It’s a long and hard road for UAE hospitality industry
But there are options for businesses to survive and eventually recover
The uncertainty experienced by the business ecosystem is certainly shaking the foundations of the hospitality industry too.
Though one cannot be absolutely certain what the road ahead will be, one cannot ignore the realities that will have a far-reaching impact on the industry in the second-half of the year and the journey ahead.
Dealing with these realities
A majority of airlines in the region and from feeder markets are yet to resume commercial operations.
Expenditure on pandemic healthcare as well as the economic and financial support extended to support local businesses will have a huge impact on government budgets and future investment priorities.
* Large corporations have downsized, and spending budgets drastically squeezed.
* Household disposable income and consumer purchasing power have reduced dramatically.
* It will take time for the hotel industry to meet new guest expectations.
* Dubai Expo 2020 has been rescheduled to October 2021.
* Business’ cash reserves and cashflows are running low or turning negative.
In the GCC hospitality market, Dubai has the least pronounced seasonality as it caters to both commercial and leisure segments almost equally. Dubai has been successful in diversifying its offering over the last five years and commendably flattening the seasonality curve.
Hotel market recovery is likely to commence in September 2020 and will be driven mainly by local demand from UAE residents, followed by commercial demand from GCC countries.
What the future holds
Dubai will see a faster recovery than other GCC markets on the back of anticipated demand in the lead up to and during Expo Dubai, which will start in October 2021 and end in March 2020.
A correction in market-wide occupancy is expected in 2023, and the hotel market is forecast to stabilize and recover by 2024, though at levels below actuals in 2019.
Some of the key elements the management and stakeholders alike need to focus on would be:
Customer experience
This pandemic has brought to the forefront numerous paradigm shifts in customer expectations that are rewriting the benchmarks as the new norm of the hospitality industry. Restricted travel will require the hospitality industry to gear up for a tremendous rise in tourism demand once normalcy returns.
How hotels coordinate their resources and adapt to this sudden increase while ensuring the brand service standards consistently is absolutely vital for survival.
Hotel brands need to revisit their existing service standard operating procedures so as to adapt and meet the transformed customer expectations. Restaurants in hotels may commence presenting personal serving spoons when delivering a shared dish, promoting contactless delivery for in-room-dining, and designing menus in single portions rather than in a sharing size.
Perception shift
It is a reality that customers will pay much more attention to the safety of food choices after this pandemic is over, especially while dining in restaurants. Customers will focus more on whether the source of the ingredients is reliable, the quality good enough, the handling is safe, as well as its nutritional value.
In response to this shift in client expectations, hotel brands need to make adjustments accordingly. Adhere more rigorously to the set Hazard Analysis and Critical Control Points (HACCP) standards, and make no compromises in hygiene procedures.
New patterns
The pandemic has seen an acceleration in the the fast-tracking of online sales and promotions.
To cope with the shift, hotels can make full use of existing online platforms to enhance and maintain their interaction with guests. During the pandemic, many hotels expanded their catering services to online ordering and delivery.
Even after the restrictions are gone, hotels can retain this sales channel and offer special breakfasts and boxed delivery for the local community with branded packaging. It will be an initiative that caters to customer needs, creates additional revenue and also strengthens the ethos of the brand.
Hotel brands should ensure maximum usage of their diverse online platforms, transforming them from one-way notification communication to two-way interactive communication, to effectively understand and respond to customer needs in a timely manner.
Asset management
The pandemic has led to the closure of some hotels due to lack of cashflow support. For such assets, some owners may consider selling the properties, while other survivors may look to rebranding or refurbishing for the purpose of repositioning and enhancing the brand competitive edge.
How hotels should do business with a sustainable development model after COVID-19 takes not only the focus on competitors’ response strategies, but an in-depth exploration analysis into transformed customer needs. Improving brand culture and service standards to adapt to customer needs is critical for independent hotel brands.
In addition, hotel owners also need to optimize their asset strategy, refurbish or renovate high potential assets, and enhance asset competitiveness to cater to changes in customer expectations. For under-performing assets, these too need to be carefully planned in a strategic manner to preserve and thereby enhance the core value of the brand portfolio.
A revival for the hospitality industry would be a tough journey. The key would be to react to the short-term challenges that arise, and while doing so quickly shift gear to long-term planning and quick identification of opportunities in the road ahead.
- Naim Maadad is Chief Executive of Gates Hospitality.