Huazhu Group’s Reaction to COVID-19 Could Be a Roadmap for Future Health Crises
China-based hotel management firm Huazhu Group operates more than 3,000 hotels in more than 300 cities and boasts 100+ million members. So when the COVID-19 pandemic began in China, and its government implemented a series of travel restrictions to prevent the transmission of the virus, Huazhu had two options: close down all of its hotel properties and layoff staff or continue operating.
It would seem that closing down a hotel and laying off staff would be the smartest decision, said Mr. Qi Ji, Founder, Executive Chairman and Chief Executive Officer, during the company’s Q4 2019 earnings conference call. This is especially so since keeping hotels open would mean result in more costs during a time when there were zero revenue generation, in addition to the possibility of cross-infection.
“After addressing all the possible risk and opportunities, we choose to keep hotels open and keep our staff and customers safe, backed by a well-established platform,” Ji noted.
Not only did the hotels see no cross-infection between guests and/or staff, the company has recovered much more quickly than its counterparts. As of March 26, 93.5% of its hotels were operating, up from 50%. And occupancy at operational hotels has reached 62%, up from single digits just a few days prior, and 15-20% percentage points higher than its second closest peer (according to the company).
So how did Huazhu pull off – what some might call – a miraculous recovery?
First, Huazhu set up a crisis task force that included a command center and 18 regional sub-command centers. The task force communicated on a daily basis to “mobilize all available resources and coordinate efforts from all parties within and outside the Huazhu network,” Ji noted.
Next, the company leveraged H-Tone, its internal information platform, to communicate with employees and franchisees. It provided franchisees with timely, emergency hotel safety supplies. And it created a 26-step cleaning process for virus prevention and then trained all of its staff on this procedure.
Because the company never stopped operating, it was available to employees when they began returning to work,” said Co-President Jin Hui.
It was also available to the government, and more than 500 of its hotels were used for quarantine purposes.
The company also worked to assist franchisees in obtaining bank loans and provided legal counseling services. And it reduced management fees temporarily.
The company also leveraged its sales team during this time to find every sales opportunity possible. It worked with the government and corporations in addition to individual travelers to actively market itself as open, safe and available to the public. During sales pitches, it advertised its Hsinchu room package which included: the 26-step cleaning process, intelligent non-contact services and COVID-19 health insurance free for members. At the time of the earnings conference call, 80% of rooms sold were for its Hsinchu package and 50% of the demand was coming from employees returning to work.
The high demand for this package is directly related to the government’s rules that any person traveling from one part of China to another part of China must self-quarantine for 14 days before returning to their normal work routine.
“The majority of the quarantine we provide actually are for workers travel from one part of the country and go back to work in another part of country,” said Min Zhang, Executive Vice Chair. “So then a lot of the companies have to use hotel rooms for that purpose. And we timely provide service to those companies and meet their needs. And only a small percentage of the – very few hotels are really used to quarantine patients.”
Besides the hard work of its sales team, the company said its investment in technology greatly contributed to the company’s ability to remain open during the COVID-19 outbreak in China. Prior to the outbreak, Huazhu heavily invested in its online booking app, service check-in, check-out and robot delivery.
These technologies “became our selling partner and enhanced our leading position at this special period when customers requested safety,” said Co-President Xinxin Liu. From January 1 to March 24, Huazhu Hotels’ self-service machine (for both check-in and check-out) processed more than 1 million customers, and its robots delivered food and supplies to guests about 240,000 times. Additionally, it had 6 million online payments and 1.7 million online room selections. This was just customer facing technology.
The company’s internal technology, including H-Tone and its work app, allowed the company to make staff efficient workers while generating effective two-way communication among employees on a hotel network that spanned 400 cities in China.
“During the past two months, we have issued timely and complete SOP guidelines through H-Tone to our hotel staff,” Xinxin Liu added. “We have quickly collected 100,000 staff health and travel online report[s]. In addition, we have provided [a] 24 hour hotline [for] psychological counseling [to] keep our hotel staff mentally healthy as well.”