH: You need to encourage shareholders to keep the faith and invest. Whether it’s an expansion, repositioning, renovation, new technology, and so on, it all costs money. Therefore, that stakeholder support is critical.
JC: The hospitality and the hotel industry, in particular, are very slow adopters of anything. It is not unusual to go into a hotel back office and find people on Windows 95. What we have now is a once-in-a-lifetime opportunity to make a technological leap. More than that, hotels and travel companies need to be a lot more creative in looking at the whole stack and seeing how much of that is their own and they’re able to influence as part of the whole trip, as opposed to being just one sort of component part. I think that will change over the next couple of years.
JF: We are seeing a number of interesting new models. Consider some of the stuff that Michael Levie, CEO of citizenM, is doing around incredibly smart subscription-based corporate packages. For around US$600 a month, clients can enjoy three nights at any of their hotels, three hours of meeting room time, as well as access their lounges, WiFi, and more. Also, their smartphone app is incredible – I don’t know another hotel company that is doing what the citizenM brand is doing in the space. Others should consider following their lead.
