The Hilton CEO has warned that service cuts we’ve seen in hotels during the pandemic could be permanent, and that’s bad news for consumers and those who work in the hospitality industry.
Hotels adjusted the service during the pandemic
As expected, hotels adjusted their service protocols during the coronavirus pandemic to save costs and limit employee-to-employee interaction. Among other things, we saw hotels:
- Eliminate daily cleaning
- Cut up all of the food in the room or serve in take-away bags
- Eliminate some in-room amenities, ranging from minibars to coffeemakers
- Close bars, restaurants and other outlets
There is nothing wrong with that in the short term, and all of this is reasonable enough. The problem is that changes are often irreversible. Just look at the concept of airline fuel surcharges or the fact that we still can’t get most liquids through safety nearly two decades after 9/11.
The new normal in hotel room service
Hiltons become “higher margin companies”
While the hotel industry has undoubtedly had big problems over the past year, Skift has some interesting facts on how some hotels’ finances have improved. Looking at the bigger picture of US industry:
- Full-service hotels have lowered their financial breakeven point from 47% in 2019 to 30% in 2020
- Limited service hotels have lowered their financial breakeven point from 43% in 2019 to 36% in 2020
In other words, hotels don’t have to fill as many rooms to break even, which shouldn’t be that surprising. Hotels have cut operating costs by sacrificing amenities and cutting staff. As you can see, the margins have improved the most in full-service hotels as they have the most amenities and most of the staff that needs cutting back.
I’m sure you’re thinking, “As soon as things get better, proper hotel service will resume, right?” It wouldn’t appear. Chris Nassetta, CEO of Hilton, said the following on a recent investor call:
“The work we are currently doing in each of our brands is to turn them into higher margin companies and work more efficiently, especially in the household, food and beverage and other areas. When we get out of the crisis, these companies will have higher margins and fewer workers than they did before Covid. “
One of Hilton’s priorities is turning hotels into higher-margin companies and working more efficiently, especially with housekeeping and food and beverages. The intent here is pretty clear – many of the cuts made during the coronavirus pandemic are here to stay.
In the future, don’t expect daily cleaning to be standard in hotels and expect some of the “efficiency” and “beverage efficiencies” to be maintained.
Will daily housekeeping ever return as a standard feature?
Will the competitive landscape allow this?
No matter how you cut it, the intent here is bad news for hotel guests and especially bad news for those who work in the hospitality industry as it sounds like there are fewer jobs. Every company wants a higher margin, and the Hilton CEO makes it clear that many of the current cuts will remain.
Let’s be clear, the focus here is not on offering better value. This means that hotels are not trying to cut costs and lower prices, but rather that they ask for the same but offer less.
How do I see it all?
- Ultimately, the hotel industry is competitive, and I don’t think that because of the landscape, hotel groups can go as far as Hilton suspects here, although I think some things won’t return to pre-coronavirus service levels
- I’m probably in the minority, but personally I think it’s reasonable enough that daily housekeeping never fully returns with the exception of luxury hotels. I have no interest in having someone in my room every day and the whole system just seems inefficient and unnecessary
- Room service and minibars weren’t a big money maker for the hotel industry, though they’re nice additions. I wouldn’t be surprised if minibars in the lobby were replaced with takeaway options and room service was permanently delivered in to-go packaging
- While I would be sad about changes in room service, when staying at hotels in the US, I usually use grocery delivery to order food because it’s cheaper, gives you more variety, and the food is usually better
Will hotel minibars survive the pandemic?
Hotels have reduced service significantly during the pandemic, both to cut costs and to minimize contact between people. The Hilton CEO is now suggesting that the hotel industry will have higher margins going forward, leading to more work efficiency in household, food and beverage sectors.
Personally, I think the hotel industry will change permanently, but not as radically as the Hilton CEO suggests. Ultimately, consumers still have certain expectations, and if Hilton doesn’t deliver what guests want, other brands will.
How do you see the development of the hotel service after the pandemic?
(Tip of the hat to see from the wing)