People, professionalism and resilience: how the hospitality industry’s partner ecosystem has thrived on working outside its comfort zone
As part of its investment in research development, PACE Dimensions regularly conducts interviews with industry leaders to develop thought leadership on strategically important topics, sectors and markets. This article draws on a recent interview with Francisco (Paco) Pérez-Lozao Rüter, President of Hospitality at travel technology company Amadeus. He shares his insight on the learnings of handling the Covid-19 pandemic, and how new ways of working are emerging.
There’s one word that Francisco (Paco) Pérez-Lozao Rüter, President of Hospitality at Amadeus, uses to sum up the impact of the Covid-19 pandemic on the hospitality industry: ‘brutal.’ However, Pérez-Lozao is also clear that stark difficulties have been accompanied by incredible feats of collaboration and diversification that are leading the industry in new, more productive, directions.
His reflections on both his team and clients are of people showing incredible adaptability to new working-from-home arrangements and embracing new ways of operating far quicker than anyone could have imagined. For Pérez-Lozao, the real symbols of hope in the Covid-19 world are how people have behaved when far away from the familiar. He explains, “Everyone in this industry has been out of their comfort zone in all possible areas – budgets, resourcing, how we work with our teams, and in particular it’s a real challenge to work out how to stay relevant. How we’ve all behaved through this tells us so much about how we will be successful in the future and other unforeseen events.”
RESPONDING TO HOTEL INDUSTRY DISRUPTION AND VOLATILITY: STAYING RELEVANT
For Amadeus Hospitality, one of the most immediate challenges was working out how to “keep near” to their customers. “Our main objective was to support our customers, understanding the impact to their business during these unprecedented times and the potential need to have commercial conversations to support them. We shifted our focus to delivering highly relevant content, training, and product enhancements aligned with the challenges the industry is facing. The demand for this was clear, over 30,000 participants have taken part in our training and thought leadership webinars,” outlines Pérez-Lozao.
While the industry is beginning to see the light at the end of the tunnel as vaccine programmes are rolled out, Pérez-Lozao is quietly cautious that most of the market remains extremely tough. Across the globe, regions are experiencing waves of recovery and virus recurrence on an ongoing basis. While there is overall progress, albeit slower than anyone would prefer, the decisions to reopen properties are variable depending on market conditions with some hoteliers getting used to challenges such as booking lead times that don’t exceed one week.
In some markets around the world, Amadeus is positively surprised by the hotel occupancy levels it sees, particularly in the leisure market. While new waves of the virus reoccur in various regions of the world, market performance in areas such as China and North America have shown resilience, and booking data gives reasons to be quietly optimistic.
There is no doubt that the events of 2020 – and into early 2021 – have, in Pérez-Lozao’s words, “made all historical market performance precedents irrelevant.” For an industry that commonly bases rates and revenue on past patterns of demand, finding new ways of planning is imperative. Early trends during Covid-19 have proven to be different from any other crisis, and variability of market performance has made effective long-term planning virtually impossible.
HOTEL REVENUE MANAGEMENT AND LEVERAGING ASSETS: FINDING WINNING WAYS
Amadeus’ business intelligence solution, RevenueStrategy360TM, was launched in late 2020. This new tool provides forward-looking market data, collecting hotel booking and rate data to provide hoteliers insight on their market and competitive set to inform more effective pricing decisions. “Hotel operators need to be able to see, in real-time, what kind of demand there is in their market to get an indication of the rates they can set as occupancy begins to reach certain levels. The far-reaching impact of the pandemic means that one hotel chain alone probably doesn’t have access to enough data to see clear and meaningful patterns, critical mass is required,” said Pérez-Lozao.
Understanding global and local market conditions such as occupancy, demand, and rates is critical to developing an effective revenue management strategy. Powering this with current, accurate, and informed data enables properties to attract guests to their property. But, out of necessity, hoteliers are also looking beyond guest room rate structure for their revenue management. Perez-Lozao hears another common theme in his conversations with hoteliers: diversifying revenue streams to include more than guest rooms. Hoteliers today are rethinking their approach to revenue management and considering all possible revenue streams at the property, including non-room inventory.
When looking beyond the guest room for revenue diversification, it’s an IT and distribution challenge that has potential in some areas fueled by fast-advancing technology. In other areas, there is work to do and it is not an easy one to solve. Hoteliers must consider how these diversified inventory options can be managed in their technology stack, published to the market for consumption, and enable internal teams to deliver on what the guest booked.
“Successful hotels are working out how to disassociate their facilities and offers from an overnight room stay. To diversify revenue, hoteliers must look at how to leverage their assets. For example, in situations where occupancy is low and restaurants cannot seat guests but can provide takeaway, you have to rethink how you sell your restaurant. Enriching the offering, and being able to price it dynamically, is essential,” Pérez-Lozao explains.
“There have been many conversations about unbundling room rates and adding other services on top for some time, but that is too narrow a topic in this environment. Hotels have to find a way to attract revenue from a guest who may never stay the night, and in a scaled way,” adds Pérez-Lozao. In fact, the greatest theme Pérez-Lozao sees from hospitality businesses who are succeeding in these difficult times is the willingness to adopt new ways of doing things. He is absolutely clear that this trend is here to stay.
CLEANING OUT THE GARAGE: REMOVING WHAT DOESN’T WORK
“Lots of businesses I talk to – from those in hospitality to those in Silicon Valley – are using this time to take an opportunity to clean up what they don’t think works,” Pérez-Lozao points out. “It’s a bit like cleaning out the garage, getting rid of product A or service B because it doesn’t deliver.”
In the initial first wave of the pandemic, hospitality businesses looked at the existential threat and moved to protect themselves. Actions were tactical and aimed to preserve cash, such as taking advantage of furlough schemes and negotiating to boost cost control. But no business can stay in that mode for the long term, the paralysing impact is too extreme. The questions now being faced, including by Amadeus, according to Pérez-Lozao are “What changes are here to stay that I need to embrace? What do I need to take advantage of? How do I transform myself? And how can I improve my technology and my distribution?”
These are big and broad questions for any business. Pérez-Lozao recommended paying close attention to digital channels as platforms that will bring results quickly given the recent acceleration of use in the past year. Hoteliers are also identifying what services could be outsourced in a flexible manner and what remains in-house. “All businesses need a ‘secret sauce’ that they keep to themselves,” explains Pérez-Lozao, “So rethinking the structure of your business costs needs to look at what can be delivered by another expert, which frees up time and resource to focus on your ‘secret sauce’ to deliver something no one else can.” Businesses are being more selective in spending their money and trying to hone in on relevant innovation.
EMBRACING THE HOSPITALITY SECTOR’S PARTNERSHIP ECOSYSTEM: ADAPTING TO CHANGING BEHAVIOURS
Amadeus is having more conversations than ever with clients to identify how they can work together more effectively. Pérez-Lozao outlines. “The industry is collaborating in better ways than before. We are together focused on what the future brings, working through how to structure ourselves to take on the demand and services of today and tomorrow.”
Pérez-Lozao talks of the pandemic providing a huge shock that has opened everyone’s minds, “At Amadeus, we’re very aware that we need to challenge ourselves every day. We are a world leader in some areas, but we know we need to continue to invest in creating new portfolios. Our investment decisions are based on what is more relevant to our customer’s needs. We don’t do anything without engaging with them and discussing their future strategies. We always try to be a transparent and caring partner who is consistent, thoughtful and there for the long term. By working together with our clients, we’re going to be better at adapting to what we don’t yet know is coming.”
Change is a key theme when it comes to talking about the sector’s recovery. “The current situation has taught us of the need to be more flexible to adapt to change. The organisations that stay one step ahead of accelerating digital transformation will be the leaders. Our teams are constantly evaluating and identifying more agile ways of working. Being faster and having shorter cycles for introducing new products and services is all part of this,” stresses Pérez-Lozao.
CULTURAL SHIFTS: ADAPTING TO MARKET CHANGES AND PLANNING FOR NOT KNOWIN
Pérez-Lozao is philosophical when it comes to what the industry can learn from the pandemic to date. His wise words, “We have to accept that there are many things we don’t know,” sum up the rollercoaster of the Covid-19 pandemic. He continues, “Our experience is that people want to embrace the challenge of working in an environment where we don’t know all the answers. For hotels, this means implementing agile operating processes to enable adaptation as market conditions change. Ultimately, teams need to think differently, watching for leading indicators and preparing to respond as conditions evolve. Planning is much more challenging than it has been historically, making access to market insight more critical than ever.”
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2020 has taught Pérez-Lozao that the professionalism and resilience of people in the hospitality industry have been one of the key factors in guiding Amadeus through the most brutal of years. “I’ve seen CEOs of huge hotel chains learn the most about possible routes to recovery by going out and talking to property owners. We’ve tried to take the same approach, to listen to our customers and be an adaptive and friendly partner,” Pérez-Lozao sums up. As for being out of his comfort zone, Pérez-Lozao is content to acknowledge that he doesn’t always know the answers, but is keen to seek them out through collaboration.
To explore the market dynamics and trends across different sectors of the travel and hospitality industry, PACE Dimensions’ interviews successful business leaders to bring to life the hot topics having an impact on the sector. These interviews highlight the latest insights around the industry, and share a view on the opportunities and issues pertinent to those working or investing in travel and hospitality. The series of executive interviews are just one area in which PACE Dimensions provides thought leadership and advisory services to its clients.