PART II: Voyaging into uncharted territory - travel and hospitality post-COVID19

Eloise Hanson Eloise Hanson Uploaded




In the second of a two part feature, BHN reporter Eloise Hanson explores four key trends that are expected to shape the immediate-to-distant future of travel and hospitality post-COVID19

Clean accreditation schemes 

Predictions on how the industry will change post-pandemic are multifarious, yet one definitive takeaway is the general consensus on improved hygiene standards. Cleaning and sanitation will be ramped up in all areas of professional and personal lives. Protocols have been intensified across the board and customer reassurance will be critical to securing potential business. When travel is back on the cards, it may well transpire that certification of a cleaning schedule be the necessary and desired proof for customer satisfaction.

Accor and Bureau Veritas, a global testing and inspection group, has announced a cleaning label designed to ensure businesses are safe to reopen. Initially launching in France, proposals for the certification are expected to be submitted across the continent following approval. Likewise, Marriott International has created the Marriott Global Cleanliness Council, and Hilton has announced its CleanStay programme. The fact that such procedures are being implemented alludes to the perceived competitive edge of clean schemes, with inevitable widespread adoption across hospitality and travel. 

Clean accreditation schemes are by no means revolutionary; the industry is one that’s consistently measured against various standards. It’s therefore no surprise that the hotel sector, one that is built on a traditional system of ratings and rankings, is the first to pilot. In fact, it’s a natural progression for the sector given its ties with the wellbeing movement.

Pre-COVID19, brand values were increasingly approached holistically. At the end of last year, London welcomed its first mindfulness boutique hotel under the Inhabit brand, and Criterion Hospitality launched its own sleep-centred brand Zedwell in February 2020. Delivering beyond physical design features such as air filtration systems and soundproofing, Inhabit has partnered with food-wastage apps like Karma and Too Good to Go, and Zedwell donates a percentage of sales to disadvantaged communities across Britain.

As the industry showed signs of a paradigmatic shift, so has the criteria by which it falls under review. CEO of Forbes Travel Guide Filip Boyen recently spoke to BHN about adapting its accreditation system to introduce sustainable considerations, and Quality in Tourism has launched a dedicated grading scheme focusing solely on responsible tourism.

Imagining a green and ethical future is not a far-fetched reality in light of the pre-pandemic trajectory. As a new minimum standard, cleaning certifications will be key for now. Gordon Bruce, director at Room to Breathe (RTB), a specialist hypoallergenic cleaning service for hotels, believes this certification to be paramount in meeting customers’ needs. “Now, more than ever, people are aware of their environment, and guests will seek out accommodations that have solutions in place that puts their health and wellness first… By providing a room that can demonstrate continuous and permanent ‘self-cleaning’ provision, you can provide customers with an unrivalled level of service and commitment to their needs and concerns.”

“A single night stay will become a hotelier’s biggest issue, as each and every night new customers require that peace of mind that rooms are as safe as possible for them to stay in. Failure to address these new concerns could result in the long-term repeat visitor more likely to go somewhere else next time. Capturing this feeling of assured safety every time must be seen as the focal point for customer satisfaction,” he added.

The advanced technology that’s now available makes ‘self-cleaning’ rooms possible. A deep clean by RTB consists of a number of elements: from UV lamps, to ULPA hoovering and fogging the air with PB2012, a proven virucide, bactericide and fungicide. The company has even developed its own BioTouch antimicrobial coating, and installs air sanifiers based on NASA technology. Its full product provides safety and security for up to 28 days. “The cost of a deep clean between every guest is neither practical nor affordable, which is where RTB comes into its own,” said Bruce. “Based on an occupancy of 72 per cent, our cost model demonstrates that a ROI of 100 per cent can be achieved in the first year with a surcharge of just £15 per night per room.” 

The prioritisation of quality cleaning protocols is evident in its global uptake. In Denmark, Hotel Ottilia has partnered with ACT.Global, a sustainable sanitation company, to bring self-disinfecting technology into the hotel’s rooms and suites. Similarly, Hong Kong-based Madera Group is the first hospitality group within the region to adopt nano-photocatalyst technology by local company RAZE. The medical-level disinfectant is to be applied to all Madera properties including its hotels, serviced apartments, cafés, facilities and back offices. RAZE even sells high-grade, self-sanitising products for at-home use.

Personal demand for professional cleaning services existed long before coronavirus accelerated the trend. Late last year, Nordic Choice Hotels piloted its ‘Hotel Feeling’ project. The initiative saw Clarion Hotel Amaranten in Stockholm partner with local housekeeping startup L2Go and provide cleaning services to members of its loyalty programme that live close by. It allowed members to earn points from using the service, and Nordic Choice Hotels now holds a waiting list of people looking to participate once it expands. 

If cleaning certifications come to be a prerequisite for the hotel sector, this may well set a standard for other commercial real estate circles. To date, there has been little headway in terms of delineating a consistent, universal approach to accreditation for serviced apartmentsand other, alternative accommodations. Jo Layton, director of CAP Worldwide, a corporate booking agency, said: "As professionals in the extended stay market, agents are expected to provide access to ‘safe and secure, clean and legal’ accommodation every day, some of which have been externally accredited and some personally accredited by the internal supply management teams of the agents… there is a huge amount of demystification that needs to happen in our industry with regards to clarity around this subject.”

With serviced apartments presenting a favourable option to holidaymakers once lockdown ends, the urge to introduce enhanced hygiene standards is pressing. Aparthotel operator Domio has fast-tracked its new cleaning programme as a result of the COVID-19 pandemic, calling it the industry’s “most comprehensive” initiative. LABS Collective has also announced its new safety programme, which entails a perforated sticker to be attached to all doors of its STAY brand following a 24 hour deep clean. Guests will then have to physically break the seal before entering the apartment. Many more will follow suit, either putting any agreement or clarity around accreditation on the back burner, or potentially speeding it up.

Growth of healthy buildings

If one tangible output of the coronavirus is the necessity for cleaning certifications, this turns attention to the general health of buildings and its operational performance. Over the last few months, there has been a global rush to house the ill as cases continued to rise; China constructed an emergency 1,000 bed hospital within 10 days, and London’s Excel Centre was transformed into the 4,000 bed Nightingale hospital. The need for hygienic and sanitary safe places is vital in the face of a pandemic and could pave the way for ‘healthy’ modifications of current and future buildings.

Healthy buildings, ones that support the physical, psychological, and social health of its people, are likely to receive considerable attention in the years that follow. Nine foundationsare said to constitute a healthy building: air quality, thermal health, moisture, dusts and pests, safety and security, water quality, noise, lighting and views, and ventilation. The benefits of at least one of these factors will be invaluable in travel and hospitality - savvy business leaders are suspected to leverage healthier indoor spaces as sources of competitive advantage.

“As a result of this crisis I think it is very likely that people will start to focus more on their general physical health,” said Stephen Marks, wellness strategy consultant and founder of Mind Body Building. “We’re going to need to kickstart getting back to our best health (including mental health) as soon as possible, and so I see there being a focus on wellness and fitness programmes and community activities within buildings.”

“Inevitably indoor air quality will be one of the main topics of discussion and this area is only set to grow while we look at the various standards which can measure the quality of air, together with a variety of purification and filtration systems available. Check out what companies like AirRated are doing. I also don’t want to underplay the significance of sound and better acoustic controls within buildings (The World Health Authority already classify noise as a leading health issue). I think we will have become used to quieter environments. And the buzzword of ESG (environmental and social governance) is by all accounts only set to expand as we may look to a fairer world. For investors and companies alike, healthy buildings will certainly take the ESG box,” he added

Buildings where emphasis on health and safety will be most pronounced is those that operate and manage coliving spaces. With its ethos and values rooted in sharing, coliving developments consist of bedrooms or apartments with large communal areas, with residences offering bills-included contracts and providing access to a number of services and amenities. The very foundation of coliving is therefore antithetical to social distancing, and poses a significant obstacle in the day-to-day lives of tenants.

For coliving brands like Ollie, health and space efficiencies are incorporated into its building design and management through the use of technology. Ollie’s president, Gregg Christiansen, explained: “Our Ollie Living App allows residents to do anything from submitting a maintenance request and checking their rent balance to RSVPing for social events and opening their apartment doors. Likewise, the Ollie Social platform is so crucial to our business model that when social distancing guidelines were put into place, we moved all of our programming over onto virtual platforms in order to still provide a "place" for people to gather and grow these connections. In terms of design, we take new or existing floor-plans and build code-compliant and thoughtful living spaces into those plans. Our technical services team specialises in space efficiency and spends a majority of the time improving upon the in-unit experience.” 

He added: “In the future, some may look at coliving and micro-housing models which result in increased density and question if this trend will continue. In that same frame of thought, you also need to ask if the cost-of-living and availability of housing will go away. The secular trends of live-work-play environments, a general sense of loneliness, and perhaps non-commuting or work-from-home lifestyles have driven needs for living options close to employment centres. A post-COVID world may require some further regulations and compliance with cleaning and more efficient building systems, such as high-efficiency lighting, air-filtration etc, but all of these items will increase the cost of housing and ultimately, get passed onto the tenants.”

De-densification, in essence creating more space, is a concept that has fuelled discussions in recent weeks - be it between bar stools and restaurant tables, between desks in offices, or neutralising seats on public transport. On a wider scale, gateway cities have seen a major de-densification from the drastic drop in tourist capacity and workforces withdrawing home. If the cost of distance, formally known as spatial economics (which determines where people work, live, shop and play) is permanently affected as a result of this occurrence, it could usher a post-urban era. 

Bain & Company, a business management consultancy firm, predicted back in 2016 that within the next two decades, a big economic shift will accelerate the declining cost of distance. It will make “new combinations of distance, density and scale economically viable… spatial economics will give rise to new markets, more innovative businesses, new lifestyles and different career opportunities.” Heavy investment in technology is said to be the catalyst for this socio-economic change, as it erodes the cost of moving people, goods and information. Previously considered prime locations could be worth far less, however the ability to operate at scale and scope could increase overall productivity.

Organisations that deliver international travel and housing programmes could be affected by this shift. Steve Lowy, CEO of Anglo Educational Services, said: “We mainly have American students who are coming to the UK for a semester. This summer, we had 149 students from UC Berkeley apply for our London internship - even though the university eventually pulled the programme due to coronavirus, 20 students emailed us direct requesting they still wanted to apply. What that showed me was that people will still want to travel, and I don’t believe the technology today is good enough to explore that excitement.”

“In response to the travel bans, we nevertheless set up a virtual internship with 40 partnering companies allowing those students to learn about British work-life culture. Online learning will ultimately offer kids with less financial backing to be able to have a little flavour of a different experience… it may even lead to kids choosing local universities and living at home with parents. And for those looking at student housing, then living in a cramped space is not healthy and rooms will need to be a degree larger - whether that includes an outside area, or preference for a one bedroom apartment over a studio.”

He continued: “A few years ago, the accreditation of higher education was changed to something called Office for Students, which considers other aspects of the university offering such as mental health support and housing, on top of the academic quality. This is how the sector will develop, and I think this will apply to universities and student halls and coliving… it’s about the full experience.”

Caring for one’s wellbeing is essential when in crisis - even more so when physical interaction is limited. Just as regular check ups are important, the pulse of a building should also be closely monitored given the amount of time spent indoors. The coronavirus outbreak has held a microscope to the condition of our physical surroundings as well as magnify possible areas for improvement. It has even brought into question KPI’s such as revenue per available square metre, with future stylistic elements potentially sacrificed to ensure a safe environment. 

Developments within dense areas could therefore succumb to these pressures. As Philip Jaffa, founder and director of landscape architecture firm Scape Design, explained: “The more a client builds, the more they can make profit. But it comes down to how much development can a land hold… rather than build 30 [units] and there’s no space between them, what if you build 15 [units] in a stunning, more natural landscape - could you not sell them for more value and therefore make the same or more profit?”.

Humans will be the currency of luxury

Ever since the coronavirus struck, there’s been a complete overhaul and inversion of roles and responsibilities. Although the majority of staff have been furloughed or laid off, previously perceived low-skilled workers have been elevated to famed heights. An enormous amount of attention has been paid to cleaning as housekeepers prepare to welcome front-line workers, and the mass preparation and delivery of meals has mobilised kitchen teams. 

The outrage felt amongst industry professionals when the British government introduced its Immigration Bill is flagged a distant memory. The news fanned the flames of the age-old stigma that jobs within hospitality are low-skilled, low-paid and short term. The need to correct this stereotype emerged a top priority, yet along with other social concerns like sustainability, the campaign quickly became eclipsed by the coronavirus meteorite.

As with any health crisis, the coronavirus has prompted a thorough reflection on performance. Businesses will look to re-evaluate and update operational infrastructures in a bid to run at optimal efficiency. Given the trend towards digital empowerment, property owners and operators may also look to adopt technical solutions in order to maintain low expenditure. 

“Cost management will be key because investors and lenders will be asking, as a standard, about your ability to survive during another lockdown,” said Julie Grieve, CEO of guest engagement platform Criton. “As we initially come out of lockdown, we will inevitably see lower occupancy levels, with corporate guests who may not really want to be there and some leisure guests who are treating themselves. Both are going to be trickier to please - particularly as operators endeavour to staff appropriately whilst not burning precious financial resources.”

Staffing will be pivotal in the months to come. As the largest cost to hoteliers, questions will be raised around practicality and productivity. First and foremost, care will be taken to minimise physical interaction. Receptionists and concierges could dwindle in numbers as these touchpoints are digitally transformed. Self-check in kiosks are not uncommon nowadays - Ruby Hotels utilises IT services “where it makes sense.” Now hoteliers are warming up to the idea of automation. Enquiries from hotel owners for Yanolja’s contactless self-check in kiosk, which launched in November 2019, have more than doubled since the COVID-19 outbreak.

Traditional methods of offering physical room keys could switch to personal mobile phones, with in-room functionalities such as voice activation and smart concierges implemented to deliver quick information. These examples are not necessarily new-age ideas: Hilton introduced Connie back in 2016 - an AI-powered robot that uses the computing power of IBM’s Watson AI and travel database WayBlazer. The argument here is that coronavirus could effectively speed up the process of introducing tech-enabled buildings.

Research by SoftBank Robotics EMEA reveals that 93 per cent of facility managers believe that cobots (collaborative robots) will increase the quality and consistency of service delivery within commercial cleaning. 77 per cent state that cobots can drive productivity, and 76 per cent predict that robotics will lead to healthier workspaces for employees. Innovative strategies for managing workloads could lead to a permanent slimming of the workforce.

The need and therefore reliance on human staff lays open to debate. Brands such as YOTEL with its “stay smarter” tagline already leverage guest-facing tech capabilities that minimise the number of on-site employees. With the brand’s launch of its serviced apartment arm YOTELPAD later this year, the company is proof that a large workforce is unnecessary. What becomes clear is that if tech-enabled buildings emerge as the new normal, then deluxe five-star offerings that depend on face-to-face interaction will be gold dust. 

The bittersweet shock of all that's hit the industry is one that celebrates its workers. When doors swing back open to the general public, attitudes towards staff will be ingrained with a deeper understanding of their value. Paying a premium for a nuanced, personalised service will be the epitome of luxury.

Distribution reset

With near-wide international lockdowns, travel bookings have fallen across the board. Data released by the UK Short Term Accommodation Association shows a 70 per cent cancellation in reservations. Likewise, analysis from STR shows global hotel occupancyreaching an all-time low. Accommodation providers accordingly responded by adapting cancellation policies, with some introducing gift vouchers as a flexible and revenue-generating alternative. Nevertheless, with the majority of customers tending to book through online travel agencies (OTAs), this has flared complications for all parties involved. 

Stocks relating to the two largest OTAs, Expedia Group and Booking Holdings had fallen by 44 per cent and 22 per cent respectively since the imposed travel bans. In a bid to source financial support, lobby group EU Travel Tech appealed to the European Commission to offer the equivalent bailout as that being offered to airlines and hotels. The battle for survival intensified when it was announced that non-refundable bookings made through OTAs are to be reimbursed without charges. The changes made to the terms and conditions has left many accommodation providers unable to afford the incurred bank charges on cancelled or reimbursed bookings. 

Booking.com has since made the decision to halt all rentals within the UK during the current lockdown period. The company has offered either a full refund of pre-payments and deposits, or a voucher for a future stay at any property on the platform. Whereas gift vouchers secure a source of income, hotels are reportedly still paying commissions between 15 and 25 per cent. Cowen Equity Research estimated that Booking Holdings had around $1.6 billion in prepaid bookings at the end of 2019, compared to Expedia’s $5 billion in deferred bookings and Airbnb’s $2 billion cash reserve. The lockdown is likely to have led to large outflows of cash as the companies grapple to refund cancelled bookings. 

Expedia Group has recently secured $3.2 billion in financing from two prominent private equity companies: Apollo Global Management and Silver Lake, which participated in Airbnb’s latest $1 billion debt offering. With both investment firms appearing to bet on the travel and hospitality sector, it shows confidence in recovery. That said, it’s also been held that Expedia’s financial injections are in preparation for potential sale when the economy restarts. The pandemic only serves to underline the vulnerability of the industry and its susceptibility to shocks in the market, cautioning a review and even a restructuring of distribution systems.

One possible outcome is the consolidation of major OTAs. The pandemic has highlighted the level of risk involved for both the dominant players as well as smaller businesses; a merger could therefore act as a fortification against market shocks. Frank Reeves, cofounder and CEO of booking platform Avvio, said: “Due to the unrivalled impact COVID-19 has had on the hospitality industry, I wouldn’t be surprised if leading platforms like Booking.com and Expedia converged with some of the smaller OTAs. In some ways, further amalgamation may benefit hoteliers by ‘reducing’ the distribution network, but ultimately these changes will put increased pressure on hoteliers and accommodation providers by forcing them to compete like crazy for their direct channel.” 

“Pre-COVID19, approximately 60 per cent of our hotel PPC budgets were being spent on defending hotel brand terms from distribution 'partners' who compete aggressively for brand terms on Google etc. Convergence also enables market share, which will undoubtedly enable some of the big players to increase their commission costs. This will be devastating for hoteliers who will already be running on reduced occupancy and will likely need to reduce their rates to compete locally.”

“I would strongly caution hotels against rushing into OTA contracts in order to support demand generation for the initial stages of the travel recovery. We fully expect demand to start with local/domestic guests and this is not something that requires the support of OTA distribution. A digital-first strategy is imperative for the upturn (and hugely important for phase one of the recovery). Hoteliers should favour Google, TripAdvisor, metasearch, SEO/PPC as well as traditional offline channel as their initial online distribution tools. There is more than enough space (and requirement) for OTAs in the long-run, and undoubtedly hoteliers may rely on them for international reach. But now more than ever provides an opportunity for hoteliers to reclaim some of the space they’d previously lost to OTAs,” he added.

While it has been conceived that the appeal of OTAs will increase due to the normalisation of social distancing, there has been an outpour of disgruntled customers. The companies’ varying approaches to managing bookings could thereby facilitate the swing towards direct. OTAs were allegedly unequipped nor prepared to deal with the spike in refund requests, with research by Which? finding 20 of the UK’s largest travel firms illegally withholding refunds. As customers are left dissatisfied with credit notes, OTAs risk a crippling loss in consumer confidence - which generally is at a historic low

The headwinds faced by customers could well steer future bookings direct with the provider. Recent activities could present the impetus for hotels to test a direct strategy, allowing for a regain of control over individual products and communications. Should customers desire the seamless search experience that OTAs offer, it’s also possible that subscription based platforms will surge in interest. Companies like Bidroom collaborate directly with hotels, providing customers with discounted bookings whilst allowing for the abolition of commission rates otherwise earned from traveller membership fees.

Michael Ros, CEO and cofounder of Bidroom, explains: “Because our business model is different in that we have a recurring subscription fee, the financial impact on our company due to the coronavirus is less severe compared with transaction based companies such as Booking.com and Expedia, for example. We believe in the membership economy as being the Amazon Prime of travel; we will come out much stronger, even though the number of bookings is limited at the moment.”

Ros concluded: “As we have members, we indeed know the behaviour of our customers and we can constantly improve our product, as well as the hotel inventory. All this combined allows for a greater level of personalisation. Because our members have to create profiles, we are able to glean customer preferences and booking history. Future searches are therefore tailored to suit similar style bookings - whether it be preference for a boutique hotel or other accommodations.”

Summary 

Characteristics of the new tomorrow are closely interrelated and therefore have a knock-on effect. The relationship between the four key trends explored in this feature are explained below:

  • Clean accreditation schemes - The psychological impact of the coronavirus will help to steer and shape strategies for recovery. Generally, people will be acutely aware of their health and their surroundings which will drive demand for clean accommodations. Proof of catering to this need will be paramount for a competitive edge when travel returns. The introduction of hygiene certifications will therefore become an industry-wide standard. 
  • Growth of healthy buildings - If one tangible outcome of the crisis is hygiene certifications, then the health and operational performance of buildings will also receive greater attention. Spaces might become larger, and technology - be it filtration systems or software as a service (SaaS) - will help to curb the spread of harmful germs. The cost of living could perhaps increase as a result, though with the cost of distance possibly declining, this could lead to new lifestyles as distance, density and scale become economically viable.
  • Humans will be the currency of luxury - Cost-management has and will continue to be critical long after the pandemic has ended. At first, occupancy will be low and staff will be streamlined comparatively. Coronavirus could therefore speed up the adoption of technology to assist with operational efficiencies and ultimately reduce headcounts. With tech-enabled buildings emerging as the new normal, physical staff become the premium of luxury. 
  • Distribution reset - As occupancy rates reach all-time lows, OTAs too are struggling with cash flow issues. With the major players seeking fresh capital to boost liquidity, consolidation will help to mitigate the risks associated with market shocks. For hoteliers this could mean increased commission costs, though low customer confidence in the OTAs management of refunds could steer direct bookings. The consumer will ultimately dictate who holds the stronger position in the long term.

To read part one of the feature, click here

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