Hotels 2.0: Check into the new normal

One year after the pandemic pandemic swept the country and led to the shutdown of businesses and a resetting of how hotel chains were operating, the after-effects are being seen in brand new strategies, a re-prioritising of luxury standards, and learnings that are directing the way forward. Even as occupancies bounce back to normal, the shift in business reflects new sets of operating rules, a new group of customers, and the realisation that the pre-pandemic business may have changed for the better.

Inbound travel from foreign tourists has all but dried up, but, on the other hand, one can now witness a wave of industry-wide traction for weekend revellers, staycation seekers, and locals who’ve simply gotten tired of staying at home, all these giving a fillip to local businesses. This has led to new SOPs and new learnings which are key, especially for premium and luxury hotels which have felt the economic pressure arising out of the pandemic more than economy players.

Research recently done by consulting firm McKinsey & Co. underscores the key differences in operating economics of different kinds of hotels: Economy hotels can stay open at lower occupancy rates than other chain scales. In all hotels, revenue is a function of average daily rate, number of rooms, and occupancy—plus food and beverage where available. Costs are threefold: variable (with revenue); semi-fixed (may be eliminated if a hotel suspends operations); and fixed. For owners considering suspending operations, variable and semifixed costs are factors, since fixed costs don’t change, no matter what. In other words, to cover variable and semi-fixed costs, luxury hotels conservatively need occupancy rates 1.5 times greater than economy hotels.

India’s largest homegrown player, the Taj group of hotels (which is owned and run by the Indian Hotels Co. Ltd or IHCL) has, in addition to implementing health and safety norms with World Health Organization (WHO) standards, also launched brand new technology systems across hotels, says Saleem Yousuff, senior vice president-operations, South, IHCL.

Going by the name of I-Zest, these digital solutions enable social distancing for guests and associates and include offering zero to minimal touch options through digital pre-check-in registrations to contactless guest access to their rooms via optional digital key cards.

According to Yousuff, IHCL implemented a series of measures as soon as the pandemic struck. I-Zest ensured that check-outs are optimised with online invoicing services without the need to use card machines and digital menus—which are installed across restaurants—facilitating dining orders through QR codes. Added to this you have the extensive use of digital payments. For Yousuff, learnings here are clear. “Minimise hotel and guest interaction at points such as restaurants, check-in receptions, and booking desks so as to limit human-to-human interface. This is now largely an industry-wide practice,” he says.

He also points out that much like how the 26/11 terror attacks in Mumbai led to a complete overhaul of the way hotels practised security, the impact of Covid-19 is similarly far-reaching. “Like the terrorist attacks of 26/11 changed the way the hotels, airports, and public spaces operated from a tangible security perspective, similarly Covid-19 revamped the way people socialised, entertained, and vacationed,” Yousuff argues. “The crisis has been an inflection point for the industry to reimagine and rethink everything in operations including the way they engage, interact, and transact with customers. There is increased social distancing and technological interventions,” he adds.

That has become the new normal for most chains. The Oberoi group of hotels, for instance, collaborated with Bureau Veritas, a world leader in laboratory testing, inspection, and certification services to validate and review hygiene programmes. Bureau Veritas began various training sessions on a regular basis, and even conducted multiple rounds of audits for the Oberoi group.

“We have also introduced technology to minimise contact, whether it is for guests checking in or checking out of hotels or dining in the restaurants or suites,” says a spokesperson of East India Hotels (EIH), which owns and runs the Oberoi hotels.

But has that changed the warmth and hospitality that Indian hotels are so famous for?

“It has in no way diminished the warm, intuitive, caring, and heartfelt service that the brand stands for,” the EIH spokesperson points out, adding that how guests are treated, recognised, and greeted, for example, have not changed at all.

What is clear, however, is that technology and its applications will become essential in hotel spaces, and one can see that happening even now.

IHCL’s I-Zest, for example, also included hotel pre-opening processes which are driven through mobile-application checklists and a contactless attendance system that uses closed group facial recognition and an HR automation platform for leaves and employee queries.

Lobbies, elevators, restaurants, banquets, and service areas have been altered to allow for physical distancing. Surfaces, fittings, fixtures, furniture, equipment, stationery, vehicles, cutlery, crockery, linen, and laundry are disinfected at regular intervals or upon every use.

The Oberoi group went a step further and even deployed a dedicated hygiene manager for each property and to further support the health and well-being of its guests, chefs across the organisation have researched and developed menus consisting of immunity building wellness dishes and drinks, the EIH spokesperson points out.

One big change from the past is the long lead times that used to be associated with bookings have gotten pinched and most customers are reserving rooms a few days before checking in at most, says Satyajeet Krishnan, area director-North and general manager, Taj Mahal, New Delhi.

Hotel officials also point out that the crisis brought with it an opportunity to reimagine business.

“The senior management recalibrated their way forward and announced the new strategy called Reset 2020 which is IHCL’s five-point agenda to provide a transformative framework to achieve revenue growth while optimising expenditure and strengthening balance sheet and, at the same time, continuing its path of excellence,” says Yousuf.

That was achieved with a combination of thrift and spend optimisation measures to convert fixed costs to semi-variable costs for the long term. IHCL moved on to resource planning, renegotiating contracts and lease rentals to help cut costs; accelerated digitisation to bring cost efficiencies and added alternate revenue streams with F&B; launched offers with staycations and ‘workations’; and set up Qmin, an online gourmet food delivery service.

These micro-level changes have also been adapted by other large chains. ITC’s Gourmet Couch, for example, has proactively pushed new menus and delivery options to customers looking for quality food at home.

At a macro level, ITC has also created new revenue options to include rooftop dining, and gardens as venues for events. “Another new concept was the ‘Floor is Yours’ where friends or families could book an entire floor for themselves,” says Anil Chadha, COO for ITC Hotels.

If interior designs, plush carpets, and fancy wall art were benchmarks of the old luxe quotient for hotels, the future is all about health, hygiene, and safety. “Cleanliness is the new amenity, replacing location. Hotels that spoke of a great location are now looking inwards to ensure good standards of health and hygiene,” Chadha says. He also adds that guests have become environmentally sensitive.

“You cannot be well in a society that is unwell and at ITC Hotels the programme comprises clean air to radiation harmonisers, local love, and low carbon footprint,” Chadha says.

So then, is the future of hospitality going to go back to a high note soon?

A recent McKinsey report on the business of travel and leisure suggests that for many, the delights of staying closer to home may linger, even after borders reopen. Having been forced to settle for domestic or regional destinations, another McKinsey study found that 30% of travellers declared themselves so satisfied with the experience that they plan to travel more domestically post-Covid-19.

Most hoteliers are optimistic. “In the next few years, we are all set to witness the revival phase for the hospitality industry. The industry has already begun to see reassuring signs as restrictions on hotel stays, restaurant dining, and banqueting have lifted. The industry has also witnessed a surge in domestic travel, thus, leading to a rise in demand for staycations,” Chadha argues. “Hotels that are at motorable distances from cities, such as our Welcomhotel properties across the country, have also seen a huge spike in demand, thus creating an opportunity for ‘destination-led’ travel. Hopefully, these resumptions signal the start of an upward trend in the coming year,” he adds.

(The story originally appeared in Fortune India's April 2021 issue).