No one wants to think about the next recession-even though we know
another one will eventually rear its ugly head. With the last recession
still a painful memory, Cornell professor Sheryl Kimes wanted to provide
the hospitality and tourism industry with a toolkit full of ideas,
tactics and strategies to deal with next recession, whenever it may
occur.
To build this toolkit, she surveyed 980 hoteliers
worldwide about how they reacted to the recession-and, more to the
point, what worked and what did not work. You'll find the results in a
new report from the Cornell Center for Hospitality Research, "Successful
Tactics for Surviving an Economic Downturn: Results from an
International Study," which you can download at no charge at chr.cornell.edu.
Not
surprisingly, the number-one tactic used by hotels during the Great
Recession was price discounting. That said, many of these hoteliers
reported that discounting did not accomplish the job. Revenue per
available room fell because the reduced rates did not bring sufficient
increases in occupancy. On average, the hotels' average daily rate fell
by more than 12 percent, and occupancy dropped more than 7 percent.
Kimes said her respondents wanted to avoid open discounting in the next
recession.
Instead, the hoteliers reported that marketing tactics
were the most successful for bringing in business. Approaches such as
developing new market segments, developing additional revenue streams
and using pay-per-click advertising did well for hoteliers in many
areas.
For 2010, these hoteliers plan to continue using
marketing-related tactics like those.
Another successful approach
was rate-obscuring tactics, including value-added packages and
distribution on opaque distribution channels. Some hotels offered a
buy-one, get-one package, but most respondents were not fond of that
approach. Instead, they preferred to offer a free night after longer
stays, or offer free breakfast (if they did not already do so).
Throughout
this year, the hoteliers plan to continue these tactics, especially
distributing rooms on opaque distribution channels when necessary.
Based
on this research, it's important to consider the long term as you
formulate your plans for when the economy fails. Cutting service, for
instance, probably should not be an option, except in dire straights.
Many respondents noted that reducing services could damage a hotel
brand's image and make recovering rates even more difficult.
Here
are six points that could become an outline for your recession plan:
- Don't panic
- Be wary of broad-scale discounting
- Don't cut your marketing budget
- Consider marketing approaches
- Consider rate-obscuring tactics
- Maintain service levels
In
closing, although many respondents said they did, in fact, engage in
discounting, many weren't happy with the results, and they blamed the
"other guy" for starting the price war. The idea of developing a
recession strategy is to map out strategies for your hotel and its
managers not only to deal with a failing economy, but to deal with the
"other guy."
