Check Into The New Normal

One year after the pandemic hit the hospitality industry like a tsunami, the experience of going to a hotel has radically changed. From extensive usage of technology to ensure a zero-touch policy to completely overhauling old business strategies and making them anew, hotels have imbibed new learnings and are forging ahead.

- Pavan Lall

ONE YEAR AFTER THE pandemic swept the country and led to the shutdown of businesses and a resetting of how hotel chains were operating, the after-effects are being seen in brand new strategies, a re-prioritising of luxury standards, and learnings that are directing the way forward.

Even as occupancies bounce back to normal, the shift in business reflects new sets of operating rules, a new group of customers, and the realisation that the pre-pandemic business may have changed for the better.

Inbound travel from foreign tourists has all but dried up, but, on the other hand, one can now witness a wave of industry-wide traction for weekend revellers, staycation seekers, and locals who’ve simply gotten tired of staying at home, all these giving a fillip to local businesses. This has led to new SOPs and new learnings which are key, especially for premium and luxury hotels which have felt the economic pressure arising out of the pandemic more than economy players.

Research recently done by consulting firm McKinsey & Co. underscores the key differences in operating economics of different kinds of hotels: Economy hotels can stay open at lower occupancy rates than other chain scales. In all hotels, revenue is a function of average daily rate, number of rooms, and occupancy—plus food and beverage where available. Costs are threefold: variable (with revenue); semi-fixed (may be eliminated if a hotel suspends operations); and fixed. For owners considering suspending operations, variable and semifixed costs are factors, since fixed costs don’t change, no matter what. In other words, to cover variable and semi-fixed costs, luxury hotels conservatively need occupancy rates 1.5 times greater than economy hotels.