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COVID-19 Spurring Hospitality Sector To Go Digital

15 June 2020 by Food&HotelAsia

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Crises such as the current COVID-19 pandemic has brought forward the impetus for businesses, especially those in the hospitality industry to accelerate the timelines of their digitalisation. As the pandemic spread around the world, countries and regions enacted measures such as travel bans, movement restrictions, and social distancing. These restrictions have since left a huge impact on global economies in its wake, with many non-essential businesses temporarily closed and employees working from home. For many businesses in the hospitality sector, the pandemic has resulted in business strategies, priorities and even future plans to be pivoted, in the blink of an eye.

Branded hotels, franchised restaurant chains or larger corporations that have earlier invested in automating processes and operations now find it easier to go digital. However, challenges remain for small and medium-sized (SMEs) companies or local businesses that have yet to digitalise. Industry experts weigh in on the impact the pandemic has wrought on the hospitality industry and share some of the opportunities as well as short-and long-term steps organisations can adopt in order to mitigate the business impact of COVID-19.

Roundtable participants:
• Chew Han Wei, President, Hospitality Information Technology Association Singapore (HITAS)
• Dr. Ahmad Magad, Secretary General, Singapore Manufacturing Federation (SMF)
• Jesper Palmqvist, Area Director Asia Pacific, STR

FHA: The impact on the hospitality industry is great. What are some of the short term versus long term steps the hospitality industry is taking to negate the impact?

Han Wei: In the short term, hotels can start looking internally on their processes or procedures to reduce unnecessary time and/or labour spent. Maybe RPA can help or simply going digital. In the long term, hotels should explore solutions that assist with reducing labour, for example in areas like stewarding, housekeeping, laundry and so on, where extensive labour is required. Hotels should also explore solutions that can impact guests’ experiences such as self-check in kiosks, express check-out kiosks and more, where technology can alleviate the waiting or queuing time at front desk.

Ahmad Magad: We have to look at both short term and long term strategies. As a short term strategy, companies could consider employing the ‘exploitation’ approach in the short term to begin digitalising their backend processes and introduce digital solutions to automate and computerise their manual systems. Digitalisation is no more an option but a given. Companies must quickly replace their manual systems with digital ones and ought to capitalise on the current lull period to embark on the digitalisation bandwagon to train their employees and implement digital solutions tailored to their business requirements.

Looking at the longer term horizon, firms ought to employ the ‘exploration’ approach to consider new business models in view that their current models are likely to be disrupted by COVID-19 and an increasingly insular business environment. New and emerging technologies, such as cloud computing, artificial intelligence to efficiently diversify their supply chains, Internet of Things (IoT) and virtual and augmented reality should be considered as options to enhance their business efficiencies and business continuity assessments.

Digitalisation also helps companies to improve on their processes to enable them to more effectively satisfy their customers, and develop new products or services that are smarter, better and cheaper to make them more competitive.

Therefore, it should behoove companies to exploit in the short term and at the same time explore in the long term, which is what is known as the ambidextrous strategy to be ahead of their competitors.

Jesper: As seen around the world there is a big variety in both the size and speed of declines, and bearing this in mind, accommodation owners and operators react differently. This includes everything from managing cost with limited revenue to simply closing hotels as it becomes an untenable situation. One challenge currently is also that the long-term view can be hard to anticipate, in part since recovery is still a constantly moving target, but also considering the total scope from a macroeconomic perspective. The impact this has across the board creates new scenarios for many people, not only in this industry. While it is still early days, one of the more recent debates is around the need for health certification, and potentially this could be something that adds to hotel operations, while also perhaps becoming an edge in terms of attracting guests.

It has been noted that hotels, especially bigger, branded establishments will be or are already implementing their digitalisation plans. For smaller hotels, technology adoption is moving at a snail’s pace.

FHA: Would technology adoption or innovation be faster or slower in the hospitality industry? Why or why not?

Jesper: Traditionally the accommodation sector gets stick for not innovating as quickly as other sectors, particularly in the last two to three decades. You can look at it two ways, there are certainly many examples historically where lodging has pushed the needle with new thinking, across design, sustainability, technology, construction, financially and legally. I believe that since society and innovation in general has been accelerating in the last two decades, across many industries, it is easy to point fingers at lodging and say that a room today looks the same as it did 20 years ago – which can absolutely be the case. But that doesn’t mean that this industry always is too slow in innovating. We have seen new owners and entrepreneurs in Asia bringing signs of innovation, and this industry can absolutely benefit from enhanced ability to adopt change management and creativity across organisations, particularly as COVID-19 has forced many to revisit operations and adopting to change.

Han Wei: Personally, I think adoption should be faster. The hotel industry is a very old trade dating back hundreds of years. With the current situation, many hotels are not prepared to be on BCP (business continuity plan) as it is a ‘people’ industry where people are our business. So, in order to continue to provide service to our guests, especially now preferably contactless service, hotels need to think out-of-the-box on how to provide such service.

Innovation and digitalisation sound like the grand plan players aspire to. But there are other opportunities out there and this crisis may be the trigger the industry needs to change.

FHA: How do you think businesses or business models will change?

Ahmad Magad: In today’s context, business models need to be dynamic in that the model’s underlying business processes and business services need to be dynamically and openly definable and re-definable. For the hospitality industry there is no exception. Their business models will need to transform as their current demand is stymied by country lock-downs resulting in curtailment in travelling, tourism and the decimation of supply chains. Re-defined business models need to create new demand with new value propositions that are more resilient and preferably better than the competitors. Among others, the consideration should include strengthening cash flows, more efficient operations management and corporate transformation to not only survive the current crisis but also emerge the stronger from it.

Han Wei: Personally, I think for the hotel industry in Singapore, we should look at how technological or innovative solutions can assist to reduce the dependency on human labour and the negative impact on the guests’ experiences. So, hotels need to look further in trying to provide the same level of service with reduced manpower. Let’s not just look at current situation. MOM has announced to reduce foreign labour quota in the hotel industry in the future. Thus, if hotels do not change the way they operate now, and adopt technological or innovative solutions to assist them, when would be a better time?

Jesper: Singapore is well positioned to capitalise on technology innovation driven by local authorities and as profitability margins are expected to grow tighter during this decade, most certainly in the aftermath of COVID-19, which in turn will make many focus on cost; we will see some optimising revenue flows better than others by using data and analytics correctly. During the upcoming recovery period domestic business will play a very important part, and of course that is a challenge for Singapore and potentially for Thailand, compared to markets like Indonesia and Malaysia – where there is less of a reliance on inbound international travel. This could change future tourism initiatives for improved resilience, and as an additional example, lease-heavy businesses are carrying a heavier load during this crisis, that could also change their setup once the dust has settled.

FHA: What do you think will be opportunities for businesses in the hospitality industry?

Ahmad Magad: Businesses should seize the opportunity during the current low period to review their current business processes and strengthen them with digitalised processes in their operations, while embracing digital marketing and e-Commerce so that they are ready to serve their customers better and more efficiently as they face a new and more digitalised business environment.

During digital transformations, employees form new social networks that facilitate their work in their changed roles. It is therefore, imperative that proper training is conducted and a strong line of communication is maintained throughout the organisation to ensure success of the digitalisation and automated processes. Clear scenarios ought to be painted of what employees can expect in the new changed environment. For instance, automated checking-in and out process, and customer service, robotised and AI processes in the kitchen and F&B, etc.

A more cost efficient environment coupled with excellent customer service permeating throughout the organisation are key ingredients to winning new customers and retaining current ones.

Han Wei: Self-service kiosks, for example check-in or check-out, F&B ordering, robot chefs and so on. Cleaning robots and robotic process automation (RPA) for administrative processes and/or procedures.

Jesper: I would envision more automation and machine learning to facilitate the decision-making process moving forward. This may change the hiring process and profile, but I would argue that’s the case for a variety of industries, not just hospitality.

Whilst businesses in the hospitality industry are heavily impacted by the current crisis, there is a silver lining if business owners look beyond the short term. And the time to go digital starts now.