This was not my first national tragedy, but it was my first pandemic. I can remember 9-11 and sitting in front of the TV in Columbus, Ohio, watching the smoke coming out of the first building when the second lit into flames. It was surreal. As an industry we witnessed the community coming together and bringing NYC back stronger than ever. The pace at which NYC recovered was impressive. A testament to community, national unity and working together for a common interest, the recovery of a great city.
This was my first pandemic. This time, it’s not just nationwide, it was worldwide. Regardless of your politics or feelings about the virus, it was global and it wrecked our industry. Unlike 9-11 there was not a sense of coming together or national pride (or even global pride). The reaction from companies, to municipalities, to individuals was wildly all over the spectrum. The same was true for our industry.
A Pound of Flesh
We all have suffered. Zero dollars revenue is hard to split. Paying bills became impossible. Personally, my company had many of our contracts canceled and our revenue dropped well below the cost for us to keep our doors open. We took advantage of the programs available to us and were able to survive. We volunteered a lot of time for our clients and vendor partners to help find a way for the industry to find solutions. I called it treading water on many of my Teams calls. We didn’t drown but we didn’t make any progress either.
Many of our vendor partners stepped up. Knowing that we could not split $0, many vendors found ways to maintain the relationship and survive without trying to enforce contracts and invoices for products and services that were sitting idle. There was the other side though, companies who wanted their pound of flesh even with the hotel doors closed. No conversation would detour their goal of being made whole. If you rented commercial office space, you felt this one firsthand as few landlords made any concessions that would not result in them being made whole. These were tough times.
While I was in Nashville (also known as NashVegas) last month for the Executive Vendor Summit, it appeared the pandemic was over on Broadway. The bars were packed with lines out the door and the party was on! For the hotel industry though, it’s not going to be that quick. There are several reports and predictions vary but for now let’s agree that 2023 is when we will start to see numbers creep closer to 2016-2018. In short, we are still facing a long climb to normalcy.
Let’s be reasonable. We need the hotel industry to survive both for our work life as well as our personal life. For the industry to survive we need to continue to work together. If the hotels don’t survive the vendors will fold. Without the vendor community, the hotels can’t survive. This includes the brands, consultants, trade publications and so on. Let’s be reasonable.
All parties need to be flexible. We would love this to be 2019 but outside of a few leisure properties it’s not and won’t be anytime soon. The vendor community shouldn’t work for free and the hotel can’t pay full margin prices either. We need to be flexible in our approach that understands and accommodates the situation. If a vendor has a product that charges per room and the hotel only has 200 of the 772 rooms open because of demand or staffing, why would the vendor charge at 772 rooms? Be flexible. Extend the contract term, adjust the room count, and be creative. The hotel shouldn’t get service or products for free but the margins don’t work when you pay for 772 rooms and rent 100 a night. The hotel may not be able to pay 2019 rates until we recover from the impact caused by the pandemic.
New Business Models Will Emerge
We should look at new business models on existing products and services that make sense for both parties. This evolution will come whether you participate or not, so either you gain market share or you lose market share. Customer requirements are changing and in turn so will our business model. Just remember, the hotel industry is not a large margin business (like soda at a fast-food restaurant) so innovation may not be changing the product, but rather the business model in which it is delivered. We’ve had to deal with several hotels going into or being purchased out of bankruptcy. That’s not good for the hotel or the vendors involved, but again we can’t split $0 so we had to find business models that make sense. Not all vendors wanted to have the conversation and that is understandable. For those that did, we have worked to find creative, alternative solutions that allow a step toward being made whole while allowing the hotel to open and operate.
Information is King
We have looked at occupancy-based pricing in the past for support and per room business models, but it never gained traction. Highgate’s Jeffrey Parker said, “Hotels already share their information with STR so maybe we could provide sanitized reports to the vendors.” It becomes a trust issue. The information also has to be accurate, but it changes the dynamic and makes the relationship more of a partnership. This could result in a more attractive business model for both hotel and vendor.
All dollars are precious on the road to recovery. Focusing spend on moving forward versus checking a box or legacy initiatives is a priority. PCI/security will cost us far more money in the event of a breach, so this remains at the top of the investment list. Dollars spent on automation that will help overcome our lack of resources has come to the forefront and requires serious consideration. Refreshing equipment on a standard lifecycle or products that don’t drive revenue or occupancy take a back seat for now. Nice to haves will come in 2023 or later.
Common sense and communication is paramount. We went through a pandemic and it’s not over yet. As Parker commented when proofing this article, “It’s the September cliff we are worried about. What happens when the kids go back to school? When will business travel come back? Will we see conventions in the 4th Quarter of 2021?”
Let’s be reasonable and work together to get back.
