AMCHAM : The government has targeted Tourism and Hospitality as sectoral activities that they hope will grow. Please tell our readers how covid has impacted this sector, where things are at today and what is the prognosis for a recovery?
Gregory Tugendhat: Over the last few years, the government has indeed been targeting tourism generally and RegiÔtels itself was a beneficiary of this vision four years ago. Today, the impact of Covid is not altogether clear yet as it is possible to see mixed results, some hotels are suffering enormously, others quite the opposite (depending on entitlement to state support). Naturally Covid stopped travel and that of course had an impact on the sector as a whole, but not necessarily a negative one given the rapid response to the unprecedented situation. The Luxembourg state provided fantastic support to hoteliers throughout the Grand Duchy. The question is not so much did hotels survive the pandemic but more will they survive when the state support ends as there is nothing final about the Covid-19 pandemic – it has been around long enough to be a consideration when booking a holiday for the next year or two which will have a negative impact on bookings. Of course outside of Luxembourg, the situation is not so clear and 2021 has yet to establish with it will be a year of recovery or that of continuation.
Luxembourg has a unique position: Vast resources to inject into the sector and the time and desire to present the Grand Duchy differently from its neighbors and more importantly as a quality tourism product of interest to a great many people. The prospects for the hospitality industry in Luxembourg are terrific as the sector is receiving the support of a key economic driver when the contribution of the hospitality sector could be called into question, especially at such a time, the Luxembourg government is doubling down and really investing in a digital tourism initiative to support the long term goals of the sector.
We have not noticed a significant number of global hotel and tourism giants operating in Luxembourg. Who are the players and how do they fare compared to the global competition… are they up to the game?
Accor is the market leader in Europe and so it is with Luxembourg. There are a handful of international chains such as NH and Hilton, but generally speaking, the international hotels make up 15% of the total hotels in Luxembourg but over 60% of room inventory. The hotels are operated as either managed or franchised contracts. This ‘asset-light’ model of operated and managed properties are the modus operandi of the larger groups and that means that they need buildings that can justify the investments. Luxembourg real estate generating €14-€18 per square meter as residential or office space beats the €10-€15 per square meter that a hotel can generate so additional incentives need to be made to entice larger groups – hence the new arrival of Marriott in front of the station. It is anyone’s guess as to how the Luxembourg corporate hotel scene will bounce back from the pandemic as there are an additional 500 rooms coming online in the next 24 months without a clear demand for such availability. There are no more passenger 747s or A380s flying into the feeder markets of Frankfurt, London and Paris – 40% of all passenger capacity of airlines has disappeared overnight and the average large plane has 280 seats as opposed to 420 from before. Corporate travel is halted – Amazon in Luxembourg alone had over 9,000 room nights in 2018 – this is business that will not be coming back anytime soon. They may be up to the game, but is there and will there be demand for the 3,000 corporate hotel rooms in Luxembourg in 2023 and beyond? That is anybody’s guess at the moment.
Hotels and others in the hospitality /tourism industry are notorious as low wage employers who require great employee flexibility, hard work and long hours. Where do companies find such employees to work in Luxembourg for the salaries on offer?
Previously, prior to Covid, there was a stream of people queuing up to get into the industry. As an entry level employer paying a higher minimum wage than its neighbours, it was never difficult to recruit. The past 14 months have been kind to all employees that retained positions as they were in effect paid to stay at home. These same employees may have decided that they enjoy the work life balance or that they would like to have more of their weekends. It is again, anyone’s guess as to whether they will return to the industry once temporary unemployment scheme is finished, but of course the hope is there. The immediate challenge is getting people to fill the roles for 2021 which has so far proved a greater challenge than expected.
What is the value proposition offered by the Luxembourg hotel industry. Who are the customers and what are they expecting?
Luxembourg has an abundance of nature to explore and features to put their regional credentials in the spotlight. A great many of the hotels in Luxembourg are outside of the city.
The customers for 2021 and 2022 are mostly those wanting to embrace the ‘out-doors’ to have the opposite experience of the last 14 months. Luxembourg has maintained its small independent hotel sector and supported it handsomely to ensure that the hotels will be thriving after the pandemic is long gone. The customers coming are expecting authentic leisure experiences that can be shared via social media while ticking all of the buzz-word boxes (local, independent, regional, community etc. etc.) Luxembourg has these experiences in abundance.
How will the hotel industry in Luxembourg change over the coming 10 years?
I am not sure that it needs to change especially or that it will. One of the delightful things about the memories of tourism in the 1970s and 1980s is that it was overwhelmingly local and national tourism that took place over long-distance travel. The hotel industry in Luxembourg is naturally geared towards such an experience – visitors coming from no more than 3 hours drive away – there are over 10m people in this catchment area so plenty to get on with to encourage them over. The digitalization of the sector is not only a professionalization of the approach but also an optimization of the revenues. The result is that with more technology involved in the process, hotels will make more money and be able to reinvest in their product and be able to make cost savings in such a way as to ensure continuity.
Has the business model changed during the Covid epidemic?
Undoubtedly in that any hotel that has not digitalized its booking process is going to struggle more in the future than it did in the past. I believe that managing one’s inventory will become more important and treating each room like seats of an airplane – no two seats are ever priced the same and the process of selling each individually starts long in advance – keeping track of all of the changes necessary requires systems and training. Maybe the model has not changed, but the process should adapt a little swifter for those not quite up to speed.
What subsidy support has been provided by the government and has it been considered adequate?
The Luxembourg government’s swift adoption of an IT system to be able to cope with the many thousands of monthly requests and the process by which each of those requests were treated in a timely manner, in my experience, lead me to believe that yes, not only was the government support adequate but also targeted in the areas that counted. I am delighted that RegiÔtels is headquartered in Luxembourg rather than anywhere else. Through ODL and the Ministry of the Economy, RegiÔtels has had the drive and encouragement to expand its horizons and become a positive growth story regarding tourism throughout the pandemic.
Who are RegiÔtels clients and what is it that RegiÔtels does exactly to support them? RegiÔtels clients are any independent hotels that need expertise and key staff to fill at optimal rates but cannot afford them or cannot find them. RegiÔtels is an outsourced agency to fill hotels – anything concerning online distribution, marketing and promotion as well as sales and revenue management. Think of all of the places that you may come across a hotel, advertising, articles etc. what is the online presentation of the brand? Is the website appealing? Does it guide you to purchase? What is the price? What promotions are there? RegiÔtels ensures that all of the touch points that a client comes across before choosing to book a hotel and arriving at the front door of the hotel are covered – hence our slogan: You look after the guest, We look after the rest. RegiÔtels as a B2B service provider exists to support the hotel sell itself and so naturally no one will really hear of RegiÔtels, only their clients.
What are some of the ways that you and your clients have diversified to combat the negative impacts of Coronavirus?
Hotels have limited options with which to diversify. The clients of RegiÔtels have adapted their offering to provide take-away services or simply rental of rooms as offices away from the noise of home, but otherwise choices have been limited. RegiÔtels had to adapt quickly and has developed a number of new initiatives, firstly and most importantly, we were able to change our pricing model and service offering that helped us to sign up new hotels abroad and increase our room portfolio by ten times. As of May 2021, RegiÔtels now has offices in Asia, Europe and North Africa with an ever-growing team of experts in each. RegiÔtels currently has coverage on all of the days of the week and the South American office due in Q3 2021 will enable RegiÔtels to cover all time zones and offer round the clock service to hoteliers everywhere while spreading the risk of our revenue streams in the process.
How do you see the future of tourism globally and in Luxembourg?
It will survive and thrive as it always has. This pandemic is not the end of tourism, it feels dramatic as it is the first time in our lifetimes that such a situation has occurred, but it is the fourth such pandemic in Asia since 2000. Sars, Mers and H1N1 between them shut down borders and national activity for more than six months each in the countries they were present. I would say that the immediate impact is that long-haul travel is not very likely. Even medium-haul; I am not sure that we are going to hear about people popping off to Marrakech for the weekend in the near future, but there is such pent up demand that there is no doubt that talk will soon turn to ‘where did you go on holiday over the recent break?’ and such a thing can only have a positive effect on the sector generally.
Thank you very much Gregory for this interview!