To appreciate the ongoing calamity that’s transforming the hotel industry, as well as what a future recovery might look like, it’s helpful to consider what’s happening in Las Vegas.
No major city in the United States relies so entirely on tourism for its economic lifeblood, and no place was so quickly and thoroughly devastated by the shutdown of travel and hospitality.
In recent years, Las Vegas has welcomed roughly 42 million visitors annually from all over the world. With travel and hospitality essentially frozen, thousands of workers now find themselves furloughed.
How will Las Vegas recover?
First of all, the brands and properties that currently operate on the Strip and elsewhere in Las Vegas will need to accelerate their ongoing digital transformation. The same data and analytics mindset that makes casinos profitable needs to be applied to the entire hotel and hospitality ecosystem across the board.
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Unfortunately, the supply side of the hotel market isn’t built to be as dynamic. Most hotels rely upon legacy systems that restrict the efficiency of their supply and pricing ecosystem. Direct booking and online travel agency platforms can often do a better job of adjusting their pricing and marketing structures to suit real-time consumer demand and optimize revenue.
Our most recent data shows a rebound in demand for limited-service properties rather than full-service properties in Las Vegas in recent weeks, indicating people are looking for long-term arrangements.
In addition, with travelers willing to fly less, drive times are getting longer, which can benefit the rebound of Las Vegas differently from neighboring states. These sorts of observations will need to factor into future planning.
Business travel bust
Secondly, how will hotel and hospitality companies adjust their operations and products to cope with a world of social distancing? Typically, 6.5 million of Vegas’ annual visitors are convention delegates, according to the Las Vegas Convention and Visitors Authority.
While personal travel may rebound once travel restrictions are lifted, all signs seem to indicate that business travel will take significantly longer to rebound, and demand is likely to be depressed in the long-term as companies have embraced remote work and teleconferencing as a potential channel for cutting costs.
Vegas hotels will need to adjust to a reality in which the next crisis is just around the corner.
Like many others in the hospitality industry, Vegas hotel properties will need to operate more like tech companies and less like real estate holding companies if they’re going to weather the storm and recovery period brought on by COVID-19.
This means that hotel companies are going to need to build brand loyalty off-premise by developing an entirely new interaction with their products.
The days may be gone when Vegas and other event destinations could rely on a calendar of annual corporate events to drive revenue. Do you think that 180,000 business travelers will be willing to congregate in convention halls for CES in January of 2021? Will the value exchange be there, and will companies float the bill? How about in 2022?
Like all hotel companies around the world, Vegas hotels will need to adjust to a reality in which the next crisis is just around the corner. Crisis planning needs to be an inherent part of the “new normal.”
Hotels and hospitality properties need to diversify their revenue streams and lean into initiatives like loyalty programs that strengthen and broaden their brand.