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Want to stay at the Black Swan Hotel? Well you are in luck!
Week 10 - 2023 so far excellent for the hospitality sector. Everyone else is a little worried.
TLDR: To Long Didn’t Read
New technologies, predictions & hope for the best. Sounds a lot like an aftermath from last week news of the world ending (again). While the travel sector is showing record performance, the rest of the economy is beginning to show cracks. All this while, the industry is predicting a stellar 2023. Predictions however are a thing we humans are awefully bad at, as our recommendation of the week reading shows (The black swan). So what will happen? Inflation, higher costs and a delayer crisis yet one that is certainly happening. How to win? Get your business in order using some of the tips & tricks at the end of the post!
1. Main Hospitality News
Core news related to the industry
How do the big hotel players prepare for the future? Do they have data we the normies don’t? Are they more flexible in their everyday business? Well according to this article, all big business do is scenario planning. A straight forward method to build a probability tree and prepare plans in case of any of the scenarios taking place (aka corona). Except one assumes they can indeed see all the potential future outcomes. Which according to Nasim Talib and his very insightful book the Black Swan is simply impossible (more on that in “readables”). Hence, all we are left with is layoffs and a long term transition that might impact the whole industry (for the worst). All in all, big players make cool graphs that get thrown out the second a black swan shows up.
While most exhibitions are struggling to come back from the covid period, ITB (the biggest travel exhibition in EU is making a come back). Why? Well, nobody surveyed the visitors (yet), nonetheless for travel experts to not travel would indeed be counterintuitive.
While the tourists amongst us are going mad for 1000 Euro average ADR in Paris, the business travel guests are still trying to put on their zoom. Corona seems to have forced an entire generation of workers to adapt more flexible long-term tactics, removing the need for travel entirely. Data in the article indicates an increase after initial lockdowns, yet as of today the numbers have gone below 2019 values.
Ever wondered how to run a travel business during the war? Well you are in luck. Skift has interviewed Ukraines Tourism Chief to that precise point. In summary you cannot. Alone the supply of rooms has dropped to 50% of prewar amount. Internation travel, has all but stopped, nonetheless the State Agency for Tourism Development is trying to promote domestic travel. Focusing on the message that life still goes on and people deserve a holiday. A hard thing to sell, yet life continues regardless of what war mongerers want to mandate.
Economics, finance, geopolitics. All have an impact on the hospitality sector. This part summarizes those.
SVB or the silicon valley bank has gone bust. Why? In short they did not accuretly predict their customer’s needs (start ups) who started to burn cash quicker as of late. Word got out, crowd mentality kicked in and a bank run quickly put the bank out of business (precisely in just 3 days). More on that in another substack here. Will this impact the service sector? Hard to say. Since either the SVB case is a one off or just the beginning of a domino effect, which will cause several banks to fail (similar to 2008). What ever it is, the target market of this case is startups and if you are in one of them, maybe it is time to reconsider.
Peter Thiel is of the opinion that google is threatened by ChatGPT like solutions (German). An encyclopedia mixed in with a simple search engine. It is also worth saying that Mr Thiel is one of the early investors into OpenAI (company that released ChatGPT), a fact that surely does not make him bias in the slightest. If you haven’t tried to use ChatGPT as your google replacement, you definetly should (its quite impressive). Nonetheless in terms of profit margins, if one would replace google’s current search engine with ChatGPT, the costs of processing alone would go up significantly. Meaning the AI model uses up more processing power than a more regular algorithm. Hence, unless the AI model is optimized it is currently not a viable business to operate on a global scale.
China is pretty famous on faking their official government statistics. From Covid numbers to apparently GDP. A new way to calculate it has been devised combining bank loans, electricity consumption and rail cargo. Result? It looks more or less similar to the official numbers. How is this important to hotels? The more stable the economy, the higher the travel expenditures. Status quo: China isn’t too well, none the less looking at last weeks post china is due for some revenge travel after some of the roughest lockdowns the world has seen.
Scientific papers are being published every day. Including the hospitality sector.
How people will behave in 2023, given that we are seeing record high travel spending and recession indicators elsewhere. From past studies financial crisis are net negative as some of you might remember. However, this time around the situation is a whole lot more complicated. While corona was disastress, private savings have gone up significantly during that period, hence combined with revenge travel and abundance of money on the market current up tick in travel can largely be explained as spending of ones savings from the past 2 years. What happens next?
Considering we are in a record high inflation economy (due to large amounts of money being printed during the covid period) we can look at past studies to at least hope to predict what is going to happen next. High cash supply, war in ukraine (and the break up of trade routes), covid under spending has now all accumilated itself into following factors that are likely to unfold one by one. Increase in costs that will inevitably lead to supply shocks. Increase in prices, and finally an array of bankruptcies due to no longer viable margins. And all of that is yet to come.
Books, podcasts & the big stuff.
Given that big companies often brague about forecasting the future and navigating the market like its a kiddy pool, we thought its appropriate to recommend this week’s reading: The Black Swan & Antifragile. Summarized well here & here. In short, we live in a world where thigns like Covid can happen (aka the Black Swans, odd ones out). What ever you can imagine, it is useless to think of all possible out comes, since the world has an unlimited amount of risks that we do not even know exist. Imagine a turkey living in a peaceful farm thinking there is nothing else to life, but free food and unlimited mating partners, little did it know tomorrow is Thanksgiving.
So how to prepare? Do we all just become stoics? Well the second book provides a pretty elegent solution.
5. Tips & Tricks Tools & SaaS
Any new software you can use? Industry tricks you missed? All of that summarized below once a week.
Were you ever in doubt as to what other tool to add to your budgetless portfolio of tech instruments? Well you are in luck! A few industry professionals have tried to list the next big thing that will revolutinize the industry (or not).
How to make your loyalty program relevant in todays market? (that is provide meaningful value to your guests). 3 “easy” points. Provide the opportunity to spend what ever points collected instantly (i.e. with a better app). Second, make it flexible for guests to spend points on a variety of things, not only your business (i.e. extend the network of partners that would participate). Third, extend awards to experiences and more intangible services (i.e. free breakfast). Unfortunetly, this kind of solution mostly works for big chains. The smaller enterprises are at a loss here. Solution? Will we list it next week ;)
Google is going to release an ad tool specific to the hotel industry. Meaning advertising on youtube and google is going to get a little easier. Stay tuned for more or follow up on the article.
Want to stand out in a crowd of Airbnbs? A sustainable accreditation for your short-term rental is now a possibility. More here. Will it actually impact your bottom line? Consumption should go down, hence lower costs. When it comes to ADR, research is not conclusive, whether people are actually willing to pay more or choose the eco stay over a regular one.
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