The storm clouds of a global recession are still looming large on the horizon and headlines about the impending downturn bring back memories of 2008.
Back then, several quarters of negative economic growth brought uncertainty and turbulence to most business sectors. Hospitality was no exception.
But as we may be steering towards rough waters once more, we can draw on lessons from the 2008 downturn to cushion the blow.
While the industry landscape has changed since then, one thing is still true. Even in lean times, travel remains on people’s minds. The post-lockdown revenge travel phenomenon only reinforces that.
However, limited budgets will force many to adjust travel plans and reduce overall holiday spend. That could be by cutting back on trip length, choosing a different type of accommodation, staying closer to home, or choosing free activities over paid ones.
This changed attitude will lead most people to focus on value for money while they research upcoming trips. As an accommodation provider, the key will be to find the sweet spot between offering value and driving profitability.
Those who can strike this balance will safely navigate the coming storm. And once the clouds clear, they’ll be ready when business picks up again.
So how can you prepare?
With harsh weather as with recessions, preparation is crucial. It gives you the chance to brace for various scenarios and adjust more easily to new developments.
Communication within teams and across departments is an essential part of that. Now more than ever, it’s critical to break down silos to work more effectively. It’s the only way to develop the agile practices you need to detect, understand and quickly react to trends and market changes.
This is especially important as sales are likely to reduce for some time. In this situation, cash reserves must be managed carefully. They’ll be necessary to both fund operations and keep servicing debt.
That may likely require cuts in certain areas. But there are ways to minimise the need for them. Focus on market segments and distribution channels that continue to drive revenue.
Leverage market intelligence to have eyes on demand sources and how your compset is performing. Analyse competitor rate strategies in tandem with your own performance as well. This will reveal areas where you can optimise your approach.
Overall, prioritise actions that drive ADR instead of solely looking at occupancy and ensure you maintain your positioning.
Here, you’ll find a list of eight steps you can put into practice to help recession-proof your hotel.
Table of Contents
- Be aware of increased hotel room price sensitivity
- Leverage PMS data at your hotel
- Know your hotel's competition inside out
- Maintain your hotel's marketing programs
- Find the right balance when working with OTAs
- Strengthen your hotel’s online presence
- Keep service levels high at your hotel
- Invest in cost-efficient hotel tech that brings your hotel ROI
1. Be aware of increased hotel room price sensitivity
The 2008 downturn showed that luxury hotels were the only ones not to experience strong downward pressure on their rates. All other segments saw customers become more price sensitive. As a result, some discounting will be the logical step forward since excessively high pricing in this fragile economy can tarnish a brand.
But while reducing your prices will help keep rates in line with your compset, it shouldn’t encourage a price war. It hurts profitability in the short run and can erode your brand image.
On top of that, once rates drop, it takes a while to claw back to pre-recession levels. After the 2008 crisis, it took four years for them to recover to 2007 levels, Skift found.
The key is to discount intelligently all while ensuring quality and value. To do that you should leverage real-time rate intelligence. It reveals live pricing developments in your market, so you can easily maintain your positioning.
That will keep guests coming your way. Then use creative packaging and develop ancillary revenue streams to up your topline.
2. Leverage PMS data at your hotel
Your PMS is a treasure trove of guest data. Use it to better understand your customer base, identify opportunities and diversify your guest mix. If there is one guest segment that is performing well despite the slowdown, can you create a targeted campaign for them?
The best way to quickly and easily make the most of your PMS data is with a business intelligence solution, which does all the heavy lifting for you, when it comes to the analysis of data.
Look at ways to drive repeat business as well. Travellers who have stayed with you several times in the past are more likely to return.
Reach out to them with targeted email campaigns and advantageous offers. This generates commission-free direct bookings and keeps a lid on distribution costs.
3. Know your hotel’s competition inside out
It’s important to have your eyes on the entire market. That includes your traditional hotel compset as well as alternative, short-term rental accommodation such as vacation rentals or serviced apartments.
According to Skift, this segment already made up 13% of Europe’s lodging offering in 2018. Forecasts project ongoing growth since many travellers still see it as a cheaper and more convenient option.
Even recent disgruntlement with Airbnb regarding hidden fees isn’t likely to reverse that any time soon.
Take this into account during market analysis and rate shops. That’s easy with a tool like Rate Insight since it can pull data from any competitor in your vicinity.
Use this information to understand what others are offering and find ways to provide a better experience and more value.
4. Maintain your hotel’s marketing programs
Reducing your marketing spend may seem like a smart way to save cash in a slow-down. Unfortunately, this will only hurt your chances of gaining bookings now and down the road.
Instead, take an data-led approach to ensure your marketing spend goes as far as possible. A tool like Market Insight can give you a deciding leg up here by providing predictive demand data for your entire market.
Use this tool to effectively plan your next campaigns. Forward looking search data can reveal the length of stays that guests may be interested in, as well as the intended travel dates, and the geographical location where the searches originate from to indicate which source markets possess the highest demand.
Target these specific regions with tailored offers and digital advertising to increase your conversion rate and drive cost-effective direct bookings.
It’s also important to remember that many guests will want to cut their spend in some way. Appeal to these travellers by including add-ons they value for free if they book direct. This could include parking, late check-out, or a day pass for the spa.
5. Find the right balance when working with OTAs
As a result of the predicted demand slump, top and middle funnel hotel searches will drop. This will probably increase hotels’ reliance on online travel agencies (OTAs) such as Expedia and Booking.com to fill rooms.
For this reason, maintaining rate parity across all channels will become all the more important. Doing this manually can be a pain but regular parity checks are key to identifying and solving disparity cases.
Tech solutions like Parity Insight (for chains) and Rate Insight (for all other hotels) save valuable time and allow you to cover more ground in parity checks.
Even if you maintain parity across your website and OTA profiles, you can still make booking direct more attractive to your guests. For example, offer perks like free parking or breakfast to sweeten the deal. That will keep you from becoming overly reliant on OTAs and struggling to regain direct bookings post-recession.
6. Strengthen your hotel’s online presence
In economically challenging times, travellers are more likely to research carefully in the hopes of finding the most value-packed deal. That’s good news as it means more people may scour hotel websites and even social media for advantageous offers.
Ensuring your site is well-structured and easy to navigate is important if you want to benefit from this development. Use professional photos and convincing copy to draw in your readers.
Then offer attractive deals and packages to encourage potential guests to book direct. Lastly, use an accessible straightforward booking engine to create a seamless online reservation experience.
7. Keep service levels high at your hotel
Look where you can reduce costs in a way that doesn’t diminish the quality of service and customer satisfaction. This will allow you to attract and retain guests even during trying times.
As a result, your brand and reputation will endure, and you’ll have better chances of a quick recovery.
This might seem challenging since staffing is the first place many businesses look to cut costs. But if the pandemic and its aftermath have taught us anything, it’s that your team is your hotel’s most valuable asset. And given today’s staffing shortages, every hotel manager knows how difficult it is to find good team members.
Unfortunately many turned their back on the industry during Covid because it no longer felt like a desirable and stable place to work.
This is a chance to challenge that perception and instead seek new ways to optimise operations, create efficiencies and still provide a memorable guest experience.
8. Invest in cost-efficient hotel tech that brings your hotel ROI
Accessing the relevant actionable insights, to think and act faster than your competition becomes easy with a leading commercial platform in place that leverages the industry’s most comprehensive data sets.
That builds the foundations for success even when overall market conditions are working against you.Tech solutions are indispensable when it comes to streamlining workflows and driving bookings.
They make your business more agile and therefore better able to handle the uncertainty and rapid change that comes with a potential recession.
For example, in revenue management, a powerful business intelligence tool like Revenue Insight makes it easy to identify high- and low-yielding areas of business. It helps to better understand your performance, how the downturn may be affecting it, and where you could make improvements.
Having continuous access to these insights in real time allows for quick yet well-thought-out responses that can mitigate the recession’s impact.
The next challenging season may be fast approaching for the hospitality industry. While it won’t affect all markets, business segments, or brands the same way, it’s wise to brace for the possibility of declining demand and reduced willingness or ability to pay among travellers.
Some level of cost-cutting will likely be necessary. But, it’s wise to think of a more creative approach than purely staff redundancies. Winning guests over with a convincing online presence and great value for money will take a brand further during the downturn and beyond.
The same can be said for data-driven business decisions. As competition for bookings becomes fiercer, a more astute strategy than mere discounting is needed. See how our tools can help here.
OTA Insight is a cloud-based data intelligence platform for the hospitality industry. We provide hoteliers and revenue managers with a suite of revenue management solutions that deliver smarter revenue, distribution and marketing outcomes.
Launched in 2012 with a mission to help the hospitality industry visualise and leverage its data in the most simple way, OTA Insight delivers the most comprehensive, complete and user-friendly revenue and distribution management tech stack to hotel partners.
With years of constant development and enhancement, OTA Insight equips hoteliers and revenue managers with historical, current and future-looking data to guide decision-making with complete, real-time and visually friendly datasets.
Since its beginning, OTA Insight has won numerous industry awards and grown to become the leader in revenue management solutions for over 60,000 independent, local and global chain properties and management companies in 185 countries, supported by 300+ stellar employees.