Hotel&: Designing Business-Resilient Hotels

Hotel&: Designing Business-Resilient Hotels

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COVID-19 is the latest — and worst — outcome in a volatile cycle of crises that have had devastating effects on the hospitality industry. While we don’t know what the next crisis will be, we know that it will likely have similar impacts. But by understanding the conditions that have made the hospitality field particularly vulnerable to past crises, we can anticipate — and design for — the impact of future catastrophes or calamities.
This research focuses on how proactive design can use this information to increase business resiliency and maintain steady revenue streams in the hospitality industry both during and outside of crises.

Source: CBRE Hotels Americas Research, Trends® in the Hotel Industry, 2018
Source: CBRE Hotels Americas Research, Trends® in the Hotel Industry, 2018

Why Is This Important?

We conducted this research to answer the following questions:

  • Why is the hospitality industry vulnerable to crises?
  • How can design help mitigate this vulnerability?
  • How can a hotel play an active role in its community?

What We Did

Throughout the research process, we performed a literature review of relevant industry publications, journals and reports. We also gained valuable insights from focus groups and interviews, which are further distilled within the report and which can be downloaded below. Three focus groups, consisting of 13 HKS hospitality team members, gave us an initial understanding of the industry’s volatility and helped identify the framework for sorting design strategies. Next, we performed in-depth case study analyses, focusing on hotels and brands with exemplary diversification of revenue streams and programming. Following this step, we conducted subject matter interviews with experts — three internal and four external — to understand the industry’s potential for innovation.

What We Found

  • Tight profit margins leave little capital for the industry to invest in testing the waters with new ideas. This has led to slow innovation in the industry overall, which has limited the effectiveness of retroactive solutions during past crises.
  • The industry is subject to a variety of external factors, including local regulations and the performance of other travel sectors, especially the airline industry.
  • Travel is a choice, but the choice is more about where to travel rather than whether to travel at all.
  • The industry overwhelmingly relies on guest room rentals. Because this inventory is not a product, but the rental of space, even a short regional crisis, timed during the wrong season, can have major impacts on a property’s profit.
Source: CBRE Hotels Americas Research, Trends® in the Hotel Industry, 2015
Source: CBRE Hotels Americas Research, Trends® in the Hotel Industry, 2015
  • Domestic and regional travel provided a lifeline for the industry during the COVID-19 crisis. The industry has seen traditional drive-to market radii grow and some regional markets performed better than in previous years.

What the Findings Mean

We believe that proactive design solutions can help diversify the user base of hotels to improve business resiliency while enhancing the everyday experience of every guest who walks through the door.

Hotels should redefine the guest to include anyone who experiences the spaces and services that a hotel offers, even if they don’t have an overnight reservation.

This diversified user base should specifically target local visitors so that hotels can leverage overlapping revenue opportunities by offering a variety of services. The hotel is reimagined as more than just a place to sleep. It becomes an active part of local culture and daily life, making the hotel as much of an attraction as the destination where it’s located.

Redefining the guest allows hotels to better connect with the local community and culture, create a more vibrant destination and have the versatility to pivot revenue streams during a crisis.

Designers must address market volatility during the initial stages of the design process to maximize potential impact. The first step to improving hotel business resiliency is asking: What more can a hotel be?

Access the full report below.

This project was completed as a part of HKS’ Research Incubator program. This annual initiative empowers practitioners throughout the firm to invest focused time and energy into exploring topics that encourage innovation and a culture of curiosity. To learn more about this program, please contact us at [email protected]