Descent beckons towards the new reality

Facebook
Twitter
LinkedIn

Sean Worker of T5 Strategies offers his thoughts on the view from the Covid peak and how to successfully negotiate the imminent descent.

Last Saturday saw the moment when my bike was lifted off the wall, dusted off and made ready for action! As I shared recently in Serviced Apartment News, I am an admitted mad cyclist, so I was ecstatic when Spain relaxed its quarantine regs enough to allow us a few hours of exercise outside our homes. Facing a set of circumstances different from when I had last ridden prior to the March 14 Lockdown, I clicked-in and took off for the mountains around Barcelona with a bit of trepidation. What had eight weeks of confinement done to my fitness and skill level? And how would my competition have fared during that time?

Questions not unlike those being asked by businesses that are just trying to reopen. After weeks of the “uphill to the peak” challenge, what was I – what are we – now facing as we begin the descent from this new, and unfamiliar, vantage point?

Good or bad, the landscape is becoming clearer, as reported across multiple news feeds. Hotel companies, serviced apartment operators, retailers, cruise ship operators, rental car companies and many others are seeking to refinance or find other ways to keep going.

From here we can see that not all of us made it to the summit of Stage 1. The first casualties along the road have been revealed as some have shut their doors permanently or indicated that their crash is imminent. But before we try and find our sightline down the road, stop for just a moment and take heart as you prepare for the descent! You haven’t had to abandon the race, and you are no longer staring grimly at those next three metres ahead as you face the climb.

So, just what are you seeing now and what are you watching out for?

It’s still tricky and treacherous and there are plenty of obstacles ahead.

Since Peak is Close, Get Ready for the Descent was published 18 days ago, governments have shown their capabilities and their inadequacies. Most of us have realised by now that we are dependent on our neighbours’ discipline to “self-distance and employ mitigation tactics”. On the personal side, many have adapted to masks as fashion statements and hairstyles are either shorn or shaggy.

Soberingly, on the economic front, the World Travel and Tourism Council has warned that the Covid-19 pandemic could cut 50 million jobs worldwide in the industry. IATA (International Travel Agents Association) forecasts a $314 billion (with a “b!”) revenue loss and 25 million jobs at stake. Airlines and airports could close if passenger volumes do not recover. STR reported on hotel occupancies during the week of April 19 – 25. In the US, absolute occupancy rose slightly to 26 per cent, up from 23.4 per cent and 21 per cent in the two weeks prior. STR says five states – California, Texas, New York, Florida and Georgia – represent 40 per cent of the demand gain in the last two weeks. Europe’s occupancies are up to 11.6 per cent from a low of seven per cent a few weeks earlier. In China, occupancy is also slowly increasing, now above 35 per cent with some markets showing the most activity on weekends.

At this stage of C-19, the next phase will not land us in the now-cliched “New Normal.” Instead, we are facing a “New Reality.” Travel and Hospitality is often 10 to 12 per cent of a country’s economy. We need the New Reality to arrive as soon as possible, yet it is predicted that it could take up to three years (yes, three years!) to see demand in air travel return to 2019, levels according to Delta, Ryanair and British Airways. Virgin Atlantic is suggesting that it will not make it to the New Reality. Travel and hospitality needs airlines – and there are practically no passenger planes in the skies. Business people and leisureists alike need airplanes – we need a “butts to beds” plan.

Clouding the mix, we know that national borders will not open simultaneously. France announced that they will allow travellers from European countries and the UK to enter and stay without proposing a quarantine period, while the UK is only allowing direct access from Ireland and quarantining the rest of the world. Other countries around the globe have yet to make clear their entry and exit plans.

Along with those airplanes, our dependence on supply chains that are much broader than the food distributor miraculously backing up to the restaurant delivery door has been highlighted by the pandemic – the realisation that travel and hospitality demands a vast and reliable transportation system to function: planes, boats, cars, bikes, rickshaws and trains to deliver an “Experience.”

We need conference centres, farmers’ markets, walking tours like Joolz Guides London walks, street artists in Times Square and Pike Place Fish Market in Seattle throwing fish around to entice others to stay versus to simply “do”.

Data about the C-19 curve appears to make sense when viewed in two-week blocks. Slogans are appearing like “StayAtHome, holiday locally” or “Stay Local, Eat Local”. The beaches in Florida and other USA states are filling fast, highways are getting busy, so detention does drive pent-up demand. Our new reality is a bit different. Tourists need income and incomes come from having a job and jobs are threatened. Consumers need jobs to be confident to go on holiday and business needs confidence that the consumer will show up.

As if all of this weren’t enough to navigate during your descent, business leaders now also have additional tough decisions to make regarding their business travel policies. Matthew Parsons recently noted in SKIFT that “the hunt is on for a silver bullet that rubber stamps an employee’s immunity to COVID-19. Only then will corporations be able to kickstart their business”. Employers may demand that a manager travels to open that new business and relocate, but what happens if the manager says no due to C-19 concerns and risk to their family? Terminated or tolerated?

Add the scenario that the employee agrees and is then infected with C-19 on a work assignment. Is the employer somehow liable? Travel managers and their risk management departments have a lot to sort out quickly in order to get the business open. Will companies demand regular testing? Can they? Will governments demand C-19-free validation to travel at all? Duty of Care has literally been stretched beyond its original intent. You can hear the legal department cringing. These issues are “descent” problems. A scientific peak is vastly different than what we in business are facing here in the trough.

But remember – innovation is already happening. Crisis is also a time of creativity and it is amazing how quickly we adapt to survive and thrive. Companies such as One-ID, IATA, and others are working on biometric and other solutions to offer a “health biometric” passport via an app. Jobs will be created with an additional level of health screening access points from airports, ferry terminals, train stations, cruise terminals and more. UpLift.com provides financing for trips – right product, right time? Imagine the lines and delays, someone invent a C-19 safe food truck please and park it next to us weary travellers of the future. There are rumours of subscription models across all categories for business and individuals to buy blocks of airline seats at discounts. Hilton recently sold loyalty points to American express.

What innovations can you add that will give your team the advantage in the realm of the New Reality?

We now have a view looking down from the peak. What is clear is that we, the citizens of Earth, have not yet come to terms with the fact that C-19 has not been conquered – merely suspended in some places and possibly slowed down to “acceptably manageable levels”, as some leaders describe the situation. As the now famous truth-sayer Dr. Anthony Fauci was quoted in National Geographic saying: “The United States will be put to the test this fall and winter by a second wave of Covid 19. Shame on us if we do not have enough tests.”

Even as we are in the midst of our recovery, our descent may be racing us towards another climb. Unlike in December of 2019, this time we have been warned. How will we respond?

T5’s seven takes and tips
1. Extended stay (ES) market: (as noted in SAN – April 14) ES is performing better than other accommodation categories due to a belief that self-contained spaces with a place to work and live is favourable over traditional hotels. It is unknown at this stage if this new-found demand is structural or temporary. ES businesses have an opportunity to win the hearts and minds of new followers. As previously reported in SAN, Marie Hickey, a director in Savills’ research team, told CityLab: “We might see serviced apartments, or so-called aparthotels, being the main beneficiaries of the situation.” Is it time for serviced apartment, extended stay brands and short term rentals to grab share?
Heed Yoda: “You will find only what you bring in.”

2. Airbnb – friend or foe? Airbnb is rattling cages – again. These are desperate times and companies pivot to survive. Airbnb’s overt move into extended stay for some reason came as a bit of a surprise. Airbnb bought UrbanDoor in August 2019. This enabled insight into how to connect 30 day+ business largely in the relocation to multi-family/residential offerings. Airbnb has been thinking and learning long before this crisis. They simply accelerated. Accommodation experts and brands have brushed them off before. Avoid that mistake this time around. Business clients will have to balance 1) duty of care and 2) driving cash flow, while finding meaningful options to overstuffed hotel lobby bars. Even if it may be wounded, Airbnb is a platform to be reckoned with – maybe even more so now. Extended stay players take note; foes can become friends during times of mutual benefit. CNBC’s Salvador Rodriquez recently reported that “Airbnb hosts are building their own direct booking websites in revolt to Airbnb’s control of the market.” Crisis innovation is in full flight.

3. Respond V React (2.0): The new economic reality and macro interconnectivity of the travel and hospitality ecosystem of demand and supply is slowly revealing itself. Every operator/brand has a different capital/asset structure such as 100 per cent ownership, leasehold, management contracts, short-term leases. Demand, for the most part, has essentially retreated into hibernation, but of course, there are exceptions. Now is the time to actively monitor both local and broader trends that may well offer early insight as to the health of your market and competitors. 2021 will be upon us sooner than you think. Is it time to plan a little further out to acquire competitors’ clients or acquire/merge? Market share and synergies may be a winner to survive the next three years.

This is far from over and requires calm heads with thoughtful strategies in order to win this fight. It is imperative that as the CEO, founder or business owner that you have a highly capable new reality team and/or upskill the existing group to win battle over the next two to three years. The solutions will be different and require those that can adapt to win. Plan on holding agile business planning meetings/retreats now, virtually or in person. This is no time to believe that you have all the answers. Seek internal and external advice to RESPOND V REACT to the opportunities that are emerging.

4. Some new options: boats and boatels. Although a niche market, boat accommodations on rivers and in coastal harbours have become sought after. Due to their proximity to major venues, city centres and resorts they are perceived as convenient but safer, close but semi-isolated with kitchens, living space, multiple cabins/sleeping spaces and decks. The leading platform in the space is Bedsonboard.com. This online marketplace is aggregating close to eight million boats of all classes and makes it easy to book and to stay (sorry sailors, no leaving the harbour). Concierge services enable deliveries from Amazon and fresh local meals by a network of “Glovos” make this a treat in these times and even beyond C-19. Once considered a rather exotic experience, boatels and their like could become mainstream for both leisure and business. Is this the new short-term rental?

5. Space: everything is changing: offices, restaurants, venues, stadiums and warehousing. Many pundits have their views on working remotely and use of space including hotel dining restaurants. Hoteliers and others take note. Be brave and adapt that empty expensive lobby real estate into something more productive. Try co-mingling living and working – screened workstations to dwell and work? Will ballrooms in hotels finally add meaningful tech to enable digital meetings at scale? Try 50 per cent attendance in person with the balance of attendees connected via an entire wall of monitors to enable 100+ rooms of Zoomites.

BTW, secure WIFI will be a primary demand of businesses. Will extended stay brands respond or react to the adaption of their full-service competitors? All accommodation brands will be under pressure to add efficient bandwidth with proper in-room tech to enable digital meet ups and project management tools. These are tough times, maybe time to park the in-room mood lighting for a while. Owners need the cash for bandwidth and workplaces to stay relevant.

6. Bikes & more: Many cities, such as Paris, London, Madrid, Philadelphia, Vancouver, Mexico City, Shanghai and Sydney, have expanded their bike lanes to address expected fear of virus exposure on public transportation systems. The UK is taking its commitment to this new reality even further with a £2 billion scheme to enhance and support cycling and walking. Sounds like there may be a significant increase in the need for secure spaces to park those bikes.

According to Stasher’s CEO, Jacob Wedderburn-Day: “More cycling in cities is great, but it raises a new challenge: where to park your bike safely? If you cycle to work every day, it’s worth investing in a decent bike that you are happy riding; but the nicer your bike, the less comfortable you feel locking it up in public.” Stasher’s model with spaces around the world, provides short term storage for bikes, helmets, bags, and any other equipment you need storage for. This is another example of innovation and adaptability. Will the public actually change their commuting habits? Time will tell.

7. Business travel – be influential. We are descending and the bends are precarious before the next climb. Release the brakes too quickly and we hit a wall, too slow and we lose the race. Making your business C-19 safe is super tough. Your clients want you to succeed and need you to be a trusted partner. Communicate to your clients personally whenever and wherever possible. Use your iPhone to create a business video update, keep it simple. It is as personal as we can get these days. Secondly, reach out to help shape and inform the reconstruction of business travel business policies. This is the time to offer insight and assistance. You will be remembered for giving unconditionally and you will be in the position to gain valuable “pre-next stage” insight into where things are heading – a possibly invaluable advantage over competitors.

Our new reality wake-up call is that airlines are structural – no less important to the economy and our welfare than power grids and water supply utilities. In 2008, governments realised that banks and the interconnected banking systems were integral to a country’s survival and prosperity. They took extreme action to ensure they survived. In 2020, it is the airlines that need that same safety net. As a cyclist and a capitalist, it is hard for me to even suggest that some critical airlines should become nationalised in some form, such as taxpayer cash for equity. The UK is a prime example. As this article was published, the UK has not stepped in to support the national carriers such as British Airways and Virgin, while Germany is signalling that it will support Lufthansa and the USA was one of the first to recognise this issue.

London Heathrow is the seventh busiest airport in the world, supporting an island nation that has separated from the EU. Should portions of both companies be “invested” in by the people of Britain to ensure “butts will be dropped into beds?” The UK travel and hospitality sector contributes about 10 per cent of GDP (Gross Domestic Product) which is approximately £257 billon. By comparison, the UK financial sector is about £132 billion and seven per cent of GDP and concentrated mainly in London with 49 per cent, whereas the contributions of travel and hospitality benefit beyond the capital and its environs. Reduced airlift = reduced everything! Heathrow is a critical airport for the world – not just Britain, and is only one example of many to ensure that traveller’s stay, work and eat in our businesses again.

Our new reality is that we all need to connect the supply chain dots with the communities and the businesses that are our global economy. We will survive and thrive once again. More importantly we can innovate, keep as many people in jobs as possible and focus on creating the next wave of relevant jobs. Staycations, much-reduced special events and non-urban accommodations will return first.

Around where I spend some of my year is not flat. It’s either up or down with an odd bit of flat. It is always changing, and you need to pay attention. Climbing is about the three metres at a time, descending is looking out as far you can to see what is coming. Information is key on how to take the next switch back bend. They come fast. Take the corner wrong and bang! We are descending at speed. This is not the last hill we will climb or curvy road that we will race down, but I know we can get the peloton across the line when we work together. The sprint for the finish is a long way off but not as far as it feels right now.

“If no mistake have you made, yet losing you are… a different game you should play.” Yoda

(BTW – In case you were wondering just how that first bike ride went for me…not bad, but a few cyclists blew by me on the first ascent, typically my strength. What happened? Could I have prepared more? Trained harder in the lockdown? Back at it and the next week I was more than holding my own. And then a real breakthrough! Despite the imposed obstacles of our new reality, I achieved a new milestone – five significant climbs in one week! Lessons to be learned.)

Contact Sean at sean@t5stratgeies.com or LinkedIn, Twitter or YouTube with success stories

T5 Strategies is a leading advisory firm to the travel and hospitality category, providing guidance to make sense of the present to optimise the future. Additionally, T5 advises firms through difficult situations including change management, administration and restructuring.

Be in the know.

Subscribe to our newsletter »