5 ways hoteliers can emerge stronger from the recession

Eco-Tourism Society gets a new name, Rakesh Mathur as its incoming president.
June 13, 2020
Hotel sector hopes to turn around in H2
June 13, 2020

The COVID-19 crisis has exposed vulnerabilities and deep technological limitations across the commercial real estate industry. The economic consequences of the pandemic have been staggering, and perhaps no sector has been hit as hard as hospitality. 
 
However, as the hospitality industry comes up for air and starts to consider operations in a post-COVID world, the low occupancy rates it currently is experiencing can present an opportunity to modernize back-of-the-house operations rather than guest-facing areas, which have long been the focus. 

Hoteliers can (and should) capitalize on this time to streamline operations, take on previously deferred maintenance projects and explore new technology and strategies to cut costs, future-proof operations and ultimately increase net operating income as they prepare to reopen.
 
Here are the top five things hotel owners can do now to best set themselves up for success during (and after) a recession:
 
●  Invest in profitable energy-efficiency solutions: When every penny counts, energy efficiency can be a cost-effective strategy—especially when considering that utilities are tied for the highest percentage of controllable costs for property owners. The cost of energy efficiency is 2.5 cents per kilowatt hour, compared to upwards of 10 cents to 30 cents per kilowatt hour utility rates in regions like New York and Hawaii. Investments in the right energy efficiency strategies—such as lighting optimization and upgrades to heating, ventilation and air conditioning systems—combined with innovative technologies can amplify return on investment and drive significant utility savings.
 
But keep in mind, all strategies and new technology must be data-backed to ensure climate solutions are profitable and measurable—and are not just greenwashing.
 
●  Modernize to future-proof: Without the 24/7/365 focus on guests, hotels can focus on updating the back-of-the-house technologies versus just guest-facing investments. For example, explore advanced technology solutions for these systems or modernized equipment that incorporates artificial intelligence and machine learning capabilities. These solutions can analyze data in ways never before possible to reveal important insights and inform immediate and longer-term strategies. Advanced technologies will help hotels address things like shifts in energy use resulting from unpredictable occupancy patterns and provide the flexibility to pivot operational strategies as hotel needs and priorities continue to shift. Ultimately, these investments help hotels be resilient in the face of COVID-19 as well as future-proof the property for expected and unexpected events to come. 
 
●  Re-evaluate your partner ecosystem: Strategic partnerships are essential to long-term growth for hotels. Therefore, owners must ensure that their ecosystem of partners is just as agile as they are for future pivots, strategies or unexpected disruptions. Owners should ask themselves: If our partners aren’t able to adapt to survive the recession, where does that leave our property long-term?
 
●  Data-back investments: The recession will add a new level of scrutiny to all upcoming investments. While owners are increasing spend in an effort to keep staff and guests healthy and safe, a recessionary environment will mean that they will need to strategically and simultaneously cut costs wherever possible. This will be an urgent priority for investors, who need to know that the property is financially sound.
 
Energy-efficiency strategies that are data-backed and maintained over time can serve as a key differentiator in this tough economic landscape. Efficient buildings are more market-competitive, offering reduced climate impact as a benefit to investors and guests alike.
 
The reality moving forward is that the only investments that will survive budget cuts are the ones that ultimately reduce costs and demonstrate clear ROI.
 
●  Optimize operations to drive up asset value ahead of potential dispositions: Due to COVID-19, buyers and sellers are contending in a market where tens of thousands of square feet of property is for sale. For hotel property owners looking to sell, energy efficiency and smart technology investments can help them stand out in a crowded marketplace. Efficient operations and data-backed energy-efficiency measures can be a key differentiator during disposition, increasing asset value and net operating income.
 
Hospitality decision-makers must take action now to ensure they can recoup lost costs across their portfolios. The steps outlined above will not only help drive value within a portfolio of hotel assets but also will lead to improved profitability in the long term. Now is the time to make smart, future-forward decisions.