Hotels in the face of Inflation in West Africa
Overview of the actual inflation situation in West Africa
From a managerial perspective running a hospitality business is an amazing and vigorous journey, numerous challenges pop up daily due to internal operational factors and market conditions amongst others. However, a trojan horse that should be faced with the aim to puzzle the hotel profit and loss is the inflation.
Depending on the region, the average consumer price inflation rate fluctuates in a wide value range. In West Africa the inflation rate rose from an average of 9.7% in 2014 - 2020 period to 12.7% in 2021 and 17% in 2022 (African Economic Outlook, 2023). In some countries, and taking the example of Nigeria the inflation peak rate forecast will reach 25.1% (see Graphic 1).
Image 1. Inflation rate in Africa at September 2023. Source: Trading Economics
Graphic 1. Inflation rate, average consumer prices (Annual percent change). Source: IMF, October 2023.
Over the past few years, the surrounding circumstances like the leap in price of transportation, food, petroleum, oil and gas resulted in a high cost of living, decreasing purchasing power and increasing costs for business with a negative impact in the economy backed up by inflation which by default triggered several changes within the hospitality industry.
The application of technology in the hospitality industry can help in reducing some of the negative effects caused by inflation. From hotel management companies, independent hotel owners and tourism & hospitality industry professionals amongst others could benefit from implementation from these new technologies as an ally in several areas as front desk, maintenance, finance, etc., to monitor cost fluctuation, implementing corrective measures and driving mechanism to enhance bookings maximizing profit and customer experience.
10 Digital Trends to support the Tourism & Hospitality Sector
- Implementing QR codes for contactless menus, no physical contact is required which helps offset some of the financial strain caused by inflation.
- In terms of guest registration, QR Codes can be used to streamline the check-in process, reducing the need for manual paperwork, and improving Operational efficiency.
- QR codes can streamline the ordering process for guests, leading to improved efficiency and potentially increased revenue.
- QR codes can facilitate digital payments, reducing the need for cash transactions, minimizing human errors that will affect other departments regards to accounting and finance.
- The App serves as a centralized platform to oversee and manage the guest experience. serving as a road map, for hotel services, amenities and location and as well a way for guests to communicate with hotel staff.
- A well-designed App can be used to manage reservations, check-in and check-out processes, and even order food and drinks.
- Guests can use the App to request services, such as room service or housekeeping, and receive updates on the status of their requests.
- App can help businesses with the aim to increase revenue and sales, improving their bottom line.
- App can also promote special offers and discounts (cross selling and upselling), encouraging guests to spend more money during their stay.
Seamless voiced-activated experiences
- Seamless voice-activated experiences can automate tasks in hotel operations, addressing safety concerns and staff shortage and comes as part of a contactless digital concierge strategy.
- Seamless voice-activated experiences provide a convenient and effortless way for guests to control their room environment, requesting information, controlling in room devices ordering room service, setting heating and lighting (positive impact in reducing energy consumption) and checking-out. This solution enhances the overall guest experience and make them feel more at ease during their stay.
Mobile and contactless technologies
- With contactless technology, guests can check in and check out directly from their smartphones which not only saves time for both guests and hotel staff but also gives them the satisfaction they desire.
- Mobile apps can be used to streamline the booking process, allowing guests to book and pay for their stay without the need for staff assistance. This reduces staffing costs and increases efficiency.
- Mobile and contactless technologies allow hotels to offer early check-in, room selection from digital floor plan, pre-arrival service requests, phone access rooms and public areas, menu offering, meals deliver directly to the rooms improving guest experience and hence sales.
Internet of Things/Smart Rooms
- IoT technology enables hotel staff to monitor and manage resources more efficiently, personalizes customer experiences, streamlines operations, swift repairs, control devices remotely and overall financial savings for instance the installation of sensors that can detect when a room is unoccupied adjusting the room according to customers preference with a positive impact in terms of comfortability, sustainability and guest satisfaction.
Biometric Identification and Facial Recognition
- Biometric identification and facial recognition can enhance security access within hotels and with these technologies, only authorized individuals have access to their rooms reducing the risk of robbery or unauthorized entry and adding selling points.
- Biometric identification can alter the check-in process for hotel guests. Guests can simply walk up to a kiosk, scan their fingerprints or use facial recognition and they are checked in within seconds and this not only saves time for the guests but also improves their overall experience.
- This technology could contribute to palliate staff scarcity in moments with high tourism demand.
- VR allows potential guests to have a virtual tour of the hotel before making a booking giving them a realistic sense of what the hotel has to offer, from the lobby to the rooms and amenities ultimately leading to increased hotel bookings and higher sales and stay ahead of the competition.
- VR can be a powerful marketing tool for hotels as content can be shared on social media platforms, hotel websites, and even VR platforms, reaching a wide audience and increasing brand visibility as the more exposure a hotel gets, the more likely it is to attract new guests and boost sales.
- VR provides an opportunity for hotels to showcase their unique features and offerings. For instance, hotel with a stunning rooftop pool or a luxurious spa, VR can convey potential guests into these spaces, allowing them to visualize themselves enjoying these amenities.
- By utilizing the power of VR, hotels that are on sale or need a loan participation agreement could motivate investors around the world to access in attractive investments without physical presence.
- Analyze historical data, market trends, and other relevant factors as AI algorithms can predict future demand patterns which helps hotels to adjust their pricing and inventory strategies accordingly, maximizing revenue potential.
- Enhancing customer service and improving guest satisfaction as AI-powered chatbots (used as digital concierge) handle inquiries provide instant responses, and even assist with room bookings resulting in better customer service and increased room sales.
- AI can also enhance pricing strategies to boost room sales. AI algorithms can recommend excellent pricing strategies for different room types and seasons. This dynamic pricing approach can help hotels maximize revenue by adjusting prices in real time based on demand and market conditions.
- One of the main advantages of using robots in the hospitality industry during inflation is their ability to work 24/7 without the need for breaks or overtime pay. This can help businesses save on labor costs and improve efficiency. Additionally, robots can also provide a consistent level of service, which can enhance the overall guest experience.
- Boosting hotel sales, Robots can play a significant role in attracting more guests and increasing revenue. Having robots in a hotel creates a unique selling point as people love new and exciting things, and a hotel that embraces cutting-edge technology is sure to catch their attention and this can lead to increased bookings and higher occupancy rates.
- However, it is important to consider the potential drawbacks of relying too heavily on robots in the hospitality industry. While they can handle certain tasks, they lack the human touch and empathy that is often valued in the service industry. This can lead to a decrease in customer satisfaction and loyalty.
- With the increasing awareness of customers on green technology, hotels that implement green technology are most likely to be guest first choice.
- In the hospitality industry, green technology can take the form of energy-efficient lighting, water-saving fixtures, waste recycling programs, and sustainable sourcing of food and materials with a positive impact in pollution reduction and climate change. Hotels that are aligned with green technology could use this commitment as a marketing tool increasing their branding value.
- The key benefits of green technology in the hospitality industry are cost savings optimizing the operational expenses.
As a hotel located in West Africa and operating under the aforementioned circumstances of inflation period, the importance to adapt the hotel business model in terms of implementation of new technologies is crucial due to the rise of tourism in West Africa in the short and medium term with some challenges that could be solved.
Let’s not forget that West Africa is the biggest region in Africa with over 400 million people, rich in culture and tourist attractions. West African Countries generate the highest number of outbound travelers in Africa according to UNWTO, 67 million international tourists visited Africa, bringing in a total receipt of USD 38 billion in 2018 (pre COVID-19).
In reality West Africa is the region in Africa that receives the least number of tourists arrivals. For this reason, building bridges to strengthen the tourism situation in the region will be an important matter to boost international and domestic travel and compensate the loss of foreign tourist to the region due to the inflationary period experienced mainly in Europe. However, as an example it is observed that West Africa is the most expensive regions in terms of passenger charges with an average of almost USD 84 for international travels (see Figure 1)
Figure 1. Average International Passenger taxes and fees per African sub region. Source: AFRAA / IATA ACIC, 2020.
According to the African Airlines Association “the high level of taxes, fees and charges is a critical issue and it is counter-productive for air transport development in Africa”.
It is observed that the top ten countries visited in Africa (see Table 1) are located in Northern Southern and Eastern Africa. So, it is evidence that the reduction of taxes and charges can allow a significant stimulation of demand on West Africa. This will help the airline sector to become more competitive and attractive.
Table 1. Africa's Most Visited Countries (2022). Source: Africa Facts Zone.
Another important factor to propel adaptation of hotel business model to new technologies is the notion that consumer behavior is dynamic, surveying the present-day consumer behavior towards hotel services in West Africa, from customer experience perspective, quality of service and satisfaction there is a huge gap yet to be filled, for instance in this present year of 2023 guests encounter problems like poor or no access to hotels online and offline, slow and inefficient standard of services etc., research has shown some hurdles faced by some hotels for instance low staffing, lack of infrastructures and technologies required to make customer experience seamless and effortless, these setbacks amalgamating with customer expectations cut short undoubtedly results to negative consumer experience.
A fundamental foundation in hospitality and tourism industry is consumer behavior, this factor raises or diminishes the interest of tourist and customers regarding a particular hotel, destination, products and services. Conventional consumer behavior elements like service experienced, failed service, cost, gratuity, and purchasing manner of customer sums the term standard of service/quality of service. Furthermore, research on adult customers indicates the rising significance associated to the market segment as consumer commitment and devotion is center addressee for consumer behavior.
Competition in the hospitality industry is on the rise, to compete with high-end hotels many low-standard hotels have begun implementing various technologies to improve guest experience, therefore the call for hoteliers to rise to the challenge is an exigency.
Evidently Egypt took the lead with almost 25,000 rooms in 103 hotels (see Table 2), and is streaking ahead of other countries with more than three times the number of rooms in second-placed Nigeria, and nearly three times third-place Morocco. Nigeria moves into second place this year, with 11 new deals signed in 2022 with BWH Hotel Group (two Best Western Plus-branded hotels), Marriott International (four hotels under their Marriott Hotels & Resorts, Protea and Residence Inn brands), Wyndham (a Wyndham and a Ramada), Continent (two deals) and one by newcomer Leva.
Table 2: Hotel chain development pipeline in Africa. Source: www.africabusiness.com
No sector is left out in the harsh experience of inflation, one out of many resultant effects of inflation is making certain products and services seem out of reach for customers. Maestros Hoteleros encourages hoteliers to have a clear understanding and prior knowledge on the right approach to tackle the issue of inflation and seize the opportunities that comes under these circumstances with the aim to have a proactive attitude instead reactive one, always there are improvements areas to tackle it.
The right track as an independent hotel is stay and defend its identity and selling in both off and shoulder seasons, to attain this the acclimatization of new innovative hotel technologies for a seamless guest experience is a necessity. Understanding the benefits of these technologies and their impacts on guests is a stepping stone to boosting the bottom line of your business.
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