On this occasion, the author invites hoteliers to reflect on the strategies they must execute to remain competitive in the event that a new economic crisis appears. By: Glenn Withiam*
In view of the great suffering of the hotel industry in the recent global recession, Sheryl Kimes, a professor at Cornell, wanted to offer a list of ideas, tactics and strategies to the tourism and hospitality industry that will allow it to solve the next recession, when it comes to happen.
To compile this list, he surveyed 980 hoteliers around the world about how they reacted to the recession — and, more precisely, what worked and what didn't. You'll find the results in a new Cornell Center for Hospitality Research study, "Successful Tactics for Surviving an Economic Downturn: Results from an International Study," which you can download at no cost from the Center for Hospitality Research (chr.cornell.edu) website.
Not surprisingly, the number one tactic used by hotels during the recession has been rate discounts. However, many hoteliers reported that the discounts failed to prevent the loss of revenue.
Revenue per available room (RevPAR) fell because lower rates did not lead to sufficient increases in occupancy. On average, the average rate per room (ADR) fell nearly 12%, and occupancy dropped more than 7%. Kimes reported that his respondents were looking to avoid open discounts in the next recession.
Instead, hoteliers reported that marketing tactics were the most successful in generating business. Approaches such as developing new market segments, developing additional revenue streams, and using advertising in the pay-per-click model performed well for hoteliers in many areas. By 2010, these hoteliers plan to continue using similar marketing tactics.
Another successful approach was rate darkening tactics, which included package and value-added distribution in opaque distribution channels. Some hotels offered a buy one, receive one package, but most respondents were not satisfied with that alternative. Instead, they preferred to offer a free night after a long stay, or the free bright side (if they weren't already). Throughout this year, hoteliers plan to maintain these tactics, especially by distributing rooms through opaque distribution channels when needed.
Regardless of the tactics he employs, Kimes and his respondents urge him to have a plan for recession. Based on this research, it's important to consider the long term when formulating your plans in case the economy goes down. Cutting services, for example, is probably not an option, except in desperate situations. Many respondents said that cutting services could hurt the hotel's brand image and make it even more difficult to recover rates.
In summary, based on Kimes' study, here are six points that could become a path for your anti-recession plan: Don't panic, stay cautious with large-scale discounts, don't cut your marketing budget, consider marketing strategies, contemplate rate darkening tactics, and maintain service levels.
*Glenn Withiam is director of publications for the Cornell Center for Hospitality Research.
