Read the full interview at inpractise.com
We interviewed the current Area Director of Operations Europe at Marriott International on how hoteliers are adapting to the current pandemic and how to think about the evolution of ADR and occupancy in Europe.
In the full interview we cover:
- Comparison of Paris attacks and coronavirus disruption to travel
- Outlook on the impact to business travel
- How hoteliers can adapt room and food and beverage operations post-covid
- How to think about the evolution of ADR and occupancy during a crisis
- Potential impact on the operational cost structure of running hotels after the coronavirus crisis
How do you think prices will change, to ignite demand, coming out of this period?
That's actually coming from market intelligence right now, to try and see exactly what's going to happen after Covid-19. The prices will need to be realistic and there should not be a war between each brand or each hotel, dropping rates. The company or the hotel that drops their price too much, you need to think, within a year or two, how are you going to ramp up your rate to the rate you had before Covid-19? In general, in revenue management, if you drop your rate too much, you're going to suffer later, by bringing it back up. So we need to be realistic also, about the service we are going to be providing. We are going to be providing the same service, so we need to also be aligned in terms of pricing.
Just browsing Booking or Expedia, I've seen some prices and I don't think the rates have dropped that much, right now. I guess because occupancy is so low that I don't think the change in price is going to matter at this point. Coming out of that, maybe in Q3, Q4, and even next year, do you still feel there is a requirement for branded hotels, and also independent hotels, to really drop that average daily rate, to ignite demand?
I think we should adjust the rate to the demand. As you mentioned, if we don't have demand, you can drop the price to whatever you want, but no one is coming. We need to see how Q3 and Q4 go and then we will have a strategy for 2021. But we need to be realistic and we also need to be aligned to the market.
How did you change prices, post the Paris attacks?
It was the same strategy, actually. Just making sure that demand is there and adjusting the price to the market. There were a lot of hotels that dropped their prices or you book a room and you get an upgrade to a suite. That's what we usually do. If the suites are available, I'm not going to keep it empty; I'm just going to keep you happy and give you the suite. We will have the same strategy.
Let's just hypothesize for a moment. Let's say that Q3, Q4, we see much less business demand than we expected. That puts the hotels in a tricky position, where they rely on that business demand, in certain parts of the year, to meet occupancy and meet certain revenue profitability targets. Would you then adjust the leisure rates or leisure offer, to balance that out? How are you looking at balancing the two sets of demand and the hotel occupancy?
Usually, there are also promotions that help the customers to enjoy more time. You book two nights and you have the third night free and that's a regular package that we do. It's more on giving the service and providing more service to the guests, rather than just dropping the rates. As I mentioned before, we need to think ahead, not just for right now or for six months. But think how we are going to ramp up the rates in 2021. The rates should not be very aggressive and very low, because the service is there. When you pay the hotel price, you are paying for the service. The associates are there, their enthusiasm is the same and they are here for servicing the guests.
When do you think we will see similar ADRs to 2019, or even 2018, going forward?
Personal guess, by experience in hospitality, would say not before the end of 2021, early 2022.
That's quite a bounce back though. Arguably, you could say there was a peak ADR or peak occupancy, especially in the US, sometimes in Europe, in 2019. You think we're going to bounce back, pretty quickly, in 2021, if not 2022?
We'll see the reaction of the customers, right after we open up the hotels and I'm sure they will be happy to travel again and to come to our hotels. With that, we will see a slow ramp up, through 2021. Therefore, we should be at cruising speed in 2022. Similar to what happened in 2015; 2016 was really a ramp-up year and then we started really seeing the previous rates, in 2017.