6 ways to prepare for the next downturn
14 JULY 2015 7:33 AM
Although the good times are here for the hotel industry, the upswing can’t last forever. Are you ready for the next downturn?
GLOBAL REPORT—Good times continue to roll for the global hospitality sector with growth in the travel and tourism industry expected to increase by 3.9% this year, according to Ernst & Young’s “Global hospitality insights” report for 2015.
But in the cyclical fashion of the industry, the upswing can’t last forever.
So what should hoteliers be doing now to prepare for the inevitable down cycle, and how much can investing in their products and services now set them up for not so good times in the future?
For Eric Danziger, president and CEO of Debut Hotel Group and Hampshire Hotels Management, preparation now is absolutely key to success in a future downturn.
“Hoteliers should be pragmatic, preparing for when it is a bit more difficult to get those much-needed guests through a property’s doors,” he said. “Hoteliers that are prepared with a product and with services that guests value, appreciate and are willing to pay for will be ahead of the game.”
Here’s where to start:
Figure out what makes your business unique
According to Serena von der Heyde, owner and GM of boutique Georgian House Hotel in London, hoteliers should take time during the good times to drill down into what makes their business unique.
“When times get tough if our hotels all offer the same (the same look, service, technology, facilities and menus), the only differentiator will be price, and it will be a race to the floor,” she said. “We should use this time to focus on who our target guest is, and exactly how we can serve their needs. Trying to be all things to all people is not a strategy that will help when guests have more choice.”
Renovate now, maintain later
Like many hoteliers in New York City, midtown Manhattan hotel group Apple Core Hotels undertook extensive capital-expenditure programs during the peak of the cycle in anticipation of a downturn.
“Having a well-planned CapEx program in the up cycle minimizes maintenance costs in a downturn,” said Vijay Dandapani, president and COO of the group and chairman of the Hotel Association of New York.
Similarly, at Debut Hotel Group, properties including the Time New York and Dream Midtown are now completing major, multimillion-dollar renovations. Yet Danziger believes hoteliers need to find a balance between investing when times are good and saving funds so maintenance can still be carried out during a downturn.
“It is imperative to manage funds appropriately so that both scheduled and unexpected maintenance issues can be addressed even if times aren’t as good as they are now,” he said.
Invest in training
While investing in training is important in an up cycle, it’s also something that should never be neglected, von der Heyde said.
“I believe that we should be investing in training all the time and be prepared to continue to do so even in a downturn,” she said. “I am committed to offering the opportunity regardless, and if the economic climate means that I am struggling for training budget I will be flexible in other areas to ensure I can always do this.”
Sarah Fussey, director of marketing for Best Western Great Britain, agreed.
“Providing an exceptional guest experience is the best investment any hotelier can make. This is why we as a brand have rolled out a membership-wide training program all about the importance of unlocking the personalities of the staff and the story of the hotel when guests stay,” she said.
She said the program, “The Personality Experience,” is having a positive impact, with members who have rolled it out seeing a double-digit increase in Net Promoter Scores and staff satisfaction.
“Having happy guests means they are more likely to be ambassadors regardless of the economic climate, which is incredibly important in this digital and social media age,” Fussey said.
Optimize distribution strategies
“Distribution more than sales and marketing is a better means of inoculating or at least minimizing the effects of a downturn,” Dandapani said. This should include ensuring proprietary channels, conventional and digital, are as extensive as possible and building strong relationships with online travel agencies.
As von der Heyde explained: “We should be seeking structures that reflect a true partnership with the OTAs. That means fair commission rates and an end to practices like bidding on brand names, which simply raises costs for individual operators.
“If we work together with OTAs to build supportive partnerships with them, then both parties will ride out stormy economic conditions better.”
Explore how technology can help
Von der Heyde said mobile, metasearch and search engine optimization are vital.
“Along with social media, these are the methods we can use to build awareness and speak directly to our current and potential customers,” she said. “The challenge for us is to join them all up, to have a consistent voice across channels and then to assess what is working and what isn’t so our output is as efficient as possible.”
Danziger also believes a dynamic technology strategy is key to success. At Debut, the team is exploring various new technologies that they believe might be of use and interest to their various guests in the future.
“Mobile is big; we’re looking at everything from innovative (customer relationship management) tools to mobile key technology to creative apps targeting millennials,” he said.
Collect guest data
For Fussey, the strength of any business is its customers, making it crucial for hoteliers to invest in constantly improving and strengthening the bond between the guest and the hotel.
“That is where the difference can really be felt when the tailwind starts to turn to a headwind,” Fussey said, emphasising that a great way to do this is through getting the right kind of data from guests when they make a reservation.
“That way, they can be communicated with correctly, and in a way that fits their personal preferences, too. Having the right information can strengthen the post-stay after glow allowing the hotel to stay longer in guests’ minds and allowing the hotel to connect in a more targeted but personal way in future communications.
“And it is always cheaper to convince a guest to book again rather than acquire a new one,” she said.