Report on Hotel Revenue and IHG’s Improvement Plan during COVID-19

Abstract

This report examines the impact of COVID-19 on hotel industries and their management adaptations through the example of an IHG brand hotel. By presenting and analyzing the hotel’s data of 2020, a trend of noticeable decrease in booking and room revenue can be found. This report also illustrates the hotel’s service improvement program, which is used to counter such decrease in its revenues.

Full text

Research in Economics and Management
ISSN 2470-4407 (Print) ISSN 2470-4393 (Online)
Vol . 5, No. 4, 2020
www.scholink.org/ojs/index.php/rem
Original Paper
Report on Hotel Revenue and IHG’s Improvement Plan during
COVID-19
Yilin Zhao1
1 Occidental College, Los Angeles, CA, USA
Received: September 30, 2020 Accepted: October 27, 2020 Online Published: November 20, 2020
doi:10.22158/rem.v5n4p164 URL: http://dx.doi.org/10.22158/rem.v5n4p164
Abstract
This report examines the impact of COVID-19 on hotel industries and their management adaptations
through the example of an IHG brand hotel. By presenting and analyzing the hotel’s data of 2020, a
trend of noticeable decrease in booking and room revenue can be found. This report also illustrates the
hotel’s service improvement program, which is used to counter such decrease in its revenues.
Keywords
COVID-19, hotel, revenue, service improvement program
1. Background
The impact of COVID-19 on the travel industry and related sectors can be described as catastrophic.
With flights canceled and travel bans imposed in many countries, the industry is experiencing a
cool-down period. The pandemic has been a major test for the hospitality industry, as the occupancy
rate for traditional hotels has fallen below 20 percent and airline travel has reduced by 95 percent.
Furthermore, virtual meetings on platforms such as Zoom have replaced traditional face-to-face
communication during this period, which in turn has led to less demand for travel and hotel rooms.
Within the hospitality industry, hotels in particular have suffered a tremendous loss from the pandemic,
as an estimated 6.8 million hotel and related jobs are expected to disappear by the end of 2020. I
attended a management trainee program at an IHG brand hotel in Northeast China from June to August,
2020. The hotel’s response to the pandemic is valuable for interpreting the broader problems facing the
travel industry.
164

www.scholink.org/ojs/index.php/rem Research in Economics and Management Vo l. 5, No. 4, 2020
2. Decrease in Booking Revenue
As a result of the pandemic, the booking income of the hotel has decreased dramatically compared to
last year. A notable drop occurred as early as February before the virus spread across the world, with
income from all channels plummeting by more than 80 percent. In April, as COVID-19 gradually
became under control, some sales such as the golden contracts proved to be less affected by the
pandemic. During July when the nation began recovering from the negative impact of COVID-19,
individual guests and employees who use points in exchange for discounts on rooms even increased by
14 percent compared to the prior year, which is one of the few revenue channels that has been positive
so far.
Since the outbreak of COVID-19 in 2020, revenue from hotel rooms has been trending downward.
However, some revenue channels have been more flexible than others. Revenue from group guests has
been the channel most affected by COVID-19, with a decrease of almost 100 percent from February to
April. Despite a 50 percent increase in revenue from group meetings in May, the number of group
guests and the associated revenue are declining compared to last year. Other revenue channels proved
to be less affected than group guests as decreases were less compared to 2019 data. Bookings through
the official OTA website have decreased 80 percent compared to last February, yet only 60 percent
compared to last April, and only 20 percent compared to last July. The same trend of smaller declines
can be observed in other channels as well, including bookings of KNR gold contracts which are on
category among the IHG reward club. All revenue channels are currently recovering except for group
guests, though the recovery has not been sufficient to prevent overall losses.
3. Decrease in Room Revenue
The decrease in the number of booking guests at the IHG hotel further affected room sales. The hotel
had underbudgeted expenses and had fallen behind last year’s revenue for June and July. In terms of
occupancy, goals were not met in June or July, the rates of which were about 5 percent behind last year.
In fact, room revenues for both months were below goals by around 30 to 40 percent, which was not a
small falloff compared to the achievements in 2019. Revenues from rooms, dining, and meetings have
had an overall decreasing trend compared to last year and are below goals set for this year. Average
room rates and income from other outlets were the least affected, as they only decreased by less than 12
percent in June and 30 percent in July. Meeting revenues, on the other hand, were the most affected
area with no less than an 85 percent decrease in both months.
Compared to last year, spending on labor and employee welfare decreased, as did spending on
resources and management costs, and all were less than the budgeted expenses for the year. The only
increase occurred in employees’ salaries, which went up by less than 6 percent compared to last year
and were 3 percent greater than budgeted expenses. The reason for this was that the hotel eliminated
some positions and reassigned the tasks to other staff while boosting salaries. Furthermore, the Chinese
government and insurance companies reduced social insurance costs paid by the company by more than
165
Published by SCHOLINK INC.

www.scholink.org/ojs/index.php/rem Research in Economics and Management Vo l. 5, No. 4, 2020
50%. Overall, spending on labor, resources, and management decreased as a result of the decreasing
number of rooms booked.
4. IHG Service Improvement Program
The IHG group did not ignore such losses of revenue; instead, it seized the opportunity to improve its
service. Despite the changes COVID-19 had brought upon the hotel, all IHG hotels have been required
to take additional precautions such as disinfecting rooms, requiring employees to wear masks, and
providing individual meals for guests. At this particular time, IHG’s service improvement plan, which
was instituted during the epidemic, is also worth mentioning.
First, we need to mention that additional registration requirements such as COVID-19 screening of
hotel guests by the disease control department, scanning itinerary QR codes, registering telephone
numbers, measuring body temperatures, nucleic acid testing to detect infections in guests from
high-risk areas, and other procedures make guests feel that the hotel service is more rigid than warm.
This causes guests to become more impatient upon check-in and leads them to feel that the entire
check-in process is inefficient, especially when something a problem arises during it.
Consequently, the IHG group implemented a Problem Improvement Program as part of their
management system. When there is an important issue that needs to be resolved, the hotel manager or
supervisor follows the program to maximize customer satisfaction. The hotel’s operation manager
started the program to improve guest satisfaction by reducing mistakes during guest check-ins. I joined
the program team as a data collector, assisting team members with all the data accumulated during the
check-in process.
We separated the check-in process into two categories—“pre-check-in” and “checking in.” After
analyzing the data, we found that “pre-check-in,” which comprises the accuracy of bookings, room
availability, arrival time notice, and payment arrangements, has a greater impact on guest satisfaction.
From data collected about the check-in experiences of more than 100 unsatisfied guests, around 89%
had problems with booking accuracy, including the arrival date, spelling of names, method of payment,
and type of beds in the room.
Furthermore, sometimes, the front desk supervisor or manager was absent when a problem occurred
and the staff could not obtain authorization immediately, which wasted guests’ time and did not
demonstrate proper customer service. Data collected also showed that for around 56% of guest
complaints, staff had to wait more than 30 minutes for a manager’s approval.
In response to the “check-in problem,” the Problem Improvement Program team implemented the
following action plan:
1). Review the reservation standards, and provide additional training and practice for all frontline staff
who book guest reservations.
2). Contact guests one day before their arrival date to confirm the reservation, especially arrival time,
payment method, type of beds, etc.
166
Published by SCHOLINK INC.

www.scholink.org/ojs/index.php/rem Research in Economics and Management Vo l. 5, No. 4, 2020
3). Empower front desk team leaders to handle guest inquires and complaints. After training, the hotel
empowers the team leader to have the amount of complimentary limit.
During the reservation process at the front desk, we also found that the logbook was sometimes not
sufficiently clear for employees on the next shift to follow; thus, time was wasted on consulting with
co-workers. At times, guests had to repeat their inquiries to a different shift receptionist, and this made
them tired of waiting and left them with a negative impression of the hotel.
Therefore, the front desk supervisor designed a new format for the logbook, making it very simple and
clear. The date is printed on the top of the page, and the shift workers taking over at handoff need to
sign off on each issue to show they all understand what needs to be done to follow up. After each item
is completed, the shift leader must sign and provide a brief description of how the issue was resolved.
Two weeks after these actions were implemented, another customer survey was conducted, and the
results indicated that guest complaints at check-in decreased by 79% compared with the first data set
collected.
This Problem Improvement Program showed me how to resolve problems step by step, measure impact,
collect data, and conduct an action plan; most importantly, it showed me how to implement a program
and make it work consistently.
5. Discussion
The loss of revenues shows that the hotel industry is suffering from COVID-19 and its effects. Data
gathered from the IHG hotel indicate that revenue loss from group guests tends to be greater compared
to that from individual guests as companies and businesses are using online meetings to replace
traditional gatherings, which appears to be safer and reduces their budgets as well. This is shown by
comparing the percentage revenue decrease for group guests from February to July with all other
channels, which showed slower decreases in revenue. The decrease in booking revenues would
inevitably effect the hotel’s room revenue, which did not meet the estimated goals for 2020 or the
actual revenue from 2019. This trend of decreasing revenues exerts heavier pressure on wages and
resources. Nonetheless, the hotel did take actions to rectify the situation, such as enforcing stricter
health regulations and boosting work efficiency at the front desk to leave customers with a better
impression of the hotel.
6. Conclusion
The COVID-19 pandemic has had a disastrous effect on the hotel industry, as fewer people are willing
to travel and people are less inclined to stay in hotels. Such circumstances have resulted in less revenue
and more expenses for hotels, which has forced them into taking appropriate action. Although the IHG
hotel had been losing revenue from both bookings and room sales, the situation started to improve after
it implemented new health regulations and improved certain aspects of its services.
167
Published by SCHOLINK INC.

www.scholink.org/ojs/index.php/rem Research in Economics and Management Vo l. 5, No. 4, 2020
References
Bertoni, Steven. (2020). Hospitality Startup Sonder Raises $170 Million At A $1.3 Billion Valuation
During Covid-19 Travel Collapse. Forbes, Forbes Magazine, 24 June 2020. Retrieved from
http://www.forbes.com/sites/stevenbertoni/2020/06/24/hospitality-startup-sonder-raises-170-millio
n-at-a-13-billion-valuation-during-covid-travel-collapse/#a6c3a1048aa6
Popstefanov, G. (2020). Council Post: How The Travel Industry's Lessons Learned From Covid-19 Will
Apply For Years To Come. Forbes, Forbes Magazine, 15 July 2020, Retrieved from
http://www.forbes.com/sites/forbestechcouncil/2020/07/16/how-the-travel-industrys-lessons-learn
ed-from-covid-19-will-apply-for-years-to-come/#1fa776de582d
168
Published by SCHOLINK INC.