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January 18, 2023
Events
Economic uncertainties and times of crisis - how do they affect tourism?
On December 20th, RateBoard had the opportunity to speak together with renowned experts from the hotel industry and tourism as well as revenue management about economic uncertainties and times of crisis and their effects on tourism.
In this article we summarize how our experts Florian Aubke, Susanne Ostermann, Manfred Pinzger, Björn Seidel and Philipp Stelzer take up the topic, analyze it and share their recommendations for hosts.
How are current political, economic, and environmental developments affecting tourism? The impact is immense, forcing hosts to discard and rethink established ways of thinking in order to remain attractive to guests.
Bjorn Seidel
Björn Seidel is head of the HotelNetSolutions Sales Team. The MICE segment and the business travel sector in international and medium-sized chain hotels have shaped him for many years. At HotelNetSolutions he brings his expertise from 20 years in the hotel industry.
Mr. Seidel talks about the effects of current global happenings on tourism, how they have changed travel behavior and guest expectations, and about future tourism trends.
Holidays and travel are very important and have long been part of the basic needs of the population. According to Mr. Seidel, the changes in travel and booking behavior that are directly related to the Covid19 pandemic are significant. A visible change is, for example, the type of travel, which has become more sustainable due to the increased use of train connections. Travelers often decide against air travel and opted for train journeys instead, especially for short distances. This trend towards reduced mobility is particularly noticeable in younger generations due to the increased awareness of sustainability.
Travel motives that have been known since the Covid19 pandemic have become more dominant, such as the need for relaxation, escape from everyday stress, but also the pursuit of unique experiences on vacation.
"Make the stay for the traveling consumer an experience as it was done in the past. Be the host."
Mr. Seidel also points out the use of pre-arrival technologies, with which guests can be picked up before arrival and optimally prepared for their stay. Any additional services can also be communicated in this way so that the guest is not involved in sales talks at the reception. As a further recommendation for action, he names the focus on direct bookings in e-commerce and the associated use of new technologies, which can reduce your own costs of commission payments, which subsequently do not have to be passed on to the guests.
Mr. Seidel recommends seeing neighboring hotel and hospitality businesses not as competition, but as collaborators to strengthen the region, for example through joint marketing activities, and thereby attract more guests. The last point that Mr. Seidel addresses is to remain flexible and adaptable to be able to react more quickly to any events in the market. However, the identity of the company must remain true, while not following every trend.
Susanne Osterman
Susanne Ostermann is responsible for the strategic development of the areas of customer success and revenue management as well as for the planning and development of the service performance of the revenue management software RateBoard. She has many years of experience as a revenue manager and director of revenue management in internationally renowned hotel chains.
Ms. Ostermann provides insights into current figures of the 2022/23 winter season and shares strategic principles and approaches in corporate management and price management.
The average daily rate for hotels in the leisure hotel industry in Austria and Germany, as shown in Figure 1, shows a positive development in the winter season despite current global events. While the advance booking period had shortened from 110 days in 2019 to 50 days in winter 2021/22, it is now 95 days this winter, 2022/23, which speaks for a recovery of the uncertainty of renewed corona-related restrictions. According to Ms. Ostermann, another reason for this is the greater flexibility of booking conditions. A longer advance booking period means more predictability for hoteliers.
The second part of her lecture deals with strategic approaches both in the company itself and in revenue management. The strategic considerations are based on three principles. These include the strategic foundations that must be achieved for the company to stand on solid ground. It is important to consider what vision you as an entrepreneur are pursuing for the business and where you see it in five years. This also includes the profile of the company, which must be clearly defined on an emotional level.
"Having a sharp profile means going deep[...] so that a common thread can emerge."
A red thread is an essential signpost for orientation, what the house stands for - both for employees and for guests. One consideration that arises from this is that of target audiences. Ms. Ostermann suggests categorizing target groups and redefining them as necessary. Whether the company profile can be lived out depends on the target group that is to be addressed with it.
The next topic that Ms. Ostermann addresses is that of strategic decisions. In this context, she mentions a homogeneous price policy with the keyword rate parity. The first decision that needs to be made is choosing the booking channels on which to sell rooms. The focus of this consideration is the target group, as the channels on which sales are made should best suit the target group. Ms. Ostermann emphasizes that the company does not have to be available on every booking channel.
Another core statement of Ms. Ostermann is to focus on early bookers, because they ensure early base occupancy and thus enable better planning.
On the subject of strategic prices, Ms. Ostermann mentions the importance of performance competition over price wars. An intelligent pricing strategy is based on a value strategy, which means that the value and quality of the operation must be paramount and improving those offers the opportunity to raise prices. According to the expert, above-average quality should not be available at a discount price.
Ms. Ostermann also advises hoteliers that exhausting the price range plays an essential role in pricing. Minimum and maximum prices must be known in order to know when to make a loss. With the knowledge of your own price range, the pricing policy can be adjusted accordingly.
"There is a guiding principle in revenue management: the right price, for the right guest at the right time."
A very topical question that Ms. Ostermann answers in her contribution is that of inflation adjustment. Her recommendation is to include inflation adjustments when creating a new price list, to plan not only seasonal but daily prices and to keep bargain prices low.
Manfred Pinzger
Manfred Pinzger has been President of the Hoteliers and Restaurant Association (HGV) South Tyrol since 2013. Manfred Pinzger is also vice-president of the state associations Federalberghi and Confcommercio. He also runs the Hotel Vinschgerhof in Vetzan near Schlanders with his family.
Mr. Pinzger talks about the tourist market in South Tyrol and the currently prevailing political framework in the Alpine region.
"Between May and October, the summer season in South Tyrol, 22.8 million overnight stays were recorded, which are very good numbers. There was already a discussion about whether this was overtourism."
Demand was high in South Tyrol in summer 2022, the region was very well booked and was able to reach the pre-pandemic level. The region is very well positioned for the winter - there was no more capacity over New Year's Eve, and very little over Christmas. According to the President of the HGV, the revitalized tourism not only affects the hospitality industry, but also trade and small industry, which is increasingly frequented by tourists due to the demand for regional products.
Mr. Pinzger names the increased interest rates, such as the European base rate, as well as the increased energy costs, which have an enormous influence, as the decisive tourism policy framework. At state level, within the framework of all business associations, an agreement was reached with the largest regional energy supplier, Alperia, to cushion energy costs for small and micro-enterprises, explains Mr. Pinzger.
Mr. Pinzger also mentions the enormous tax burdens in Italy, which are disadvantageous for hotels, such as the municipal real estate tax on production companies. With the country's new budget law, which was passed in December, successes have already been achieved in terms of tax cuts, but the President of the HGV also emphasizes that there is still a lot of room for improvement on this topic.
Recommendations for action to optimally prepare for the future include reflecting the trend towards regionality authentically and professionally in the company. The guest must feel this, for example in the in-house kitchen, since nutrition plays an increasingly important role for holidaymakers due to increased intolerances and different types of nutrition. Another core statement of the hotelier is to use trends such as influencer marketing in a targeted manner to position the business as desired.
Florian Aubke
Florian Aubke is head of the tourism and hospitality management course at the FHWien der WKW, the leading university of applied sciences for management and communication in Austria. Before moving to FHWien der WKW, Mr. Aubke was decisive in setting up the private university module, where he worked as Dean of the Undergraduate School and Director of Non-Degree Programs. He received his academic degrees from universities in Germany and Australia before earning his doctorate with honors from the Vienna University of Economics and Business.
Mr. Aubke gives exciting insights into topics such as the shortage of skilled workers and the expectations of tomorrow's employees in the industry and how it must be designed in order to become attractive on the labor market again.
Right at the beginning, Mr. Aubke states that there is not only a shortage of skilled workers in the hotel and tourism industry, but that there is generally an evident shortage of employees. Expressed in figures, this means that, depending on the region, the employment rate in the sectors mentioned is between 8-10% below that of 2019, which corresponds to around 20,000 fewer employees than before. The rate of stayers is constant at 70-75%. This difference between those who remain, and the shortage can be explained by the fact that the number of people working in the industry remains largely unchanged, but fewer workers are entering the industry than before the pandemic.
When asked to what extent the city hotel industry differs from the leisure hotel industry in terms of the shortage of skilled workers, Mr. Aubke answers that the labor market environment is more dynamic in urban areas, while in the leisure hotel industry employees can be integrated into the company more as part of the family and with this knowledge, appropriate strategies can be driven.
The head of the degree program and tourism expert explains that the understanding of values has changed from generation to generation. The hotel industry is an industry that is in fact primarily occupied by young people, so it is even more important to build a narrative that can be given to these people, which is currently missing, according to a study of the labor market offer.
"Hoteliers are hosts. Young people who are employed in the hotel industry do not do it to be receptionists or waiters, but to be hosts."
Mr. Aubke advises hoteliers to refrain from thinking in functional areas and to design work areas based on values. Especially in the leisure hotel industry, it is important to think in terms of destinations, cooperation and networks, because employees rarely decide on a company, but on a region. Mr. Aubke also mentions the importance of approaching training institutions and becoming visible to young people who are interested in the industry.
Philip Stelzer
Philipp Stelzer has been Head of Sales at HQ Plus for 7 years, a globally active, renowned technology company that aggregates and analyzes market and business data in real time, where he originally started as Destination Manager in 2013. He started his career in the hotel industry as a revenue manager and data secure manager before continuing his education in tourism and business in 2011.
Philipp Stelzer gives an annual review of room prices for 2022 and goes into more detail on the development of valuations in the DACH region.
Unsurprisingly, the first quarter of 2022 got off to a slow start due to Covid measures. From mid-May, demand increased in some regions of Austria, in the 4* hotel industry consistently more than in the 3* hotel industry until the end of summer.
The Review Score shows a significant downward trend from April 2022 onwards, a phenomenon that is visible globally. The reason given by Mr Stelzer is inflation and the shortage of skilled workers. Room rates have gone up, but operations are the same except that fewer staff are available despite increased demand. This results in the quality of service declining while at the same time guest expectations are rising due to the increased prices. In the examined region in Austria, establishments in the 5* segment had the least impact on the review score.
We at RateBoard would like to thank the top experts and all participants once again. We are already looking forward to the next events.
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