With Reduced Revenues, All Options on the Table As Asia’s Hospitality Industry Pivots
In recent years, the hospitality sector has been evolving. Lobbies are no longer simply a place for checking in and checking out: hotels have started adding to them work and leisure spaces, as well as retail experiences.
In typical times, it would be normal to ponder how new concepts are reinventing the hospitality business and food and beverage (F&B) offerings to reshape cities, add real estate value, and delight customers. However, the global pandemic has hit the sector hard, altering the focus of the “Play” panel discussion at the 2020 ULI Singapore Conference, which was held virtually. The moderator was Gaurang Khemka, an architect and designer who runs his own practice, URBNarc.
With revenues dwindling as air travel and tourism have ground to a halt, panelists spoke about having to pivot and adapt their offerings while facing an existential crisis.
Revenue losses of more than 50 percent are expected for the first half of 2020, and with occupancy at just 38 percent in March, the situation has suddenly turned bleak for hoteliers. Tan Shin Hui, executive director of Park Hotel Group, said pivoting is the only option.
“The RevPAR [revenue per available room] fell off a cliff,” she said. “In February, things were still OK, but in March, we really saw it fall off and had no choice but to pivot. If not, we would lose millions each month.”
For Park Hotel Group, F&B operations expanded to offer meals for takeaway and delivery to private homes, something most hotels would not bother with beyond room service for paying guests.
As for rooms, Tan said the group engaged with government stakeholders early on about participating in a program to house people under quarantine and isolation orders, accepting arrangements once the company was satisfied that precautions had been put in place to ensure the safety of hotel staff.
Using the company’s room inventory in the program “has definitely helped in providing much-needed cash flow and in keeping the people in jobs,” she said.
Harpreet Bedi, chief executive officer and legal counsel for Garcha Group, said her firm had two hotels in the program and that the “new normal” moving forward and the degree to which the hospitality sector would have to pivot depends on how quickly international travel resumes.
Ashish Manchharam, founder and chief executive officer of 8M Real Estate, said hotels may need to rethink the formats for restaurants, bars, and clubs with social distancing restrictions in place.
“For F&B, this could mean a reduction of seats in a restaurant, which would in turn affect revenues,” he said. “This would require a look at the identity of a business—whether to turn to a smaller footprint and have takeaway and delivery” account for a larger share of future revenues.
Both Manchharam and Bedi sounded an optimistic tone on the long-term future of F&B establishments and on the communities that support them returning in force.
“I don’t think this will change in the mid- to long term. I think memories are very short-lived, and people’s nature is to be very social,” said Manchharam, citing the post-SARS recovery after 2004 as an example. “[Singapore is] a foodie nation, so I have great faith in our desire to continue to be a community around our F&B. Of course like any business, you have to be creative in what you offer.
“But with our strict protocols for cleanliness and containing the virus, I actually feel [the pandemic-induced downturn] may not be as long as some may argue.”
In the meantime, as hospitality brands grapple with the situation, the adoption of contactless technology and automation has become timely.
Park Hotel Group’s Grand Park City Hall hotel was launched recently with a contactless, keyless check-in and room access, in line with Singapore’s Smart Nation initiative. It has also experimented with the use of robots to deliver food and other essentials to quarantined guests.
“This crisis has shown us that contactless service delivery is actually desirable,” said Tan. “Many of us are familiar with contactless food and [e-commerce] retail deliveries. For hotels, it is a very near-term possibility, but there is some learning curve” and thus adoption rates may vary, she said.
Bedi also noted that though technology may exist to mitigate face-to-face contact during delivery of services, not all guests of luxury brands may appreciate this.
“It’s really difficult to change people’s mind-sets. Luxury is a high-touch type of service that’s expected,” she said. “I’m sorry to say but I think there’s only a certain amount of technology you can do in certain segments of hospitality.”
Other trends to look out for, according to Tan and Manchharam, are hotels reviewing the proportion of foreign-worker hires and broadening their local base of workers, and developers possibly reevaluating conventional designs, such as that of the ground-level F&B and retail floor.
Asked if desperate times call for desperate measures, such as seeking avenues of income at the expense of brand image, Tan was unequivocal about playing the long game.
“At the end of the day, we are in this for the long haul. I think many of us were trying to hold out in February and March, trying to not do maybe the unnecessary,” she said. But putting up rooms for government requisitioning or offering rooms at half the normal price could not be more damaging to a brand than staff furloughs, layoffs, or shutting down completely.
“It’s not a very easy decision, I agree,” Tan added. “But if this crisis continues longer than we thought, then I think some brands have to start considering some of these measures.”