While the Covid-19 outbreak and subsequent lockdown has significantly impacted the short-term revenues of the Australian hotel sector, an emerging positive has been the forensic focus on hotel expenses that has resulted. In this article, we outline some of the steps that owners and operators should have already implemented in response to this demand shock.
Many hotels have grappled with the decision of whether to close or not. Much of this decision rests on what, if any, revenue is likely to come.
By now each hotel owner, in collaboration with their operator, should have stepped through every market segment and contacted every account within each segment to determine what if any room night demand exists. If those accounts have indicated ongoing demand, you should have determined their stay patterns as well as their food and beverage requirements whilst at the hotel.
In terms of public demand channels like Expedia and Booking.com, most hotels that have remained open have adopted pricing policies similar to that of pre-Covid 19 levels, in other words they are not heavily discounting these channels, given the limited volume they are generating.
You should have also explored new revenue opportunities, particularly from government channels to determine if there is further demand that can be sourced. Some groups have opened new revenue lines such as take-away food and beverage, retail offerings, daily room rates for those who cannot work at home and pre-selling value-add gift voucher packages that encourage people to stay once the lockdown lifts.
Having honestly assessed the likely income expected over the past two months and the coming three months, the next step you should have undertaken is to restructure the cost base to match that revenue outlook.
Collaboration is Key
Head of Hotels | Australia
Having joined Colliers in early 2014, I have subsequently sold over $180 million of hotel assets across Victoria and NSW, including the largest hotel transaction in Victoria since 2008, being Bell City Preston for $143 million.
Prior to joining Colliers, I was Director of Asset Management for Tourism Asset Holdings Limited (TAHL), Australia's largest hotel owner and responsible for selling down this portfolio totalling over $1.5 billion.
Before TAHL, I was with Jones Lang LaSalle Hotels for 7 years, as Head of Asset Management and Chief Operating Officer for the Hotels group across Asia Pacific.
National Director | Hotels
For 30 years, Nigel’s career in the hotel industry has spanned hotel operations and finance, working for leading hotel operators and more recently, heading two of Australia’s leading wholesale hotel investment funds.
Prior to joining Colliers, Nigel spent 10 years as the Fund Manager of Eureka Fund Managements First Core Fund. The fund comprised hotel investment in branded hotels such as InterContinental, Four Seasons, Crowne Plaza and Holiday Inn. He led the fund team in establishing an investment in over $1.0bn of hotels in Australia and New Zealand. Nigel was responsible for the entire fund strategy of acquisition, repositioning, asset management, equity and debt capital strategies and exit strategy.
Nigel commenced the hotel investment stage of his career with Colonial First State Property as an Asset Manager for the portfolio of Marriott hotels in Australia before taking the funds lead role as Fund Manager.
In the early part of Nigel’s career, he held a number of Finance Director roles for Southern Pacific Hotels Corporation (now IHG) in Australia and the Pacific. After a period, as Regional Director of Finance for the Northern half of Australia he established his own hotel finance consulting group which provided accounting and financial related services to hotel operators and owners in Australia, New Zealand, Vanuatu and Fiji.
'Charting the Course' series
Colliers International Hotels team have put together a series of articles to help the hotel and tourism industry chart the course to recovery, as one of the sectors most acutely impacted by social distancing measures introduced in response to Covid-19.
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