Post date: 14-05-2020

There is little doubt that during these past few months, we have seen our world turn upside down. The nature of Sars-Cov-2 has forced governments across the globe to impose strict social distancing rules and in extension order the temporary closure of many businesses in the hospitality industry.

These compulsory closures may have caused a significant disturbance in the revenue streams of practically every business in the sector but are also a great opportunity for management teams to reassess the way they think about and conduct their business.

Two key aspects of the operating model of businesses in the sector that management teams should focus on, are Technology and the Management of Financial Constructs.

For many in the sector, one of the most obvious issues that has come to light, is their lag in technology adoption. This lag is often the effect of a lack of understanding of the role that technology can play in their business.

It is not uncommon for management teams to either not think about technology at all, or treat it as a big black box that often causes more headaches than it solves problems. Social distancing rules have come to prove this impression a falsehood. When done right, technology can reveal new and exciting business opportunities and increase the efficiency of standard operations. In hospitality in particular, technology should play a complementary but impactful role in the offered client experience and enhance the brand of the business. Furthermore, technology should be a catalyst in streamlining back office operations and in increasing the efficiency of deployed assets.

Management teams that understand the role of technology for their business, and have already attributed its justified space in their investment mix, are finding that they are now in a significantly enhanced position to cope with government regulations.

The second big issue that we have seen surface for many in the industry, is a clear deficit in their financial operations.

Entrepreneurship in principle involves risk and decision making under uncertainty. Established businesses that tend to forget this reality, find themselves in awe of unexpected events and more importantly at a loss on how to move forward.

The process of decision making can be significantly improved with proper financial management processes. Out of these processes, budgeting is unfortunately equally useful and neglected in the hospitality industry.

Management teams that adopt modern budgeting principles find their businesses in a far better position than that of their competitors. When designed and implemented properly, budgeting enables the quick and effective modelling of key forces in the market. This in turn allows for the definition of appropriate tactics according to various scenarios and makes the management of risk a structured and auditable process. Budgeting is a key ingredient of proactivity and proactivity is critical in the effective management of change.

The global pandemic with its sweeping effects on our everyday life, has many lessons to offer businesses in the industry. Our new reality should act as a lever for improving the way management teams structure their business and respond to the ever changing environment. In fact their viability may very well depend on it.

About the author: Stathis Rassias is the Managing Partner and Chief Strategist at Strategy Lens. He spends his days advising companies in the Hospitality and the Food and Beverages industries on how to empower their operations and succesfully navigate their markets. You can reach out to Stathis at srassias@strategylens.com or by phone at +30 2614 409 230.