Covid-19 took the world by surprise in early 2020 and had a radical impact on our lives and businesses in every industry. However, the travel industry has been hit particularly hard, not least because governmental regulations have been put into place, preventing anybody from travelling who is not an essential worker (obviously definitions vary by country).
Ultimately though, travel restrictions will be lifted again and we will reach a “new normal” that enables travel again. The benefit that Hotels have during this time over other businesses in the hospitality industry is that they can already sell for this period of “new normal” today. This article, therefore, focuses on explaining to you how Pace’s algorithms take Covid-19 into consideration and the impact on Pace’s price recommendations and forecasts for nights in the future.
The Quick Summary
Pace will continue to provide you with price recommendations for nights during & after lockdown periods. However, periods in which your property was completely shut down due to a country-level lockdown won’t influence Pace’s predictions about future nights. We’ve added an understanding of these lockdown periods into Pace to ensure such nights are interpreted accordingly.
The general macroeconomic changes (which we all are currently expecting) will be addressed by Pace’s core algorithms, which are continuously evaluating how your property is performing. It’s important not to jump to conclusions on how things will change in the future. Pace will continue to evaluate your property’s historical & real-time performance to draw conclusions about changes in demand and your guests' willingness to pay - ultimately influencing forecasts & price recommendations accordingly to maximise your revenue.
If you’re curious to understand how all of this will be handled in detail, please read through the below which gives you a detailed understanding of what changes we’ve made to accomplish the above.
How will Pace interpret the impact of Covid-19
It is important to distinguish between two main driving forces which are currently affecting your property:
- Governmental Restrictions on Travel & Hospitality
- Macroeconomic Downturn
Although both of these points are very much related (1. being one of the causes of 2.), it is important that we look at each of them separately within Pace. Below explains each of these points and how we are handling them in Pace.
1. Governmental Restrictions on Travel & Hospitality
During the period of “lockdowns” hotels are fundamentally blocked from selling their rooms. So any data Pace is currently gathering on these nights is inherently flawed. The performance of properties for nights which fall within the lockdown period is influenced by drastic reactions (e.g. dropping rate to the minimum during times of high uncertainty) and occupancies which are driven by partnerships with organisations employing essential workers rather than public demand.
To ensure that these lockdown periods don’t affect your future nights (e.g. April 2021), we have decided to effectively exclude these nights from our data analysis. This means that for all of our customers' countries we are currently keeping track of when lockdowns have been put into place and when they will be lifted.
What does this mean for Pace?
For any night where we set prices or determine forecasts in the future, we won’t use any of the nights which fall within the lockdown period as a reference point. This enables us to not add any data to our analysis which was out of your and our control to price for. This means that your forecasts won’t be dragged down for next year even if you hardly had any occupancy this year. But what about the impact of the lockdown period on future nights? See below ⬇️
2. Macroeconomic Downturn
All indicators are currently telling us that Covid-19 will have a long-lasting impact on many if not all global economies. This will also include the hospitality industry leading to fewer guests in the near future. STR has been doing various analyses of different geographic regions to understand at what point we should arrive at the “old normal” again. But nobody really knows - until it happens.
What does this mean for Pace?
Based on your historical data and your real-time pick-up, Pace builds and continuously evaluates a model for your property to make predictions about your performance and price accordingly. If Pace identifies deviations of the norm in a consistent way, the model will adjust to this “new normal” and price accordingly to maximise your revenue.
Hence, Pace will adjust to each of our customers' properties independently, tailoring the algorithm to the changes in experiences in the market. Reacting to changes in demand and price elasticity is still, and will always stay, at Pace’s core.