10 WAYS TO BUILD BUSINESS RESILIENCE TO THE NEW NORMAL
The phrase “accelerated change is the new normal” accurately sums up the challenging operating environment that businesses find themselves in today.
Consider for a moment how technology innovation is changing the way companies compete, geo-political change is reshaping trade and economic conditions, sustainability is changing legislation, investor criteria and consumer attitudes, and government interventions have fundamentally changed patterns of demand. Travel and hospitality businesses need to be prepared for the disruptive changes that continue to lie ahead and ensure that they are agile enough to respond and survive.
The pandemic has proved the importance of preparation and demonstrated that intense disruption can take place at any moment, with huge and immediate consequences. Since then, travel and hospitality businesses particularly have been fighting for survival. Now, those that have survived must move on to focus on how they can build resilience in the new normal to not only weather, but thrive in the long term. Here are 10 ways that businesses can achieve this:
1. Strategy planning to enhance the long term success of travel and hospitality businesses
Defining business direction in an uncertain landscape can be difficult, however businesses can make better decisions by basing corporate strategy on multiple possible outcomes. Scenario planning helps businesses to predict how their operating environment will change over time, and allows travel and hospitality professionals to build strategies that enable rapid and dynamic responses to unknown futures.
However, organisations must ensure that the process of scenario planning is based on the true drivers of change in demand. Strategy alternatives should consider all the dependent business functions and ensur an aligned and joined up approach is taken to achieve impact.
2. Building and diversifying portfolios and partnerships
Another key strategic consideration to aid resilience is to diversify and tap into different markets, customer segments, purposes or occasions for travel. For example, this may mean developing corporate partnerships in new industries, and targeting a trip-type that was previously not an essential part of the mix. With some sectors recovering slower than others and consumer needs changing as a result of this, businesses should consider providing different services, such as shared working spaces, social areas to hang out in and feel at home. Plus, hotels should explore diversifying the services they provide to adapt to changing customer needs.
3. Increasing operational agility and speed
Reacting quickly to high-impact changes in the business environment is key for survival and success. Corporate strategies must focus on increasing operational agility and speed. For example, before the pandemic the volume of transactions taking place online was growing but as lockdowns hit this growth was exponential. In the travel and hospitality industries, some brands quickly moved to offer home delivery of restaurant favourites, virtual tours, fitness and wellbeing classes, and even the opportunity to recreate a hotel experience at home with online ordering of everything from bedding to wine cellars.
As working from home became a new normal, several hotel brands also took their room portfolio that was previously only bookable per 24 hours, and offered day rooms to entice those with less-than-perfect home offices to try something new. Read more on the working from hotel proposition and its long term opportunities in our blog post here.
Flexible digital platforms enabled these changes and immediate responses to living with lockdown. Technology is the enabler for businesses to be agile and adapt to market changes, whether that is scaling quickly to a sudden spike in demand or taking advantage of an opportunity to bring a new product to market. To build resilience, businesses must focus on accelerating digital maturity.
4. Finance and investment changes to aid travel and hospitality businesses to be fit for purpose
To adequately tackle change, organisations need to have a strategy in place to increase their finance capacity and debt facility. By creating a greater debt facility, brands will have more accessible funds to invest in the operational functionality they need in order to weather future disruptive change. For example, this may mean seeking further external investment in order to develop digital functionality to grow sales as market demands change, or to ensure that a brand or property’s sustainability credentials are fit for purpose in the future. It includes targeting investors with compelling future plans that ensure new developments are fit-for-purpose in today’s world when past patterns of travel and work are no longer recognisable.
5. Increasing flexibility in supply
The nature of demand in the travel and hospitality industry has changed, and the facilities and experiences offered need to adapt to better meet what guests want. For example, this can mean re-purposing some spaces where demand is lower, such as event and function suites, to offer new services such as co-working lounges. Organisations needs to also look at the units and ways in which elements of a hotel are sold and re-think this structure. Selling rooms with flexible arrival and departure times rather than in fixed windows, packaging services together to create more value, and selling services that were previously only on offer to certain categories of room to everyone. For example, offer executive lounge passes to all guests, sell contactless check-in to everyone rather than just those on loyalty schemes, and make booking flexibility benefits a paid-for extra.
6. New and more flexible approaches to pricing and selling
Business must re-adjust their pricing strategies in line with the changing market to build resilience. Previously, the lowest price commonly won the online booking war, however today factors such as flexible cancellation policies are highly attractive. The pandemic has changed which services many consumers are prepared to pay more for. Travel and hospitality businesses need to address the fact that what customers value is different for each booking, product and service. Packages, prices and conditions of sale should therefore be flexible and personalised to many different options. Read more on our recommendation strategies for revenue management professionals to consider in the new normal here.
With Covid uncertainties remaining while the world learns to live with the virus, travellers are seeking reassurance from businesses and they need to ensure that they are offering flexible policies for those rebooking or altering travel plans, including at the last minute. As travel bookings are returning in peaks and troughs, for the time being, businesses need a pricing strategy that reflects consumer demand at that particular moment in time.
7. Place a greater focus on maximum revenue per stay
When it comes to pricing, a further important shift for the travel and hospitality industry is to move away from over focusing on RevPAR, and in addition increase focus on maximum revenue per stay. The travel and hospitality industry remains on the road to recovery, and although people are travelling once again, booking numbers will not fully recover for many years. In a market with supressed demand, businesses should improve their ability to upsell and cross-sell. With fewer rooms being booked, it is more important than ever to increase spend per stay through add-ons and exclusives that guests value and are prepared to pay more for.
For example, it is commonplace that hotel services such as spas and fitness classes are paid for only when in property. Offering packages and extras pre-travel to guests that can enhance their stay – and at the same time empower a more seamless experience – boosts revenue. The same applies to restaurant and bar bookings. More integrated digital platforms should allow a guest to book and pay for any service that the hotel offers and at any point along the customer journey, be it at the time of booking, ahead of travel, and during or after the stay. Global coffee chain Starbucks enjoyed significant uplifts in customer spend when they introduced ordering via a dedicated app. Customers could be targeted with relevant offers, and had more time to consider and be tempted by add-ons. The same learning can be applied to restaurants spas, room service, hotel bars and more.
As Starbucks found, analysing data and spend is key . There may be certain audience segments where offering lower room rates, with fewer extra inclusions, is a good move because your data tells you that this audience spends more when in residence. Prompting these behaviours is key to long term success.
8. Ongoing innovation and addressing consumer trends
Businesses must be constantly innovating and collaborating to build resilience. Offering new products and services, while guests are on-property and may typically have more time than when at home, is one route to explore. Airlines have exploited this successfully in the past, offering many different products for sale in-flight that are unrelated to the travel experience. Their finding was that those with time who were served up the right options in a manner that was easy to purchase, had a greater propensity to spend more.
Innovation also means re-thinking every aspect of the guest experience, from loyalty schemes to approaches to rising consumer trends such as sustainability. Listening to guest demands is essential. Our research has found that hotels offering a more sustainable approach could charge more than less environmentally favourable alternatives without presenting a barrier to booking. This provides a strong case for innovating in the field of sustainability. Read more on the business opportunity for sustainability in travel and hospitality here.
9. Providing answers to new market needs
Products and services also need to be constantly innovated and should never be truly “final”. With consumer needs and demands ever-changing, businesses need to be able to flex their products and services to help them meet these needs and stay resilient through change. Some of the most immediate changes seen from the pandemic include hospitality options that offer blended work and leisure space for longer trips, as travellers explore the possibility that working-from-anywhere brings.
While in its early stages of adoption, the metaverse brings many challenges and opportunities for the travel and hospitality industry. In our executive interview here with Eric De Neef, global chief commercial officer at Radisson Hotel Group, he touches on how the impact of the pandemic and the rise of virtual experiences means this is a trend that brands need to explore and understand in the way that, for example, entertainment businesses are beginning to embrace and monetise.
10. Gather insights from data
Data is not only key to guide innovation and highlight changing market trends, but also to interpret digital insights to transform the customer experience accordingly. Businesses can mine insights from customer data to target and personalise interactions, helping to build better relationships and increase longevity. Having the ability and flexibility to respond to the trends found in data is key – constant changing patterns of demand, commonly related to Covid outbreaks and government restrictions in response, is one of the clear patterns emerging from the pandemic.
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