CitizenM, Interlude, Sokos Hotels: 3 European hotels trying to stay afloat
The challenge all hotels across the world are facing, but especially small chains and independents, is unprecedented. Pamela Whitby speaks to three
It was meant to be a straightforward feel-good interview for a series through the month of March featuring inspiring ‘women in travel’. But International Women’s Day on March 8th feels a million miles away for Laura Lo Mascolo, CEO of Interlude Hotels & Resorts, which she established in 2012 to run a small chain of boutique establishments in Italy.
“COVID-19 affects our lives, our economy, and our work. This is an incredibly difficult time for a small chain like us and we have closed several properties to cut costs,” says the former statistician and analyst who has helped tourism operators with revenue and yield management, a subject she also advises the University of Palermo on.
Many independents, and small to mid-sized chains and resorts in remote or seasonal destinations rely on online travel agents (OTAs) Booking.com and Expedia, which control 70% of reservations in many markets. Even more powerful is Google, which has been building a travel empire travel worth $100-billion in 2017, according to Skift Research, and which rivals its own biggest paying customers. In 2019, the OTAs shelled out $18-billion for Google real estate.
At the best of times, a challenge for small hotels, which fork out anything between 15 and 25% in commission to intermediaries, is cash flow. So, as the Coronavirus crisis has intensified, and the OTAs have changed their terms of agreement in response, it has become increasingly tough. Booking.com, for example, has issued this guidance on its partner hub: “We expect you [the hotel] to refund any prepayment and waive any cancellation costs (fees, expenses and/or other amounts) in situations where the guests/travellers requested cancellations as a result of the Forced Circumstances (FC).
Although Booking.com says it will waive the commission in these cases, that’s little comfort for Lo Mascolo, who says: “The problem of refunding could create a serious deterioration of what is already an uncertain financial situation for small hotels.”
The problem of refunding could create a serious deterioration of what is already an uncertain financial situation for small hotels
Laura Lo Mascolo, CEO, Interlude Hotels & Resorts
Lennert de Jong, the CCO of Dutch chain Citizen M, empathises: “If individual guests pay their commitment towards these hotels it might float the salary bill towards the end of the month, so I completely respect the fury that some hotels have towards Booking.com and Expedia for deciding on their behalf that the hotel does not get paid.”
However, with CitizenM hotels in Shanghai, Kuala Lumpar and Taipei, among the first regions affected by the virus, de Jong has watched the crisis unfold. “In February, we raised an eyebrow when the OTAs took a stance on agreements that we have set in place with guests but the magnitude of the situation for people coming from or going to the regions impacted quickly became clear.”
As a result, CitizenM elected to copy the OTA stance on who could cancel and who could not. “They [the OTAs] were keeping a close eye on the World Health Organization developments and updating procedures along the way,” De Jong adds.
I completely respect the fury that some hotels have towards Booking.com and Expedia for deciding on their behalf that the hotel does not get paid
Lennert de Jong, CCO, CitizenM
However, at this early stage, for people and groups that were deciding to cancel elsewhere in the world, it was business as usual. “But that all changed with Trump's announcement last Thursday morning our time. We saw the enormous escalation of the situation and that all fundamentals of travel were gone,” he says.
The Dutch group took immediate steps to offer, for example, all cancellations free of charge for all transient travel as well as rebates for prepaid arrangements on stays until April 30th. “During these challenging times, we have not lost focus on our mission: the safety and wellbeing of our guests, our ‘citizens’. They are so important to us that we even named our hotels after them,” he says.
This decision to allow customers to cancel free of charge has helped relieve the enormous pressure on support teams, and has generated messages of support from guests.
At Interlude, Lo Mascolo says they are proactively trying to manage the conditions imposed on them by their “so-called OTA partners" by contacting guests directly and allowing them to use their reservation for a future stay one year from the original arrival date. Many customers have welcomed the gesture, buying her business some time.
Helsinki-based Marco Corsi, a third-party distribution manager for Finnish chain Sokos Hotels, says they have less of a problem because they do not have any non-refundable rates with the OTAs, except in Russian hotels, where cancellation fees are soft anyway. “As far as I can see OTA cancellation policies are following pretty much the international restriction guidelines, and if this is not a force majeure, what is?”
Meanwhile, Expedia and Booking say they will continue to provide regular updates to partners.
Staying innovative, staying afloat
In Corsi’s view, the battle for the coming months is already lost: “Our line is to keep the customer happy, hoping they book us again when things improve. Right now, it’s more about maintaining a good image and guest relations rather than counting pennies, as it seems they will be quite easily counted for a couple of months to come.”
Now it’s more about maintaining guest relations rather than counting pennies… it seems they will be quite easily counted for a couple of months to come
Marco Corsi, Third-Party Distribution Manager, Sokos
At Interlude, a company that employs just eight people in head office, and 50 in its hotels, Lo Mascolo feels the weight of responsibility, and she wants to stay open for the sake of her staff. On Friday, the World Travel and Tourism Council warned that up to 50 million jobs were at risk and the travel sector could shrink by 25%. Lo Mascolo is trying at all costs to avoid making her staff a casualty. In a recent survey from EyeforTravel by Reuters Events, 63% of respondents said that the employee experience was crucial to delivering a great customer experience, which had already become the new battleground for travel before the crisis. She says: “We are a big family and we are doing our best to save all jobs. If we achieve it will only be because of our loyal employees and customers.”
The team is working together resolutely and collectively to stay afloat with flexible and innovative products and services in the properties that remain open.
Steps the groups has taken include:
Home working: Interlude eight HQ staff (#InterludeViP) are working from home to communicate positive messages via social media, and planning products, and the idea for when the market recovers.
Home delivery service: In Tuscany, even though there are no guests, the #SantAgataatHome campaign promises to deliver restaurant cuisine at home to their most loyal customers. Loyal clients are invited to design their own meal from the menu, choose their own ingredients and cook that at home. If they post a picture of the final result, the most ‘liked’ picture wins a dinner voucher for two, for when the situation settles down.
Homemade jam: From Sicily’s Salina Island, customers can order homemade organic marmalade and jam.
A warm word: In Palermo, the Cavalieri Hotel remains open as a refuge in these in these troubled times. “Sometimes people just need psychological support, they just want to talk with someone,” says Lo Mascolo.
A new world order?
Today there are mandatory restrictions on people who have recently been in affected areas within the last 14 days, which apply in over 60 countries. With nine borders in the EU now closed and at least 27 globally the water is rising.
One question for De Jong, is how fast it will rise? Still he remains hopeful that in a few weeks or months “the pigeon will come back with a leaf, to tell us when we are going to get our hospitality fundamentals back.”
A bigger question is what exactly will the fundamentals look like in the world that emerges from this global crisis? The intermediaries will still be around but will those that have dominated travel for so long still wield so much power?
Later this week, we will produce more detailed analysis of what hospitality might look like in the medium to long term, and where there may be opportunity