Hospitality Industry Top Winners and Losers in the Post-Crisis Era

Here are the big winners as a result of the current coronavirus crisis:

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1. Major Hotel Chains:

Hospitality has been moving from an industry of independent hotels to an industry dominated by major hotel chains for at least two decades now. Currently 8 global hotel brands dominate many major markets: already 70% of hotel rooms in the U.S. and 50% in the U.K. belong to branded properties. Post-crisis developers, owners and managers will flock in droves to the major chains, attracted by their deep pockets, ability to implement safety and cleanliness protocols, huge loyalty programs able to generate 58.3% of roomnights, dominance in the corporate travel and group markets, comprehensive technology stack, expertise in maintaining and increasing occupancy and RevPARs in post-crisis, unparalleled direct channel distribution, 2x lower OTA commissions and 3x-4x lower dependency on the OTAs.

2. OTAs:

The OTAs have emerged stronger after all of the previous crisis and calamities: 9/11, SARS, MERS, the recession, ZIKA, H1N1. Because of the shelter-at-home mandates around the world, the vast majority of the population – even late adopters – were forced to use online services to communicate and work or study remotely, search fir news or information, purchase goods and services, order food, communicate with friends and family, watch streaming services and entertain themselves. This “online planning and purchasing education” has created millions of converts and believers in online travel planning and booking, which will benefit the OTAs immensely.

3. Automation and Robotization of the Hospitality Industry:

With labor costs constituting 33%-38% of overall operational cost and top line revenues plummeting, owners and managers will be looking to curtail costs and boost efficiencies. Next gen technology applications, automation, robots and devices will be replacing or augmenting back office operations, housekeepers, porters, reservation staff, front desk clerks, concierges, porters, line cooks, wait staff, etc. with robots, automation, AI-powered mobile check-ins and self-check-in and self-ordering kiosks, chatbots, virtual concierges, mobile virtual assistants, IoT devices, messaging services for guest communications and issue resolution, etc.

Well-funded, cloud-native hospitality technology vendors that provide real value, innovations that solve concrete needs and issues and superb customer service will not only weather the storm, but will flourish in the post-crisis era. Next-gen tech vendors providing the industry with subscription-based applications and solutions to engage, acquire, service and retain guests, as well as API exchanges and marketplaces, will do especially well and benefit from the major consolidation expected in the hospitality tech sector.

Here are the biggest losers as a result of the coronavirus crisis:

1. Traditional and brick-and-mortar travel intermediaries:

Even before the crisis the traditional intermediaries have been steadily losing market share. In the U.S. from more than 30,000 travel agencies 20 years ago, there were less than 9,000 left before the crisis. In the UK from nearly 9,000 travel agencies back in 2000, today there are less than 4,300 left. Last year’s demise of Thomas Cook and now COVID-19 will further decimate the traditional brick-and-mortar distribution marketplace (travel agents, smaller and midsize tour operators, bed banks, etc.) due to accelerated shift from offline to online travel planning and booking and the B2C travel marketplace (brand.com and OTAs) increasing market share at the expense of GDS, brick-and-mortar travel agencies and tour operators and bed banks.

2. Destinations relying on long-haul or foreign feeder markets:

Drive-in and short-haul feeder markets will be the first to “wake up” in the immediate post-crisis period. People are better informed about nearby destinations and can better assess the post-coronavirus situation there, and hopefully, resume traveling there if they believe the situation is under control. Destinations relying on long-haul, fly-in or foreign feeder markets will experience very slow and painful recovery, which will extend well into 2021. Focusing on domestic travel and invigorating locals to travel domestically via government or company sponsored and partially funded trips and vacations is one of the solutions to save the local tourism economy.

3. Independent Hotels:

The number of independent hotels has been shrinking for over 15 years. By adopting an asset-light business model and introducing soft brands, the major hotel chains have been aggressively expanding their global networks. In the post-crisis environment independent hotels will not be able to compete with the major brands for the fledgling travel demand and will further rely on the OTAs for their distribution. Independents are already falling behind in the adoption of best practices in revenue management, CRM, digital and brand marketing and technology applications, crucial to service the tech-savvy and digitally-obsessed travel consumers: next gen technology applications like AI-powered RMS, CRM, chatbots, IoT devices, guest-facing applications such as messaging, issue resolution, virtual concierge, mobile check-in and self-serving kiosks, etc.

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