At Beonprice we want to help as much as possible in this difficult situation caused by COVID-19. Here are a series of recommendations and a bit of data to cope with the crisis.
Don’t panic. Use your energy to get creative.
We’re well aware that staying calm is easier said than done. It’s always tempting to lower your prices when there’s little demand. But this is more likely to lead to a price war than generate bookings when the market has lost confidence. It’s worth remembering how the financial crisis of 2008 caused ADR to drop steeply in just a few months. It then took seven years to regain pre-crisis rates. Traditionally there are industry experts who believe lowering prices stimulates demand. But if your competitors follow suit, all you achieve is the same number of room nights at lower rates. That has a negative impact on everyone’s profits.
Instead, you need to get creative. One good alternative might be to close some floors of your hotel to reduce direct costs. Using opaque prices, such as Hotel + Flight packages, will allow you to offer discounts without changing your price positioning. We advise using upselling and cross-selling strategies. You could offer additional experiences or a special deal on your Junior Suite, for example. Make sure you offer inventory to all channels and segments.
Sadly, no one in the industry has a crystal ball and unexpected events will always pose new challenges. Algorithms take time to adapt to changes in customer demand and supply at such unique times. That’s why we advise paying special attention to short-term recommendations.
Use data: analyze your business to identify opportunity.
It is important to conduct a detailed analysis of your business performance to identify opportunities. Demand will vary in different segments, chanels and feeder markets. For example, in Spain the domestic market is resisting better than the international one. Once you identify opportunities you can design specific products.
Don’t forget about the mid- and long-term – remember this crisis will end.
In the short term, many hotel companies have lost more than 25% of future bookings since the Coronavirus appeared. But it’s important to think about mid and long terms.
We’ve seen in China how the number of new cases falls once the Coronavirus stabilizes. Be proactive in seeking mid- and long-term business, such as group bookings for Q3 and Q4 2020. By then, demand for rooms should be back to normal. It could even increase if people who delayed trips make up for lost time.
We can compare the situation with the last time we had a pandemic in 2009. The first case of the more severe H1N1 virus was announced on March 17, 2009. Less than five months later, on August 10, the World Health Organization (WHO) said it was under control. The first case of COVID was announced in December last year.
Think about customer loyalty
Now is a good time to build client loyalty. We suggest waiving cancellation fees and offering new dates at no extra cost. It’s true that customers who paid lower rates might select high-demand dates. But a customer-oriented approach will make guests much more likely to return. Eliminate all non-refundable cancellation policies. In the face of such uncertainty, guests are more likely to book when you’re flexible. Showing support by offering no-change fees will build loyalty in your customers.
Measure your performance against the market.
The budget you set at the beginning of the year is probably no longer valid. So there’s little point in comparing how current performance matches your budget. It’s more relevant to assess your performance against the market. The STAR reports from STR Global can be useful in determining how you’re doing relative to your competitors. If you don’t have these reports, it might be time to consider obtaining them. At the very least, look at their reviews of the analysis, as well as their up-to date bulletins about the impact of Covid-19.
We have some data about cancellations and no shows in both Madrid and Barcelona. We will share it with you periodically (see below) to help you assess your market performance and developing trends.
Cancelled Room Nights in Madrid (by arrival date)
We see a clear increase in cancellations from 6th March onwards
Cancelled Revenue in Madrid (by arrival date)
Cancelled Room Nights in Barcelona (by arrival date)
Here the trend is not as acute as in Madrid, although there is a clear peak in cancellations for arrivals due in the next few days.
Cancelled Revenue in Barcelona (by arrival date)
Here we can clearly see the impact of the Cancellation of MWC.
Use your free time wisely.
Prepare for the future. This requires training your team and improving processes. The best way to spread a revenue management culture throughout your organization is by educating your staff. Train everyone with progressive RM content, so they will have the knowledge and culture when the crisis is over. Our Beonprice Academy learning platform can help you reach this goal, by offering an online Revenue Management Certificate with progressive content.
More information here.