From managing your hotel's cashflow to having the processes in place to prepare for its reopening after the coronavirus pandemic settles - we are here to help with your burning real estate questions.
This is part three of a special series, that answers the top recurring real estate questions from our clients across sectors, to help navigate these uncertain times and uncover opportunities that may arise.
As the world starts reopening, the hotel industry is eagerly awaiting to lay out the red carpet, chill the welcome drinks and warmly greet their first guests back.
In most instances during the pandemic, in the absence guests, the hotel sector has shown agility and pivoted to stay relevant, reinforcing the strong foundations the industry is built on.
As we prepare for the new norm in the hospitality sector, strategies are being revised, financials dusted off and sharpened, new health and safety measures put in place and staff are being armed to handle the new ways of working, ensuring your guests feel welcome and comfortable.
With revenge spending around the corner, hotels need to be readying for the return and surge now.
Our Hotels and Leisure expert, Govinda Singh, shares his insights on a smooth and seamless reopening strategy.
What do I need in place, to reopen my hotel?
The process of reopening a hotel can be overwhelming. To simplify this, approach the reopening as if the hotel was the opening for the first time, albeit having the inside knowledge of what to expect in the first few months.
"Understand that resources will need to be managed both operationally and financially whilst balancing social distancing measures and the guest experience."
Firstly, a top priority is clear communication among staff and guests alike - this will set the foundations of a smooth reopening.
Secondly, hygiene and cleanliness need to remain at forefront of your action plan, encompassing all aspects from the time the guest arrives at the front door, throughout their stay and when they leave. Sustainability measures will also remain relevant. Social distancing is high on the agenda, particularly in public spaces. Adopt technology wherever possible. And remember -- buffets are a no-no, for now.
Next up is planning your staffing and inventory effectively. Understand that resources will need to be managed both operationally and financially whilst balancing social distancing measures and the guest experience.
Track and trace should be as seamless as the guest experience - a journey from booking on the website to entering the hotel lobby and room check-in. As always, a smooth guest experience should underpin each step of the reopening.
Remember to keep abreast of the latest government guidelines and ensure these are fully complied with.
Which market segments should I target for the reopening?
Start locally, reach out globally.
Depending on the market and positioning, this can vary. We expect markets with higher domestic travel to pick up faster with essential business followed by weekend leisure.
Markets dependent on airlift, whether domestic or international, will take longer. Much will depend on the reopening of airspace and relaxation of quarantine measures at both ends of the journey - be mindful of this when targeting source markets.
We expect MICE to be one of the last segments to recover as social distancing measures are likely to remain in place for some time for larger gatherings.
How will my cash flow be impacted, and how do I manage this?
Typically, a hotel needs at least 38% - 40% occupancy to break-even, even at the bottom-line level. Expect cash outflows to exceed inflows for at least the first three months of re-opening.
As the hotel reaches the break-even point, this position will change as operations become cash generative. My suggestion is to effectively manage your hotels RevPAR, and constantly relook at your strategy.
"In the short term, focus cash on stabilising operations... Now is the time - if not you have not done it already - to reexamine suppliers, management and financing relationships."
Timing is crucial, so keep constant check on booking platforms for visibility on forward patterns. Only re-open when you are confident that the visibility on bookings can get you to that 38% - 40% hotel occupancy within the shortest frame of time.
In the short term, focus cash on stabilising operations, with fees and leverage requirements rolled up if not stood aside, i.e. until the hotel recovers to at least 55% occupancy, consistently. Now is the time - if not you have not done it already - to reexamine suppliers, management and financing relationships. Stakeholder alignment will play a role and remember to pay your bills.
Finally, we anticipate any return to pre-COVID-19 performance to take at least 12 to 18 months, given the current outlook. You and your team should effectively plan for this timeframe at a minimum.
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