Wuhan hotel serves up innovation during lockdown
For a finance director in the city where COVID-19 hit first, lost business led to creative strategies.
At midnight on 8 April, a celebratory light show lit up Wuhan's skyline. Messages on office buildings beamed, "Hello, Wuhan". The world's first city to be put under strict movement control to contain the coronavirus's spread ended its lockdown after 76 days.
In the Chinese industrial hub of 11 million, the reopening of highways, train stations, and the airport began an exodus of tens of thousands travelling back to their cities and workplaces. In the coming months, the city will be closely watched worldwide for lessons on how communities can recover from vast humanitarian and economic losses.
For businesses emerging into a new normal, how will they grapple with lost business opportunities? What inventive ways and out-of-the-box thinking will we see?
At New World Wuhan Hotel a few days after the end of the lockdown, 209 health workers who had been caring for coronavirus patients in intensive care units — the last remaining group sent from another province — were given a grand send-off by the city government and hotel staff. As a police motorcade escorting the buses of medical workers departed from the hotel, preparations for a reopening began in earnest.
But when the hotel reopens, will there be visitors to Wuhan?
"The pandemic has caused a huge change to our industry and market," said Janet Yan, FCMA, CGMA, finance director of New World Wuhan Hotel in an interview with FM magazine.
In January, when the city was put on strict quarantine measures to contain the virus's spread, the hotel immediately closed its restaurants, cancelled wedding banquets, and refunded room bookings.
At a customarily busy time when families gather for a Lunar New Year reunion dinner and up to 90% of its 327 rooms are occupied, the five-star hotel was closed to the public and only hosted the health workers and about 20 stranded hotel guests who didn't manage to leave the city before the lockdown.
Part of Rosewood Hotel Group — a subsidiary of Hong Kong-based conglomerate Chow Tai Fook Enterprises — which owns 39 luxury hotels from Paris to the Caribbean with more than 10,000 employees, the hotel typically hosts domestic business travellers. It also attracts some international travellers from France, the US, and Japan due to manufacturing facilities that automakers Peugeot-Citroën, General Motors, and Honda set up in the city with local carmakers.
With many countries still battling the coronavirus spread, the travel and hospitality industries may take the longest time to recover. The longer a crisis, the more likely temporary measures become permanent fixtures.
Already, millions of office workers worldwide are being forced to work from home and replace face-to-face interactions with virtual meetings. Travel budgets have been slashed to save costs. Many CFOs are considering permanently moving employees to full-time remote positions. In finance, it's also becoming clear that remote auditing is possible. Virtual annual general meetings are also springing up out of necessity.
For hotels, the road to recovery will not be as simple as picking up where they left off.
Quest for new customers
But Yan's team has not been caught unprepared.
In the past two months after the initial crisis response mode, Yan's finance team of 19 employees, working from home, started researching new business opportunities. They first looked at new businesses for the hotel's restaurants.
"Because business or travel trips will be stopped, the only group of people we can rely on is our own community," Yan said. "We need to expand our consumer channels."
As a finance director whose role includes business partnering, Yan said part of her remit is to support the guest services and restaurant divisions' marketing efforts. "During this time, we're constantly thinking about what's next in our operational strategy."
"Previously, when our guests walk into our hotel's restaurants, what they seek are luxury and first-class service and dining ambience," Yan said. "But if these can no longer be our main selling points after coronavirus, we need to reconsider customers' needs."
And their search for answers started with a humble breakfast item — steamed buns.
From social media posts by friends and relatives during the lockdown, her team members realised that many started cooking a lot more and a recurring theme in families' kitchens was wheat-based food — breads, buns, noodles, and dumplings. Likes and comments abounded for these posts.
"So we thought, what's a food item that's suitable for the young and old in a family, easy to deliver, and can be sold at an affordable price point?" she said. They also scrutinised available online sales channels and the additional costs to sell on these channels.
Brainstorming sessions led to steamed buns, or baozi in Mandarin, as the first test product. Soft, pillowy, and stuffed with sweet or savoury fillings, they are one of the most common breakfast items in China. A morning rush to school or work for many includes a pit stop at their neighbourhood steamed bun seller.
The main objective was to assess the market's demand for ready-made food delivered to customers' doorstep, Yan said. Would a five-star hotel brand associated with high quality and food safety standards be enough to win over consumers from more recognised food brands?
Using neighbourhood group chats
As eight pork buns in a packet, vacuum sealed, and delivered to designated pick-up points in neighbourhoods, the test product gained traction. At CNY 48 ($7) per packet, the hotel sold 300 buns on the first day the product was rolled out in February. In following weeks, the staff grew bolder in their offerings. Durian pancakes, cakes of all kinds, and roast duck were added to the list.
What's fascinating is how they're reaching these new customers. It's a lesson in spotting consumer trends and making quick adjustments.
During Wuhan's lockdown, when one person from each household could go out only once every three days for necessities, a new form of buying and selling emerged.
Families that didn't want to venture outdoors at all bought groceries online. Small neighbourhood grocers that couldn't compete with big supermarkets with online stores decided to set up chat groups on WeChat, a social media platform, to take orders.
These neighbourhood retailers added customers they knew into the chat group and posted notices in neighbourhoods to get more people in the community included. These small retailers essentially created their own online platform for residential neighbourhoods to sell vegetables, fruits, and meat.
The social nature of the chat platforms sparked interest amongst users as they could see what neighbours and friends were purchasing, said Ashley Dudarenok, founder of ChoZan, a digital marketing agency in Hong Kong. (See the sidebar, "What Is Community-Focused Retail?")
As the lockdown continued, the number of community chat groups exploded. Bigger brands such as Walmart and Alibaba's Freshippo entered the space by building apps within WeChat called mini programs. The neighbourhood group chats also evolved beyond groceries to community groups for parenting and fitness.
After the lockdown, this decentralised, community-focused service and product sales model may continue to be a strong trend, Dudarenok said.
The hotel seized on this new opportunity. It set up online groups for neighbourhoods it wanted to target. The orders are then delivered to pick-up points in neighbourhoods with help from apartment buildings' management.
But the test products need to be perfected. Yan said hotel staff were working on product taste and delivery lead time to better target these communities. A bonus would be social-media-worthy aesthetics, where "the packaging or design compels them to take pictures and show it off to friends on social media".
Reinventing hotel's place and purpose
Steamed buns aside, Yan's team has also been cooking up other business plans.
The hotel plans to propose outdoor weddings to its customers who had to postpone their wedding banquet bookings. Just as necessary as food, "people still need to get married", she said.
Chinese weddings are usually large-scale celebrations with friends and extended family members invited. In the countryside, the whole village would be involved. In cities, indoor banquets in restaurants or hotels with hundreds of guests are common. But this will change as people take precautionary measures to avoid contracting the virus.
With the warming weather, people will want to be outside. The open space will allow wedding guests to practise physical distancing while enjoying the social aspects of a gathering, Yan said. In March, her team attended an online wedding expo to gauge consumer demand for wedding events in the coming months. Further planning will include pinning down suitable outdoor locations and pricing for these packages.
Suite rooms for staycations, gym memberships, and steak dinners are also on pre-sale ahead of its reopening. The deals have longer-than-usual validity periods on them, some up to a year. This is to assure customers that they can take advantage of the discounted prices well into the future after the pandemic subsides, Yan said.
It's about reinventing what a hotel can offer by taking apart services typically reserved for room guests and marketing them piecemeal to a wider base of customers. Guests may walk into the hotel for different services, but all enjoy the five-star experience. This rethinking of a hotel's place and purpose is an idea long espoused by the group's CEO, Sonia Cheng.
"Traditionally, it's all just about people coming in. You stay over in the room. You use the restaurant, the meeting space, for events. That's it. But now I think it's about building community," Cheng said in an interview with travel news site Skift. "People want to be connected ... the behaviours of consumers are changing. And we need to change and re-look at the whole hotel real estate model to cater to that."
Connecting finance and the business
For finance professionals, the pandemic has made it even more apparent that risk management skills are vital, Yan said.
"Before this crisis, a company may not even realise that it is only three months away from running out of cash," she said. "You may never think of crisis preparation and crisis recovery planning because things have been going smoothly."
But in moments of emergency, companies realise there needs to be contingency planning — what to do when workers can't show up at work but there's work to be done, or if the finance processes are really traditional and banks are closed, how to keep the business going, she said.
She also thinks the notion that a management accountant's work connects both finance and the business will receive greater buy-in and influence in companies after the coronavirus.
"The pandemic has altered companies' business opportunities, business model, and operations," she said, adding that a management accountant will really need to keep up with the operational changes and evaluate the stakeholder relationships.
"By doing this, you will have an even deeper understanding of the data you have and not a case of just acknowledging and recording the revenue numbers from operations."
Road to recovery
As the hotel reopens, forecasting and reforecasting will continue as the finance team keeps a close eye on revenues and profits. Her team will also need to look at more ways to control costs and increase cash flow to get through this downturn before the business fully recovers. It has so far avoided layoffs, which was key in sustaining employee morale, Yan said.
Another key activity is procurement. The hotel used 450 kilogrammes of disinfecting alcohol during the lockdown. Stocking up on disinfectants and protective equipment for its staff is crucial to keep the hotel doors open.
"How will Wuhan's business environment look like, whether it will recover to pre-coronavirus levels or not at all, we need to know these scenarios," Yan said.
But Yan admits that there's simply not enough information at this point for complete answers to those questions.
"I honestly don't know. I see the manufacturing industry and the government workers back to work," she said. "But our industry is one of the hardest-hit, and we may be the last to recover from this. Of course, our hope is we can at least return to normal operating conditions by the end of the year."
On the day when the lockdown ended, Yan and her husband went for a drive around the city. They are feeling more at ease. Their 7-year-old son, who, during the lockdown, couldn't return to Wuhan from what was supposed to be a weeklong Lunar New Year holiday at his grandparents' two provinces away, was finally home after three months.
They saw young couples out dating, people and cars back on the roads, bringing back a glimpse of the exuberance in the city before January. But the city is no longer the same and may never be the same again. Of mainland China's total reported casualties, the vast majority have been in Wuhan.
"Yes, we may be in the epicentre, but when I speak to friends and co-workers, we're all still very optimistic," Yan said. "No matter how much longer we need to wear masks or how much longer we need to be on guard against the virus, we're doing the little that we can in our work, in our personal lives to help this city bounce back to life."
What is community-focused retail?
Buying and selling via chat groups on WeChat, a ubiquitous messaging and social media app in China, emerged when cities in the country went on lockdown. Because people weren't able to go to their neighbourhood markets to buy groceries, sellers at small fresh food markets were seeing almost zero customers. Unable to set up online stores overnight but determined to find customers, these sellers started creating group chats for nearby neighbourhoods to market their fresh produce.
The chat groups are typically arranged according to apartment buildings or neighbourhood compounds, and they reach an immense number of consumers because "the density of population in China is unmatched. In a one-kilometre radius, there may be hundreds of thousands of people", said Ashley Dudarenok, founder of ChoZan, a digital marketing agency.
How it works
"Every day [sellers] would send them a message saying, 'Hey, we have spinach and fish today'. Think about what happens — people on the group would make their orders and even if you were not thinking of buying anything, you're seeing all your neighbours purchasing things and then you also want to buy it," Dudarenok said.
Purchases would then be delivered at designated times each day to these neighbourhoods. There's also group buying: If buyers in a neighbourhood chat group buy above a certain amount, the seller would offer discounts. So, there was incentive for neighbours to speak to each other and group their purchases together to benefit from the discounts. Neighbours also acted as reliable reviewers. A neighbour could ask someone who bought something if the products were a good buy and if they would recommend them.
"Even though we're getting back one way or another, people are rather anxious and social distancing is going to be the reality in 2020," Dudarenok added. "This [community-focused retail] is a new way to be connected and to have this community — to buy, consume, share and talk, and enjoy. You get to know your neighbours at a different level."
Why it matters
Costs to acquire new customers have increased tremendously in China, and this is a comparatively low-cost method to obtain a database of new customers. Weeks into Wuhan's lockdown, big businesses such as Walmart and Alibaba's Freshippo entered the space by creating mini programs (an app within an app) to sell to WeChat users. The mini programs are not new, but the pandemic has accelerated consumers' use of these programs.
"Companies need to find a way to make the consumer journey less lonely," Dudarenok said. "People want to be part of the community, part of ... a group like them. Those that understand it early enough and use technology to make the process seamless, fun, and easy will be the biggest winners."
Resources
CGMA report
CGMA tool
"Porter's Five Forces of Competitive Position Analysis"
Alexis See Tho is an FM magazine associate editor. To comment on this article or to suggest an idea for another article, contact her at Alexis.SeeTho@aicpa-cima.com.