There is light at the end of the tunnel for the North American hospitality industry as it claws its way back from the devastation of 2020’s pandemic-driven shutdowns. That doesn’t mean things are back to normal, or even “new normal” (whatever that means). But the industry is rebounding to a desired future state that is vastly improved from last year.
As summer approached, operations were trending up. In May, U.S. hotels hit average daily occupancy rates of 59.3 percent, their highest since February of 2020, right before the pandemic hit. Revenue per available room, at $69.81, was also a milestone. U.S. restaurant sales continue to trend up, too, but still were 3 percent below pre-pandemic levels in May.
In Canada, where coronavirus restrictions started easing in mid-June, hotel occupancy remained depressed at 28.1 percent in May—significantly better than 2020 levels, but well below the pre-pandemic levels of 2019.
Hard Insurance Market Challenges Recovery
One roadblock to the hospitality industry’s comeback is the difficulty it faces to get or stay insured. At a time when the sector’s resilience has never been more tested, how well operators anticipate, manage and mitigate risk, and especially the unknown, is a critical challenge. The insurance market is the hardest it’s been in 20 years, making risk costly to cover as insurance availability has shrunken.
Related: Tips for managing risk in the hotel industry
Property rates have been a continuing issue in light of more and larger claims for natural disaster damages, but they were aggravated by COVID-19-driven business interruption exposures. Cyber insurance is also under pressure as technology’s embrace by hospitality has led to more and more severe cybercrimes (and premium increases of up to 50 percent). And the executive liability exposures created by COVID are driving directors & officers and errors & omissions coverage up by 50 percent, too.
Operators can best deal with insurance challenges with the aid of their brokers and risk consultants, who are best positioned to help them present their cases on successful risk management to underwriters. They are also logical guides on the way forward through the changes impacting the industry.
Investments in the Comeback
There’s huge pent-up demand for travel and dining across North America. Business people are ready to shelve Zoom and have face-to-face business meetings again. Tourism continues to pick up with summer. A more complete recovery will require the comeback of the lodging industry’s big profit center of business travel—which some believe won’t happen until 2025.
In the interim, many operators used the pandemic shutdown to make investments, notably in technology and personalized service features, that will position them for the comeback.
Technology adoption was moving fast before the pandemic. Driven by increased use of Internet of Things networks, the “smart” global hospitality market is expected to more than double to $12.727 billion by 2025.
As much as operational efficiencies, a host of new and added capabilities has been key to touchless transactions necessary for guest and staff safety and safety compliance. These solutions increasingly are table stakes for success in hospitality today and in the post-pandemic future.
Beyond merely booking and check-in platforms, integrated platforms can track where and when guests use spaces, when they’ve been sanitized, and communicate with guests when rooms are ready. Capabilities also enable virtual guest communications for spa reservations or assistance from staff. And behind-the-scenes operations are facilitated, too, like coordinating with housekeeping.
Much of the investment is customer facing, especially since the guest experience is a big competitive differentiator—especially important now. It’s made another trend also pick up more speed—personalization—which relies on digital systems and tools. In fact, the two top technology priorities by travel and hospitality organizations are digital analytics (to gain better insights) and the front-end customer experience itself.
Improved analytics will give operators the depth of information they need to truly personalize the guest experience—with persona development. Personas reflect distinct customer segments and align services and experiences to their preferences. Given the vast amount of data at a hotel’s disposal, this can be an ambitious undertaking.
The return on investment of well-satisfied guests, though, speaks to the value of personalization. Consider their reviews. One study showed that every one-star increase will boost a hotel’s revenues by 5 percent to 9 percent. Another survey found 82 percent of respondents will pay a premium for a four-star rated lodging.
Kevin Eggleston is managing director for hospitality and real estate for Hub International. Mark Lee is VP and risk services manager at Hub International.