During WiT Virtual, Louise Daley, deputy CEO, APAC, Accor was very realistic about the harsh realities being faced by the hospitality industry – poor occupancy rates, declining RevPAR, staff redundancies and furloughs. However, she also pointed out areas worthy of optimism in the sector. She identified new areas of opportunity in technology, what sectors could do to revive themselves, and what lasting effects the crisis could have on how companies operate.
Asia first to be hit, may be first to recover
In its first quarter results, Accor announced a 17% decrease year-over-year in revenues to 768m Euros, the closure of 62% of its properties, a drop of 25.4% in RevPAR and that it had furloughed or put on temporary leave 220,000 people, about 70-75% of its workforce.
The impact in Asia was harder in the first quarter, said Daley, with RevPAR down earlier in the year. “In China, we were already facing this before Chinese New Year… we went to single digit occupancies in China through February and March. Then it started to spread across Asia… It was like this tsunami that started to come,” said Daley.
She also remarked that while Asia was the worst hit, it was also the earliest, so by the same token, she expects the APAC market to recover first. She commended how many governments in Asia responded “responsibly, quickly and rationally.”
Daley argued that watching and learning from the countries that emerge first would be very valuable in determining how companies should react and respond. Looking at China and Korea as the first markets to see ‘green shoots’ of recovery, as well as New Zealand and Australia, she said they were in a position of strength because of their large domestic markets.
“That will be part of the saviour in the end…[but] then the key will be how they recover in international markets. [They] won’t just open up but I believe they will do country-by-country.”
As China emerges, pent-up desire for travel is shown
While recovery may be slower than desired, Daley was optimistic about the return of the voracious appetite to travel. In a campaign launched with Fliggy in April – selling vouchers that could be converted to room nights – Accor sold six times more vouchers than it did for ‘Singles Day’ (November 11), the Chinese shopping holiday.
“There’s a pent-up desire to travel and that’s pretty much for leisure…we’re seeing more investigation of travel opportunities but we’re still a little way from the booking of it.”
Daley said many consumers likely wouldn’t be comfortable with farther destinations; domestic travel would be the path forward for some time. “They’re still getting used to what this emergence looks like… it’s like having one foot on the accelerator and one on the brake … our occupancies are increasing every day which is pleasing, but so far it is still tentative.”
She added that other than domestic travel, which is linked to staycations, the drive market and corporate travel, particularly SMEs, would be the early starters for recovery in markets when they emerge.
Looking at the necessity of business travel, Daley made the case that the personal nature of business is difficult to usurp. “There are many centuries of behaviours embedded and they will continue.”
Development deals still being discussed in China
Accor is still charging forward with its expansion plans to develop more properties in China. Daley explained that the company has hired more people to cope with enquiries around deal signing, indicating the high number of opportunities it is seeing in the market.
“China has a long game… they’ve been very good at building infrastructure over the course of the last 10 years and that will continue.”
Its marketing strategy in APAC would take a “submarket by submarket” approach that is “very local and very domestic driven,” said Daley. The company is being “very granular about which digital spend is going to drive which market.” It is also working with various government and private tourism bodies that can help kick-start travel.
While hospitality companies must be quite aggressive in their marketing efforts once travel resumes, Daley said she did not expect there to be an accelerated shift to direct business.
“Hotels have always been a highly distributed product… there are many echelons of business – wholesale, OTAs, corporate etc. – and we recognise there will always be partners. Now it’s about choosing the best partners. Who are the ones that were there for us in tough times and who will be there in the long run.”
She said Accor would continue to invest in its Accor Live Limitless loyalty programme. “We have to rethink some of the benefits – before it was around concerts and sporting events, maybe we need to look at more intimate events. The key is to make it easy for members to earn and burn and the bigger the ecosystem we can create, the more interchangeable that currency is.”
In food and events, rapid changes needed to come back
Beyond hotel beds, Daley said F&B was under enormous pressure to evolve as restaurants needed to rapidly adapt to the delivery market to keep business afloat.
Daley, who is also responsible for two food-related businesses – ResDiary, a table management platform, and Bizzon, a restaurant POS and payments solution, said the former pivoted to pre-orders and takeaways and both ResDiary and Bizzon are working on solutions that will allow customers to order and pay at the table – to make dining as contact-free as possible.
“We have to think about how we come back – and contactless service will be key. This will allow customers to order room service from their own phone, in the restaurant or room service. We are bringing back staff from furlough to work on this project.”
“We see this as a big focus coming out of Covid-19.”
With the spike in food delivery business during this crisis, Daley said one major challenge for restaurants is the high cost of delivery platforms, which makes it costly for both consumers and restaurants.
“I predict that restaurants, with this direct to consumer shift, will work on their own delivery tech or collaborate with those in the same hoods to do so so they don’t have to pay the 30% fee to delivery companies.”
The last component of the hotel business that Daley predicted would recover is the MICE events space. She remarked that it was an “enormous piece” of business, so hotels may have to begin look at starting with some type of hybrid, for example smaller-scale events with less people, as it will be quite some time before social distancing measures are fully relaxed.
She put it down to a simple financial equation of whether it is better to leave a room empty or have events but just with fewer people in it.
Covid-19 has challenged all assumptions around work
Daley described the current pandemic as a “health crisis developing into a financial one,” alluding to the broader impact it will have on the economy, employment, and new businesses.
In the startup realm, she said valuation is secondary and cash is king. “Startups that will survive aren’t the ones with best valuation but who’s got cash… if they don’t have cash, how can they raise it right now?”
Daley, herself an angel investor and who also keeps an eye open for acquisitions for Accor, noted that it’s still too early on in the crisis for the opportunities. “Remember, governments are underpinning the economy for the next few months – it’s what happens after that will be interesting. That’s when we will see the fallout, and we will see more financial fragmentation.”
In the corporate sphere, Daley argued that companies will need to rethink how they work, saying that the crisis “broke down everything you believed about what was possible and not possible productively.”
Organisations must ask themselves how they can provide the right space for teams to come together, and the right tools to enable people to work effectively at home.
When it comes to talent recruitment and retention, Daley said she didn’t believe the travel industry would be disproportionately hit compared to other industries in terms of its appeal. The financial effects of Covid-19 would make it challenging for young people to find employment overall.
Of course, there will be financial recovery eventually, but in the meantime, Daley predicted that many young jobseekers will gravitate towards financially stronger, more robust brands. “They might be a little more boring but a lot more stable.”
Lead image: Getty Images
