So What’s A Hotelier To Do?
By Jeff French
Cayuga’s Marketing Group Leader, French has over 30 years of diverse marketing experience in hotels, resorts and conference centers domestically and internationally. His background includes sales and marketing roles with Intercontinental, Four Seasons, Marriott and Prime Hospitality. He holds a degree in hotel administration from Cornell University and a masters in travel and tourism from New York University’s graduate hotel program. For 10 years, he was an assistant professor of marketing in addition to his duties in the hospitality business. As president of his own consulting firm, French emphasizes integrated marketing communications to maximize the power of individual marketing elements.
Many sectors of the hospitality industry are reflecting a “doom and gloom” mentality. Leaders of the industry report poor 4th quarter 2008 results, and are projecting extremely challenging conditions at least through 2009.
In early March, 2009, Smith Travel Research reported substantial declines in the key performance metrics in the Americas for January 2009. Occupancy was down 10.5% ADR 6.1% and REVPAR 15.9 %. Many of the major companies saw this downturn in demand coming, and should have taken steps during their fall 2008 planning cycle for 2009, to cut their expenses, improve operating efficiencies and garner increased market share.
Hopefully, they and you remember that consumers are likely to expect the same guest experience they enjoyed before the downturn. You are certainly aware that corporate travelers have been told to watch their budgets, and perhaps to trade down from the hotel or restaurant they previously used. Many leisure consumers are contemplating a less expensive vacation or none at all. Their dollars have become more precious than ever. Thus, the customer’s perception of value is a key to success.
Corporate operating gurus, revenue managers and sales and marketing professionals have been helping unit management teams combat the impact of the current recession. If your operation carries the flag of a well known brand you probably have the resources to do what can be done to be successful, or to mitigate losses during the downward trend. But if you are an independent, and there are lots of those, you may need some help.
The doom and gloom crowd suggests a long period of poor performance and resulting poor profitability. Many owners and operators need help now. So what are they to do?
Take a look at some of the basics.
Reduce expense. Has your staff grown beyond what is needed? Are all of them contributing to overall profitability or guest experience? Are some programs no longer working or have they outlived their benefit? Do you have amenity creep? Don’t automatically eliminate them, but review them. Go line by line down your budget. And decide where you can save without jeopardizing your positioning.
Operational efficiency. Have you approached all your vendors for a better cost arrangement? If you have multiple outlets do they all need to be open for the same hours when business was good? Can housekeeping be more efficient? Has staffing been adjusted to reflect the lower occupancy?
Revenue management. If you have the good fortune of employing dedicated revenue manager is the role at maximum efficiency? Does management understand the value of the role? Are you yielding the best RevPar possible?
Can you earn incremental room revenue by giving customers value-added items that cost you little, such as a free breakfast, a round of golf, a spa treatment, a complimentary night during a slow period? Many hoteliers are offering value-added items bundled in attractive packages giving consumers benefits, which do not cost much for the hotel. And they do not degrade the positioning of the property.
Do you know all about your competition? Do you buy Smith Travel Research information? Do you use STAR benchmarking so that you know how you are doing versus the competitive market? Contact Smith Travel Research in Henderson, Tennessee, for programs they can deploy to help you.
Be very careful about publicly cutting rack rate. It is very difficult to make up lost revenue and increase rates later when business improves. It is also a dangerous tactic that sets a precedent and may hurt your relationship with your key customers. Certainly some key segments get discounts based on their volume with you. If you must lower price for key corporate or group customers get incremental business for the concession. And keep those arrangements confidential.
Marketing dollars spent on sales travel, promotion, advertising, public relations, e-commerce and distribution need to be reviewed to ensure that they are having the intended results.
What was a must sales trip, a gift, or a promotional expense in the past may not be appropriate today. Those items were probably budgeted last fall. On the flip side, perhaps traveling to see key customers needs to be increased.
The Sales Team. These people are the revenue producers of your operation.
Be sure they have the tools they need to be successful. Have you trained them so they know the competition? Can they differentiate your product from the others? Do they understand the concept of building long term relationships rather than one - off bookings?
Think about the possibility of additional sales representation if you have little or none. Consider hiring more sales staff or an outside sales and marketing company to enhance your recognition in the marketplace.
Does your sales department have leadership, general manager support, goals and incentives? Are they sufficiently well motivated? Get management out of the office to see customers. A GM thanking existing customers or pitching new ones is invaluable to the sales effort. It also encourages your sales team when they see the boss working hard to get business, too. Other managers can help in this effort!
Are you protecting your existing business? Make sure those customers know you appreciate their business. Empower your sales team to work more closely with customers. You may need to discreetly provide customers with a special arrangement to maintain or increase business from them.
Public Relations. PR is often the best “bang for your buck.”
Positive publicity whether created by your staff PR person or an outside agency is often an inexpensive way to keep you as the place to stay or go. It is often a forgotten tool that is unused or is used badly.
Create a plan that is in concert with your other strategies. Integrate tactics to support promotions, ad campaigns or other efforts to increase sales. Strengthen your positioning in the marketplace. Make sure you track efforts and results.
Promotion. Partnerships with other hospitality entities can be valuable.
Travel agents, airlines, convention bureaus, tourism organizations, chambers of commerce are suffering in this down market, too. Look for cooperative effort with them if their promotions or activities fit your needs.
Advertising. Make sure it fits your image.
Be sure the ad campaign represents your positioning and gets you incremental business. Perception is important. Are you online? Could you use pay-for-click-ads, print, radio, TV, barter or cooperative campaigns?
Remember that the best promotions do not work well if no one knows about them.
Distribution. Do customers know who you are?
Are you working with travel agents, wholesalers, online companies when appropriate in selling your rooms? Do you have a website that accurately and effectively presents your product?
So what do you do now?
I am sure you are already doing many of the things I have suggested. I have posed many questions because they may provide you with additional insight into things that might be appropriate for you to get through this very difficult period. Explore the other opportunities which would fit your operation. Doing nothing is really not an option.
If you do not have the resources to implement significant changes, there is a wealth of talented consultants who have endured previous economic down turns. Many are veterans who are keenly aware of the important things to do. They are objective evaluators of your plans.
Do remember that things will improve. They always have. But you need to work smarter than ever in this challenging economic climate
