Restructuring Hospitality: A New Reality…….

6 steps to adapt to the new reality in Hospitality.

As we now are seeing the light at the end of the Covid 19 tunnel it’s time to refocus. Even if you or your family are fortunate enough not to have been affected, we certainly must adjust our thinking regularly. This applies at a personnel level and as importantly at a business level.

This article has the purpose to list the necessary steps that each owner of a hospitality asset, be it hotels or resorts should consider to undertake.
It serves as a hands-on checklist and helpful tool for owners to use. The way we have been managing our assets prior to the crisis, is for most properties and owners no longer a viable way moving forward.

NEED FOR CHANGE…….
The world is forever changing; however, this pandemic has hastened the need to accept change and adapt much quicker particularly in the business of hospitality. We are to accept that we need to modify how we operate our businesses, and take a fresh look at what exactly do we need to do in order to remain profitable.

Almost all hotel and resorts will be simply forced due to lower revenue streams and slow recovery, to change the business model and the way we have been doing business.

So here is a guideline of where to start and which actions to consider…………

In our view with the current crisis the main areas of the business where we see a need for change are:
A. Human resources
B. Operations
C. Finance
D. Marketing

So, lets briefly tackle them and break them down in steps for action:

STEP 1: CHANGE HUMAN RESOURCE……..

One of the highest costs in hospitality is clearly payroll and we can and should approach to manage this expense differently and in a new fashion.
In the new reality a solution in payroll is to “outsource” some main management functions and overhead departments to third parties and outside experts.
This with the clear objective to overall reduce the cost of managing and execute these responsibilities in a professional manner.
Here are some real outsource solutions for you to consider directly:
- Interim Management - outsource your main executive management with Interim Management. Instead of having a permanent full time Manager(s), hire an Interim Manager and have at the same the operation supervised by an outside asset management company. This will give you the benefit of getting more expertise, more out of the box thinking in management, introducing new practices and clearly saving a lot of executive payroll.

- Sales – focus on direct sales
Instead of having a full team of sales managers, you should consider to outsource these functions of direct sales to a sales company that has good contacts in contracting and distribution channels. Allow specialists and experienced sales persons to execute direct sales on your behalf. We have seen this successfully being done at a much lower staff cost and with more efficiency and a higher sales productivity.
- Marketing, including marketing communications & Social Media management.
This important responsibility can and should be outsourced to a specialized marketing company and for them to manage the content and communications methodology. Clearly this can be done on part time basis instead with a full-time team in house. The advantage is that a more focused and more experienced team is fulfilling these responsibilities at a lower monthly cost.
- Accounting & Finance
It has for long been very interesting phenomena that the accounting and finance teams in Asia are so much larger than in EU or USA. On an average they can easily be double in Asia. Regardless outsourcing the main accounting responsibilities to an outside accounting firm can make a lot of sense and be quite efficient and economical. Areas to outsource would include accts payable, accts receivables, payroll admin, P&L reporting. Areas like General cashiering, purchasing may be kept inhouse. It is important to note that this does not imply loss of control as long as objectives and reporting methods are clear and disciplined.

We are to change how we use of our resources and shift to make use of outsourcing and use specialists who are compensated by their achievements, measured by the deliverables.
This is to be combined with pro-active senior management whereby all heads of departments are to hold an extra key responsibility other than their more general role. They are to take on sales approach, drive revenue and all be out “knocking on client’s doors” – thus becoming an active hands manager. We are to look at our teams and review the deliverables and set more clear objectives of what we expect from your management team and indeed also evaluate our team in this regard.

STEP 2: INCREASE HYGIENE AND SAFETY

Operations clearly have to change and of course the first and foremost required area of change is in HYGIENE & SAFETY
“Clean Management” is to be a new discipline in our operations !
Hygiene practices are already being modified and more emphasis on training and understanding of the importance of hygiene is required, from the moment a guest arrives at check-in till they depart, while visiting and using, guest rooms, public areas, outlets, recreational facilities.
Clean Management is and will be a new standard in hospitality and this means executing an extensive checklist including: screening of guests, disinfecting public areas and guest rooms, personal protective gear for staff members, reduction of guest & staff contacts both personal and through tools, equipment & amenities. Options are using Ultra violet air & light sterilizers and anti-microbial coating on public surfaces.
This extensive checklist is available.

STEP 3: CHANGE OPERATIONS – LAYOUTS

The focus on Food & Beverage has changed, as guests now expect more healthy menu options. It once was an option, but now it has become a mandatory inclusion. The manner in which F & B is served and the now infamous breakfast buffet is a format of the past and replaced with controlled “pods” being preferred and expected. In-room food & beverage is also to change. Minibars should have been made extinct a long time ago and replaced with a grab and go counter in the lobby. Room service will be more important and will grow but with a limited and more compact menu to be offered while reducing staff interventions with guests.

In operations we now can and we are to utilize more technology. Today we are in a much more sophisticated business environment and the technology is working in our favour. This we should embrace and we are to keep abreast of these changes in the most affordable way possible, by seeking regular technical upgrade guidance. Clear examples forcing faster change are key-less registration, self-check-in and check-out kiosks, plus screening and disinfectant tunnels, UV air and light sterilizer cleaning methods.

STEP 4: UNDERSTAND NEW GUEST EXPECTATIONS

Guest expectations in the tourism world are changing as we speak. The deeper and longer the crisis will last, the more the consumer will be changing their expectations. Tourism is most certainly not going to be the same as before and we will be faced with a transformation in tourism in general. The consumer is already adapting and they are acknowledging that we no longer have to travel all around the world. Guests will opt for more domestic or short haul travel opposed to have to travel to other side of the world to an idyllic island. Consumer will opt to take a holiday in a RV and explore the nature in or around his own country or neighbouring country without having to fly. Guests will want to spend “to do good” and request to engage in more responsible tourism.
The expectations will change, as the COVID crisis has a combined impact on topics like climate change, circle economy and sustainability. All this implies that the guest now more and more will request more sustainable solutions in hotels & resorts, more organic food, more vegetarian options, experience more waste reduction, witness more plastic free operations. The consumer will want to explore more local experiences and enjoy local sourced produce and supplies.
As mentioned, expectations will also include the post Covid hygiene and distances practices while maintaining a people interaction element but with a more practical approach. We can preserve the environment whereby human contact is evident but introduce reduced direct contact.

Resorts where space allows can offer a greater feel good factor, touching nature through exploratory walks, creating flora and fauna interaction, have herbal gardens, select locavore styled suppliers with local primary producers delivering a farm to table product with less chemical interference. The cultural experiences are to include not only the culinary aspects but also the medical and the spiritual will be sought. We are to differentiate with sub regional cultures and cuisines, specialise and create holistic experiences.

Another important aspect of the changing guest expectations is answering to the request for Wellness facilities and services. The term Wellness is all encompassing versus the feel-good Spa concept. We are to add in the Health component and then see where these two terms can be introduced as part of the daily operations. It will soon be expected by all guests, explore it and then introduce it throughout your business to include both staff and guests.

STEP 5: NEW WAYS OF MARKETING

In the first phase of a new marketing the emphasis is clearly going to be: “Going Domestic”.
In all countries and regions domestic tourism is going to the key to most instant recovery. Most attention is to given to individual travel and stimulating and selling individual tourism.
Group travel and meeting business is still long and far away and should be targeted merely in a second phase.
Secondly it will be important after opening up again, that revenue management is given highest priority. Correct pricing is going to crucial, while closely monitoring supply and demand patterns. Those with a revised and strong strategy will be able to pick up business the fastest.
Thirdly the importance of distribution channels is ever so increasing and one needs to engage heavily with the main players. At the same time there is an opportunity to engage more local distribution channels, with offering local and domestic packages, pre-sale offers and communicate such through local media. Social media will only have increased power, as the traditional wholesalers will in first phase not be your feeder markets
You are to create more local packages both for local leisure and for local small business get-togethers.
Finally a new given is that one will have to strengthen to communicate to all potential customers in a different way and giving the consumers the comfort and trust that the destination and facilities are truly safe and trustworthy.
Communicating and instilling confidence will be a new thing and of great importance. This delivery of confidence and safety will distinct the winners for the losers.

STEP 6 CRITICALLY REVIEW FINANCING.

One of the most important factors going forward is that owning company will have to take a much closer look at their asset management: how to they manage their investment and cash flows.
In order to continue a healthy business model, you as owning companies will have to closely monitor the cash flow in mid and long term. Measures you can take and are to consider include restructure the finances, with newly negotiated loan agreements with new interest and principal schedules. Negotiate with the banks and lenders revised grace periods and deferred payment schedules.
Secondly is to review and negotiate management terms, (in the case that you have an operator) including deferred payment schedules, softening of cluster fees or change of such.
Thirdly is to review the reserves for capital expenditures and if these clauses can be deferred or altered.
Fourth is to review local tax relief measures, including reduced withholding tax, deferred or lowered corporate taxes imposed by government and revised land/ estate taxes.

IN CONCLUSION

In summary the Covid 19 crisis can be seen as a positive game changer and we should take advantage of such opportunity. It has given us time to reflect on ourselves our families and more importantly on others. Now it the time to embrace the opportunity for change and to become leaner and more efficient. Hands on change in management is the answer. You are to seek and challenge change, consolidate your particular concepts and specialise by using the best resources available.
You are not to be intimidated by change: review, restructure and restore your business.

Bangkok, July 1, 2020
By Mark van Ogtrop
Beacon Sky Hospitality