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An opinion piece by Moritz von Petersdorff-Campen, Co-Founder and Managing Director of SuitePad.
To state the obvious for everyone in the hospitality industry including staff, hotels and suppliers: a tough 24 months are now behind us.
Finally, we can see that the market is recovering. At SuitePad, we see this in our usage statistics such as the order volume and more significantly, I hear from many of our customers that their bookings from now until September are already looking very promising.
We could assume this is the post pandemic “happily ever after”, but let’s not forget the world outside is still pretty messy. The pandemic did not fade and China’s response has had a massive impact on global supply chains. It is expected that Russia’s war in Ukraine will last longer, and in addition to all the awful consequences for the people of Ukraine, it will also mean fewer Russian travelers and high energy prices. I am no economist but the combination of supply issues, increased energy prices and cheap money will continue to drive inflation.
The problem is that with inflation rates around 7% or 8%, even the ECB will have to intervene and raise interest rates at some point. Once that happens the pressure on the economy will further increase. If we have not sorted out energy pricing and supply issues by then, there is a good chance we are heading for a recession.
What does that mean for us in hospitality? Travel is one of the most cyclical industries, hence we are usually quite affected by economic downturns. If you combine that with low equity positions in the balance sheets of many hotel corporations, it can spell disaster for many companies.
So where does that leave us? I believe we still have a lot of reasons to be optimistic. In some areas I even feel that we have never been in better shape to overcome what is ahead. Here are the four reasons why this is the case.
Customers want to spend more on travel than ever before
The pandemic changed our way of living in many ways. But we also spend far more time at home than we intended. That is why we already see leisure travel skyrocketing these days. Business travel is expected to rebound too and many conference hotels are already booked solid this autumn. This is also reflected in a recent study from American Express which found that 86% of travelers want to spend as much or even more on travel compared to 2019.
This is surprising news considering the increasing gas prices overall, high inflation and the cyclical nature of our industry. It appears that the desire to travel outweighs the typical economic dynamics. This will not last forever, but should still give us a strong 2022 / 2023.
A cost structure that is ready for the next crisis
Everyone in our industry is seeking new employees right now, and given the labor shortage - hotels expect a lot from their front-line staff. While we must ensure that teams don’t burn out and that we don’t lose too much revenue due to limited service, it is also an opportunity: from what I hear, almost no hotelier believes that they will return to the same staffing level as before even if occupancy goes back to 2019 levels. Hotels have found ways to cope with the situation.
Let’s not forget that the personnel is usually the most expensive item on hotel budgets. Hence the ability to do more with less, is exactly what we need to prepare for difficult economic circumstances.
Management and frontline staff that are experts in crisis management
As unpleasant as the last two years were for everyone in this industry, the truth is that many of us had to leave our comfort zones in order to make things work and by doing that, we learned a lot.
Nobody wants to repeat the last two years, but we all have more tricks up our sleeves that we can put to work if ever we face similar problems again. And these tricks go well beyond just understanding how to apply for government programs.
Those who stayed in hospitality know what resilience truly means and after having survived the worst crisis for hospitality ever, a potential recession looks like a walk in the park.
Hotels are finally going digital
I have been in the industry for almost 10 years now and recall my first meetings with hoteliers who told me they didn’t need to digitize since they had great staff that take care of guest engagement. Today there seems to be an industry consensus that one does not go without the other. Just as customers don’t stop shopping in malls after creating an Amazon account, hotel guests will still reach out to staff members even if they have digital alternatives available.
Although there were always forward- thinking hoteliers who adopted technology quickly, others struggled with the shift. COVID has changed that. Digitization is on everyone´s mind and topic in every board room. This new mindset will help to overcome the staff shortage and prepare businesses for what is ahead. After hiring, deploying technology is the second best way to streamline operations.
Unfortunately we do not have a crystal ball here at SuitePad, but I truly hope that my predictions are wrong and we will see strong economic growth in the next few years, with the hospitality industry thriving alongside the global economy. But if that is not the case and the ride continues to be bumpy, there are few industries that are as well prepared as we are.
- Published on June 3, 2022
