Dipl.-Kfm. (techn.) Detlef Schmidt, Stuttgart, Germany
Translation and updated version of the article 'Hotellerie im Wandel der Pandemie: Neue Wege zum Wachstum im
(published in German language on May 11, 2021 and in an updated version on June 25, 2021 at: https://www.viable.design/journal/)
Despite falling incidence rates and further easing of the legal protective measures, both private and business travel remain limited. It is therefore imperative for the hotel industry to learn the right lessons from the pandemic and to make use of the opportunities for sustainable growth. Now more than ever, adjustments to the business models are required in order to react appropriately and with foresight to the dynamics of the hotel industry ecosystems and thus to be better and more flexibly positioned for the future.
This article illustrates the current situation in the business travel segment of the hotel industry by using the German market as an example, summarizes the experiences of a well-traveled transformation expert during the pandemic and highlights opportunities and risks of the current dynamics. Finally, solution approaches are being presented with an impact for today and for future growth after the pandemic.
Behavioral changes to last
Significant behavioral changes in society became apparent during the pandemic. On closer inspection, these changes in behavior did not come overnight. They were known to long term trend experts long before the pandemic. The fact is, however, that many of these developments, such as increasing digitization, increasing need for security, growing health awareness, and the desire for more sustainability, have been accelerated by the pandemic and have thus become more noticeable to the public. It is expected that these develop- ments will be ongoing after the pandemic.1
The use of social media in Germany has increased by 19% during the pandemic. Since the global average even shows a plus of 45% here, a flattening is hardly to be expected, not even with the associated online buying behavior, which reached double-digit growth rates last year.2 But other behavior patterns also became visible. Customers are acting more cautiously, despite all the optimistic rebound forecasts of the market research institutes: Investments are postponed, and when investments are made, there is a tendency towards higher quality and regional sourcing. Investments are particularly made in the areas of digitization, health, and safety. Interestingly, brand loyalty has declined, which can probably be justified by the fact that buyers take more time to do extensive research before making a purchase decision and are less dependent on a brand promise.3
Overall, according to a study by McKinsey, consumption habits have changed by 50% of the people surveyed, and the majority of these respondents would like to maintain the changed consumer behavior even after the end of the pandemic.4 This prognosis should be taken seriously.
Effects of the pandemic on the business travel segment of the hotel industry
The effects of the pandemic on occupancy rates in the hotel industry are still massive. According to statistics, occupancy rate of all accommodation establishments in Germany were between 29% and 8.7% from December 2020 till May 2021.5 These figures reflect almost the entire business travel share, as private trips were only possible in exceptional cases during this time, before private travels have become possible again by the end of May. According to a survey by the German Travel Management Association (Verband Deutsches Reisemanagement, VDR), around 60% of the enterprises and organizations currently consider a reduction in business trips of up to 30% after the pandemic to be realistic.6 The pandemic also showed that many business trips can no longer be justified from efficiency and cost considerations. The savings opportunities are so tempting that some of the biggest companies in Germany even want to reduce business travel by up to 50%.7
The recovery of the conference and meeting business is also viewed critically in the industry. With digital format alternatives, Mark Hoplamazian, CEO of Hyatt Hotels Corporation, expects a full recovery to occur in three years at the earliest.8 Similar developments are also expected for the trade fair business, in which Donatus Landgraf von Hessen, CEO of the Hessische Hausstiftung, expects high losses in the next two years due to canceled events and competition from hybrid formats.9
In addition, sharing platforms with their high degree of digitization (e.g. Airbnb and apartment providers) seem to get through the pandemic relatively well and are attracting customers from the classic hotel industry. Thanks to digital business models, providers in this segment are evidently close to customers and their needs even during COVID-19. A study in January 2021 came to the conclusion that 32% of German travelers opt for accommodation via a home sharing platform and only 15% would choose a hotel.10 The conclusion is that the current desire for security along with a tendency to a need for more space and for digital business models with attractive pricing is credibly marketed.
Future developments in the business travel segment
If we look at the changes in behavior, the available statistical data and the current forecasts, the following conclusions on future developments in the business travel segment can be drawn:
The increasing digitization of business models, the increasing dissemination of remote work (home office), the rising importance of local sourcing and ongoing budget pressure are likely to lead to a significant reduction in business travel.
The digital availability of decision-relevant information is increasing; this reduces the need for personal onsite coordination and therefore the need for many business trips.11
Business travel bookings are increasingly being carried out digitally on one's own responsibility (mostly taking company requirements into account).
The desire for digital information and communication is increasing: before, during and after a business trip.12
The desire for more security and space requirements leads to a strengthening of sharing platforms.13
Brand loyalty is increasingly being questioned, as customers research more extensively, try out new options, and have developed a better feeling for excellent service from other purchase decision situations.14
Sustainability and ethics are becoming more and more important: business travel decisions are increasingly being checked for their ecological and carbon footprint which surely leads to a more focused and (more) responsible business travel behavior.15
In order to remain successful under these new circumstances, carefully considered and structured action is required. Otherwise, hotels will become vulnerable under the changing market conditions with the risk of losing occupancy and market share. It is doubtful whether lower business customer occupancy rates can be overcompensated by private and leisure travel. Especially in city hotels, where the average proportion of business travelers in non-pandemic times is estimated to be significantly more than 50%, a forecast decline of up to 30% can hardly be compensated by private and leisure travel, which are traditionally limited to weekend stays or shorter stays during the holiday periods.
Personal experiences during the pandemic
According to the author’s firsthand experience with more than 35 business overnight stays since the beginning of the pandemic16, most hotels do not sufficiently focus on the changing customer needs. Although there are hygiene- and safety solutions in place, consistent strat- egies are rarely noticeable. Since the quality of service leaves room for improvement in most of the cases, one gets the impression that a lot of hotels have lost sight of their customers during the pandemic and are busy with themselves (e.g. administration of COVID-19 aids, compliance with legal requirements). Demanding the right quality of service in these times can be exhausting and for sure it is not for everyone to complain. What often helps in the end is to improvise in order to improve one’s stay.
From a hotel perspective there is definitely room for increasing the service quality perceived by the author. In times where occupancy rates are low, it would be possible to offer guests more value by flexible check-in/out times or by offering discounted upgrades. The guest would certainly appreciate this service initiative, and the hotel would have the chance for incremental sales and increased customer satisfaction.
In some cases, the author was able to observe reduced room prices and discounted rates for bed and breakfast. For this, however, the guest had to accept performance and service reductions. The offered discounts were very often not in good proportion to the reduction in scope of services.
Efforts to increase sales per guest or per room (RevPAR) by value-added services have so far only been noticed by the author in less than 10% of the stays. Especially in times when per- formance and services are being reduced or have to be reduced, hotels could score well to increase the customer satisfaction. Innovative service ideas in areas like sustainability or health could qualify here.
When it comes to appreciation for being a guest in these difficult times, the author only felt appreciated in around 20% of his stays.
Key challenges of the hotel industry
In the light of the above, the current challenges for hotels can be summarized as follows:
How can the changing needs of business clients be better met and thus increase cus tomer satisfaction and guest loyalty (customer relationship management)?
How can the erosion of the business travel segment be stopped and how can new growth be generated (innovation with value add)?
How can the revenue per guest/room under new conditions be increased (service excellence)?
Structured innovation along the customer journey
Developing innovation and anchoring added value in a structured way requires a radical ap- proach of rethinking the status quo, especially in current times when client behavior and needs are shifting. The competition for future clients can only be won when hotels understand the necessity of a new thinking when it comes to customer orientation. By following a consistent user-oriented perspective, even disruptive potentials can be unlocked.
Customer Journey Mapping has proven itself as a method to generate valuable information and innovation, derived from a user-oriented perspective. In this way hotels can consciously examine their respective target groups on their behavior. The customer relationship is being analyzed across all phases and all interaction points (“touchpoints”) with a strong focus on user experience (UX) to make individual customer needs transparent. This can be done through interviews and can also be measured by the individual behavior at touchpoints, both online and offline. In this way, changing needs become visible in all phases, also in the important early phases of contact initiation, in which the customer relationship can be shaped.17
The following example of a customer journey map illustrates the experiences of the persona “Helena” (persona = user model of a target group), a 45-year-old sales manager who travels a lot for work. Helena is about to go on a business trip and would like to find better working conditions in the hotel of her travel destination. What Helena experiences during her customer journey and how her needs are being met in every individual phase is graphically visualized at touchpoints, using an emoticon scale.
Illustriation 1: Customer Journey Mapping
In the next step, it is important to draw the right conclusions from the information generated. The better understanding of the client expectation helps hotels to set up measures and innovations in a way that the target group is going to experience a convincing user experience during all phases of the customer relationship.18 The following illustration explains how improved measures at respective touchpoints can be derived from the client expectation.
Illustration 2: Customer Journey and measures
It becomes obvious that possible measures have to be considered and planned over the entire customer life cycle in order to develop their full potential. An optimized hotel concept is of little use for business clients, when they are not being confronted with it at the planning stage of an upcoming hotel stay. In the future, business travelers in particular will focus more on options for safe and healthy working conditions in a hotel before booking, as they will most likely spend more time in their room (e.g. need for security, participation in video conferences). Not only do the right measures have to be put in place to better meet the needs of today’s and future guests, but also the right communication channels and touchpoints have to be found, so that potential new and existing customers benefit equally from them. Since media and search behavior are constantly changing, especially in the digital space, a multi-channel strategy is essential in order to draw the attention of clients to the hotel and it’s services. A choice of different media touchpoints helps to influence, especially in early phases, to establish solid relationships. Otherwise, a large part of the measures implemented could fall flat. If everything has been done correctly, a smooth stay is booked and an impulse will be given for a new booking immediately after the stay.
By using the Customer Journey Mapping methodology, a successful customer relationship management that includes innovation with added value and service excellence can be established and developed across all phases. The measures and innovations listed in the second illustration are exemplary and can be specifically expanded and refined using creativity techniques in workshop formats. It is important that the identified measures are tested in practice beforehand. A proper measurement should also be included to monitor the continuous success of the implemented actions in order to receive feedback for potential countermeasures in time.
Conclusion and outlook
Towards the end of the pandemic, the hotel industry should focus on its virtues: customer relationship management, innovation with added value and service excellence. These virtues will only remain success factors in the future if they better meet changing client expectations. Curated innovations with added value which reach both existing and new customers in all phases and media relevant to them, are crucial success factors for defending and gaining market share in the business travel segment. This way, however, requires a radical new thinking: a break from the previous point of view towards a user-oriented perspective. Customer Journey Mapping plays a key role as a methodology. If it is used correctly, it provides ideas for innovations with added value, even in difficult times, by simultaneously serving as a management tool. Especially towards the end of the pandemic, the decision makers in the hotel industry should definitely deal with the new realities.
Would you like to find out more or start your ‘customer journey’?
Contact the author Detlef Schmidt at email@example.com. Start shaping the future now, it will pay off!
1 cf. Zukunftsinstitut, Megatrends 2021: Zeit für eine Revision, 2021, retrieved May 11, 2021 under:https://www.zukunftsinstitut.de/artikel/megatrends-nach-corona-zeit-fuer-eine-revision/; Horx, M. (2021), 10 Zukunftsthesen für eine Post-Corona-Welt, 2021, retrieved May 11, 2021 under: https://www.zukunftsinsti- tut.de/artikel/10-zukunftsthesen-fuer-die-post-corona-welt/
2 cf. Rainsberger, L., 5 Trends im Konsumentenverhalten, die wir von der Krise erben, retrieved May 11, 2021 under: https://www.wissence.at/post/5-trends-im-konsumentenverhalten-krise-covid; cf. Bundesverband E- Commerce und Versandhandel Deutschland e.V., Umsätze im E-Commerce im 1. Quartal 2021 weiter von Corona-Effekten geprägt, 13. April 2021, retrieved May 11, 2021 under: https://www.bevh.org/presse/presse- mitteilungen/details/umsaetze-im-e-commerce-im-1-quartal-2021-weiter-von-corona-effekten-gepraegt-be- reinigtes-wachstum-z.html
3 cf. Charm, T. et al., Consumer sentiment and behavior continue to reflect the uncertainty of the COVID-19 crisis, McKinsey & Company, 26. Oktober 2020, retrieved May 11, 2021 under: https://www.mckin- sey.com/business-functions/marketing-and-sales/our-insights/a-global-view-of-how-consumer-behavior-is- changing-amid-covid-19; cf. Barchet, R. et al., Survey: German consumer sentiment during the coronavirus cri- sis, McKinsey & Company, 20. März 2021, retrieved May 11, 2021 under: https://www.mckinsey.com/busi- ness-functions/marketing-and-sales/our-insights/survey-german-consumer-sentiment-during-the-coronavirus- crisis
4 cf. Barchet, R. et al., Survey: German consumer sentiment during the coronavirus crisis, McKinsey & Com- pany, 20. März 2021, retrieved May 11, 2021 under: https://www.mckinsey.com/business-functions/market- ing-and-sales/our-insights/survey-german-consumer-sentiment-during-the-coronavirus-crisis; cf. Charm, T. et al., Consumer sentiment and behavior continue to reflect the uncertainty of the COVID-19 crisis, McKinsey & Company, 26. Oktober 2020, retrieved May 11, 2021 under: https://www.mckinsey.com/business-func- tions/marketing-and-sales/our-insights/a-global-view-of-how-consumer-behavior-is-changing-amid-covid-19
5 cf. Graefe, L., Durchschnittliche Auslastung der Schlafgelegenheiten deutscher Hotesls bis 2020, Statista, 22. Februar 2021, retrieved May 11, 2021 unter: https://www.de.statista.com/statistik/daten/studie/312525/um- frage/durchschnittliche-zimmerauslastung-deutscher-hotels-nach-monaten/; cf. Tageskarte, Hotelauslastung deutschlandweit im Januar bei 8,7 Prozent, 10. Februar 2021, retrieved May 11, 2021 under: https://www.tageskarte.io/hotllerie/detail/hotelauslastung-deutschlandweit-im-januar -bei-87-pro- zent.html?tx_news_pil%5B%40widget_2808_0%5D%5Bcur- rentPage%5D=46cHash=dbc771a81d78c077397dd0eb0736e9ba
6 cf.Verband Deutsches Reisemanagement, Ergebnisse der VDR-Barometerumfrage zum Coronavirus/Covid-19 (Unternehmen), 2021, retrieved May 11, 2021 under: https://www.vdr-service.de/corona/ergebnisse-der-vdr- barometerumfrage-zum-coronaviruscovid-19-corporates-2021
7 cf. Busse, C., Zuhause statt unterwegs, Süddeutsche Zeitung, 2. Mai 2021, retrieved May 11, 2021 under:https://www.sueddeutsche.de/wirtschaft/geschaeftsreisen-lufthansa-reisebranche-1.5281808
8 cf. Schlautmann, C., Video statt Flug, Handelsblatt, 29. April 2021, S. 5
9 cf. Tageskarte, Einschränkungen bei Geschäftsreisen – Hoteliers bangen um lukrative Zielgruppe, 2021, retrie- ved May 11, 2021 under: https://www.tageskarte.io/hotellerie/detail/einschraenkungen-bei-geschaeftsreisen- hoteliers-bangen-um-lukrative-zielgruppe.html?fbclid=IwAR07guVNjJ8eA2CaGleGaTmrtO8u3JgwgGQIULre- tUT8cFYp8SddXEXrf54
10 cf. Airbnb, Nathan Blecharczyk spricht auf der ITB Now, 10. März 2021, retrieved May 11, 2021 under: https://news.airbnb.com/de/nathan-blecharczyk-spricht-auf-der-itb-now/
11 cf. TrustRadius, B2B Buying Disconnect, 2021, retrieved May 11, 2021 under: https://www.trustra- dius.com/wp-content/uploads/b2b-buying-disconnect-2021.pdf?utm_source=content&utm_me- dium=blog&utm_campaign=B2BDD2021
12 cf. Rainsberger, L., 5 Trends im Konsumentenverhalten, die wir von der Krise erben, retrieved May 11, 2021 under: https://www.wissence.at/post/5-trends-im-konsumentenverhalten-krise-covid
13 cf. Handelsblatt, Airbnb kommt trotz hohem Verlust besser als erwartet durch die Krise, 25. Februar 2021, retrieved May 11, 2021 under: https://www.handelsblatt.com/unternehmen/dienstleister/zimmer-vermittler- airbnb-kommt-trotz-hohem-verlust-besser-als-erwartet-durch-die-krise/26954332.html?ticket=ST-225496- yNdq6QxPc0cdPxMfvfsq-ap3
14 cf. Charm, T. et al., Consumer sentiment and behavior continue to reflect the uncertainty of the COVID-19 crisis, McKinsey & Company, 26. Oktober 2020, retrieved May 11, 2021 under: https://www.mckin- sey.com/business-functions/marketing-and-sales/our-insights/a-global-view-of-how-consumer-behavior-is- changing-amid-covid-19; cf. Alok Kulkarni, C., The 3 silent killers in your customer experience, Hotel Manage- ment, 18. Oktober 2020, retrieved May 11, 2021 under: https://www.hotelmanagement.net/operate/3-silent- killers-your-customer-experience
15 cf. Schlautmann, C., Video statt Flug, Handelsblatt, 29. April 2021, S.4/5 16 Number of stays in hotels: national: 23; international: 16
17 cf. Keller, B. und Ott, C., Erfolgreich agieren entlang der Customer Journey, in: Keller, B. und Ott, C., Touch- point Management, 2017, S.19-26
18 cf. QuestionPro, Customer Journey & Customer Journey Mapping, retrieved May 11, 2021 under: https://www.questionpro.de/customer-journey-mapping/#schwaumlchen_und_staumlrken_des_cus- tomer_journey_modells