A response and solution to surviving the rugged economic downfall: As a seasoned hotelier of over 40 years, I have worked through five previous recessions, ergo, I feel qualified to provide insights into what we should do as we face the sixth recession since the 1970s.
If we have not preserved cash, the financial portion of this brief article is perhaps the most critical. The human side is near and dear to my heart, but the financial side weighs heavily.
Here is my suggested plan for recovery, not from COVID-19, but from the economic wounds it is causing.
Financial Relief
The most critical first step, if not already taken is to project our expenses for the next 90 days. This requires contacting the lender and asking for some type of relief. A forbearance letter requesting a 90-day period of no payments is a good first step and additional requests for relaxed debt-service coverage ratios and others are logical as well. Ensure that your request to the lender includes your commitment to the hotel, a new forecast for the balance of 2020 and history of your guest service scores, quality assurance reviews and a reminder of your timely payment record.
Most franchise companies will be open to some type of relief and we will need that. Federal, state and city officials will be important calls as relief will come from many government sources. Preserving cash is so critical that even if you just received 30 days relief from Transient Occupancy Tax, it will make your cash flow improve.
Vendors can be very forgiving if we have been loyal and current with bills and might be able to provide services at a discount if you continue to use them now. Utility services have not been tested in this environment, but it is worth a try. All in-house contracts should be reviewed. Landscaping and trash removal, copiers and any services must be scrutinized. We must prioritize vendor payments and reach out to national providers for deferred payments.
The most difficult part of this is the layoff of staff. They must fully understand that there will be schedule reductions and furloughs or layoffs. If we are able to keep their insurance intact with hopes that they can return to work relatively soon, they will be grateful. There are so many resources for them from the government and from us in the form of information. We are considering a gift card that our team members can use while navigating this crisis.
Demand Generation
Reach out to local community organizations to see what is going on in the community. While we may be told that social media should go silent, I say engage! We are part of the fabric of our community. When we posted on Facebook that we had suites at a reasonable rate for those who wanted to self-isolate, we got questions about whether or not our fitness rooms were open, how we were serving food and more.
Answer honestly – in our case, we allow one guest at a time to reserve the fitness room for 45 minutes. We sanitize it after every use and hence can get one guest in per hour. For buffet food, we do not allow guests to touch anything. Our employees will serve what our guests want.
Contact churches and other non-profits, local care providers to see if there are partnership opportunities. Contact universities for students unable to stay in dorms and those working remotely to see if they would like the convenience of a room that provides WiFi, no clutter, a desk, a place to lay down and rest, a fitness room, pool, food, beverage, adult beverage, basic retail services and in some cases much more. The market will start coming back in mid-April and May at levels that only feel good because of where we are today.
Operational Efficiencies and Alternatives
We can reduce the size of our hotels by closing off a wing or floor, saving on utility consumption, staff services and supplies and completing maintenance work that is difficult to do when we are full. Housekeeping services can be offered to guests on a request-only basis.
Contacting guests in advance to ensure that they are still planning to travel is prudent. If all else fails, there will be a need for rooms for those who test positive for COVID-19, but are not ill, those who have mild cases and if that market is not appealing, there are the homeless who really need shelter before the weather warms up.
At the end of the day, this is about compassion for employees and surviving the worst economic challenge many of us will ever face together. We will survive and must remember those who are victims of this virus. May our luck turn for the better and soon!
Robert Rauch, CHA, is a nationally recognized hotelier and President of R. A. Rauch & Associates, Inc., a leading hospitality management and consulting firm. Rauch has over 35 years of hospitality-related management experience in all facets of the industry. Widely recognized as the 'hotel guru,' Mr. Rauch maintains a blog where he expounds upon insights and trends in the hospitality industry at www.hotelguru.com. Along with the blog, he also publishes Hospitality Innsights, an electronic newsletter that is distributed monthly.
Mr. Rauch held nearly every position in the hotel business including General Manager of full-service Four Diamond hotels for Hilton and Embassy Suites. His education includes a bachelor’s degree in Hotel Administration from Western International University and a master’s degree in Tourism Administration from Arizona State University. He is a Certified Hotel Administrator and has served as chairman of numerous tourism organizations nationally and in the western U.S. He has been directly involved in developing several leading brand hotels, some of which the firm still owns and manages. R. A. Rauch & Associates, Inc. currently operates hotels in California, Arizona and Colorado with several under development.
www.rarhospitality.com
