To boost services or cut costs: Hotels face balancing act

The hotel industry faces a fine balancing act between cost cutting and providing the best experience for guests this year as businesses work out their Covid-19 recovery.

Hoteliers seeking a competitive advantage are forced to offer services and amenities provided in pre-pandemic years costs despite running on reduced room inventory and at low occupancy rates.

Apart from room and front desk services, hotels offer themed menus and experiences, fun activities and services including in-house cocktails, city tours, clubs and gym.

Conventionally, businesses in most other industries would stop most of such non-core services to stop haemorrhage cash. But not the hospitality industry where despite the lower revenues due to the impact of Covid-19, hoteliers maintain that halting most of these services would make a bad situation worse.

“For the festive season rates running until January 2, 2021, all our properties rates were lower than 2019 by between 10-25 percent depending on the room type booked. What is important to note is that the daily themes and offerings were not scaled down versus 2019,” Sarova Hotels managing director Jimi Kariuki said.

Sarova Whitesands in Mombasa, for instance went ahead with its exclusive firework-themed New Year’s Eve party that it holds every year.

This year it will also keep an 80 percent room inventory, but Mr Kariuki added it would continue on the all day dining theme, meaning guests can eat what they want whenever they want, except for drinks.

Serena Beach Resort and Spa Hotel has also enhanced its food and activities offering to attract guests after reopening on December 15 following eight-and-a-half months of closure.

The hotel’s booking was recorded at 30 percent in the beginning of the festive season, from as 60 percent recorded in December 2019.

The hotel retained 2019 rates for normal rooms, but increased them marginally for others.

Costly measures

“The reopening prices are marginally higher than the pre-Covid rates and this is because of enhanced product offers like food and activities,” Serena Hotels EA managing director Rosemary Mugambi said.

Following the easing of restrictions mid last year, hotels were required to comply with stringent and costly  measures as a condition for resuming business. This saw them adopt contact-less service, which forced them to lean heavily on technology to interact with customers. Most  also reduced the number of rooms and the number of guests who could be accommodated in each at any given moment,  affecting their dining areas, bars and swimming pools.

A cut in room rates therefore would have seen the facilities struggle to maintain business.

According to Ms Cathy Gachie of Barefoot Consultancy, the need to provide the exclusive offers while trying to adopt cost cutting measures and make profits with slashed rates could lead to poor service, in the end destroying the brand.

“Having all the hugely discounted rates is both a benefit and loss for guests. It could raise many complaints of poor or slow service due to reduced staffing, hotels controlling food portions, guests waiting for rooms to be made up as housekeeping is on a skeleton staff, among other matters,” said Ms Gachie.

“Those properties that do not destroy their brand by affecting service levels— which prevents the hotel from meeting base costs, compromise on guest experience as well as destroying loyalty—will be the ones to survive in the long run.”

On average hotel room prices were slashed by 30 percent last year compared to 2019.

Hotels have in past years recorded more than 90 percent occupancy during the December holidays. However, low bookings forced the facilities to lower their rates to woo guests.

Hotels such as English Point in Mombasa gave a 20 percent discount on their 2019 rates. This, for instance, saw them charge Sh24,800 per person sharing per night half board.

Travellers Beach Hotel, also in Mombasa opted for a deeper cut, reducing prices by 40 percent to charge guests Sh19,000 for a single room per night half board.

Similarly, PrideInn Paradise Beach Resort Mombasa was charging Sh15,250 per person sharing on half board and Sh18,800 per person sharing for a new whole day dining concept.

In 2019 the rate was Sh20,500 per person on half board.

According to a report by global data solutions firm, STR, Africa saw the lowest hotel occupancy in November at 27.8 percent compared to the same period last year, representing a 58.7 percent decline.

The average daily rate has dropped by 13.3 percent to $92.40 (Sh10,154) while the revenue per available room also dropped by 50.7 percent to $50.63 (Sh5,564).

Over the years, the industry has been experiencing a peak season between July and April due to demand by holiday travellers. The local hotel market, however took a huge hit in the second quarter with facilities recording the largest drop in years on reduced demand following  interruptions in business, travel and pressure on personal incomes due to reduced business activity.

Optimistic outlook

This was also attributable to the reduced bookings over the restrictive measures imposed by the government in April and  subsequent cancellation of flights globally, as well as halt of conferencing facilities, especially government-sponsored events.

This saw the overall bed occupancy fall to 10 percent in May in the country, which has since improved to 23 percent in November on easing of government restrictions and resumptions of intentional flights, according to the Market Perception Survey by Central Bank of Kenya.

Hoteliers have remained optimistic in recovery betting on clientele who have been looking for a break due to long stay-at- home.

The survey by CBK disclosed that hotels in Nairobi had a slower recovery due to high concentration of new infections in the county.

Airport hotel, Crown Plaza Nairobi Airport, however reported  50 percent occupancy due to its position at the airport, Covid-19 clean status and bookings from airline crew who have being in business after resumption of international travel.

The hotel is currently charging from $75 (Sh8,369) to $300 (Sh33,477) single rate per night for different room categories exclusive of taxes, which is usually $30 (Sh3,347) less than double rate.

“The impact of Covid-19 on the rate is that we have had to reduce our rates by 15 percent to 20 percent impacting the total hotel revenue,” said the hotel.

Kenya Association of Hotel Keepers executive officer at the coast, Sammy Ikwaye said businesses have been eyeing forward bookings especially from the domestic market for full recovery.

The emergence of a mutant Covid-19 strain in Europe is, however a big concern for the hoteliers as far as forward bookings in the 2021 peak season are concerned, with countries likely to bring impose new travel restrictions.

Their hopes now lie in the effective administration of the recently approved Covid vaccines, which would allow wider reopening of economies and travel.