The hospitality sector has been one of the most impacted industries due to Covid 19. As a result of the unpredictable nature of the pandemic, accurate forecasting of the sector has been a key challenge. The reopening of the economy has created an unforeseen demand scenario for the industry segment.
Key challenges in the industry have emerged in the budgeting and financial planning segment. Hospitality companies are struggling to figure out occupancy patterns, governmental regulations, and broader consumer trends regarding travel. The pandemic’s impact on hotel performance has varied on a market-to-market basis depending on the nature of the asset type.
Shift to Individual Forecasting – Changing Perspective
The industry needs to consider a shift to an individualized forecasting approach to the industry. The contrasting demand shift between business travel and personal traveling requires the industry to explore the demand patterns on an individual basis to have accurate forecasting. An example of this phenomenon can be observed in the difference between business hotels and entertainment facilities. On the one hand, business establishments have witnessed record-low occupancy. On the other hand, entertainment avenues are experiencing occupancy levels even beyond pre-pandemic levels.
The public distribution of vaccines has been identified as a critical step in solving the current scenario and exploring a viable structural solution for the end of the pandemic. The increase in remote working and virtual engagements has posed strong questions on the future viability of the business traveling segment.
According to the Barclays Business Travel Survey, up to 35% of Business Travel before-Covid, 19 could be permanently lost to changing trends and technological disruption.
The extent of loss projected by the survey could negatively impact hospitality properties and investment segments. In this landscape, having accurate individual assessments is essential to explore the way forward for the hospitality sector.
Forecasting Demands in the Hotel Sector – The Options
In light of the unprecedented transformation of the hoteling sector, strategic decisions in the hospitality sector require a structural overhaul to have a complete re-imagination of the changes. Whether that is the evaluation of potential capital expenditures or management of acquisitions and dispositions, the industry segment needs to consider different perspectives in estimating its upcoming results.
Traditional forecasting strategies cannot be accurately applied in the context of the unforeseen transition brought by the pandemic. The extent of business travel loss will need to be evaluated on an individual basis to ensure that viable strategies can be explored to correct course. Hence, it is essential to complement conventional macro approaches with a broader top-down approach with a detailed analysis of internal assets.
Top-Down Macro Perspective
In the context of the broader exploration of the economic landscape, traditional forecasting methodologies are no longer efficient. According to DIF experts, prior to Covid 19, the primary divers of the tourism and hospitality industry were disposable household income. Covid 19 has added additional variables in the equation. From limiting consumer spending on hotels to the additional requirements during stays, consumers from all demographics are avoiding traveling activities due to the acting barriers to travel.
Shifting away from the conventional hospitality models is a central requirement of the current landscape. New forecasting factors have to be embedded into the equation to have a viable insight into the direction of the sector. A transformed forecasting approach has been suggested by DIF consultants to provide hospitality businesses with a viable method to forecast elements based on variables, including vaccine distribution, social distancing requirements, and legislative requirements.
Even though Macro-level evaluations are essential to have perspective, the core element of forecasting need to be centered around individual properties. DIF experts recommend businesses individually evaluate properties with a detailed outlook into the context of the business. Based on the uneven impact of the pandemic on different hospitality establishments, data-driven forecasting models need to factor in Covid 19 while exploring the room occupancy and demand within these properties. Hospitality companies can use the updated model to explore newer opportunities and accelerate tactical decisions within the framework. The model provides a wide range of scenarios for evaluation based on the progression of the Covid 19 pandemic.
The core methodology of the model is centered around bringing together both models and providing an accurate forecasting directive. The model includes the coverage of the best, worst, and expected case scenarios, all linked to vaccine distribution and Covid evolution around the globe. Other factors included in the forecast include the national unemployment trends and social distancing requirements. The analysis is further supplemented to tailor the eventual forecast based on the updated demands of the local market.
Changes in Visitor Behavior – Impact of Changing Dynamics on Consumer Behavior
Extensive changes are expected in terms of the key consumer dynamics impacting the hospitality business. From consumer spending power to broader changes in social trends, the factors need to be considered while exploring the future of the hospitality industry.
Based on a study by DIF, Hotel operators are unified on the role of technology being a significant factor in altering consumer behavior. With consumers opting to save unnecessary expenses, the financial influx towards business expenses such as conferences and conventions is expected to be vastly different. Digital innovation is also expected to replace networking avenues. Digital platforms are connecting users together using technology.
The end of the pandemic will unveil an entirely different outlook for the hospitality and hoteling sector. Without having a clear idea of the end of the pandemic, it is still challenging to figure out an optimal forecast for the direction of the sector. Implementing a broader exploration model can help companies adopt a better approach despite this challenge.
Conclusion – DIF Insight
The Covid 19 has massively impacted the global hospitality landscape by introducing newer variables in the forecasting equation. As the recovery from Covid takes shape, hospitality stakeholders must take an individual approach for each property to have effective insight into the industry’s future.