How Hotels can Recession Proof their Business Now
How Hotels can Prepare for Recession
The tourism and lodging industries have suffered many negative impacts from past economic downturns due to reduced travel and spending. Hospitality has survived these massive roadblocks, with savvy managers and leadership teams finding ways to overcome them. Owners of small lodging properties can do the same to guide their business through a recession using the right strategies.
This article discusses how hoteliers can survive and even thrive amid economic turmoil.
How the Most Recent Recession Affected Tourism
An international study conducted by the Center for Hospitality Research at Cornell had some interesting findings:
- ADR (Average Daily Rate) dropped by 12.6%
- There was a 7.4% decline in hotel occupancy
- Revenue Per Available Room (RevPAR) decreased by 14%
- There was a reduction in the length of guest stays
- Guests booked their stays closer to their arrival dates to avoid changing their travel plans and losing money
Can you relate to some of these changes? Clearly, Covid had a devastating effect on the overall lodging economy, and many B&B, hotel, and resort owners remain concerned about keeping their doors open or managing financially during future economic downturns. However, no matter what the future holds for your lodging business, there are many steps you can take in advance to keep it strong.
Differentiate Yourself on Quality
In times of financial concern, sometimes people want ways to escape the humdrum of day-to-day life and escape into luxury. Upscale properties can use this advantage by centralizing quality as their main differentiator over competitors.
- Identify your differentiators including a list of traits, features, history, services, and characteristics of your hotel or resort.
- Create signature cocktails in the bar. Distinctive beverage programs can set you apart. If you don’t have one, do some research and build your own or consult with a mixologist to help you create a signature offering for your bar.
- Offer farm-to-table local food offerings. This could include locally produced vegetables, honey, meats, or chocolates.
- Invest in the A team of customer service.
- Invest Efficiently in Hotel Staffing
Look at the way your team is structured, as well as the way it is reporting to you. You might even be able to reduce the number of hours your team needs to work. Sometimes, outsourcing for certain services may be more cost-effective than doing it in-house with your own staff. This is especially true for distinct competencies that require unique subject matter skills. For example, rezStream has found that many of its clients can achieve much more with a few hours of outsourced digital marketing services than by putting a digital marketing specialist on its own payroll. In these cases, rezStream serves as an extension of the staff and helps market the property to drive more bookings.
Invest in Technology That Makes Your Work Easier
Technology can help your hotel boost occupancy, streamline operations, optimize ADR and save money. Hotel technology allows guests to make online bookings, enhances the guest experience, sends guest reminders, streamlines internal processes, and empowers smart solutions. Modern property management systems like rezStream Cloud helps hotels with this and more.
Be Proactive: Make an Action Plan
Many hospitality businesses wait until they are suffering before trying to find solutions. Instead, you should create a plan in advance. When your business slows down, have a list of concrete tasks to accomplish. You might investigate new package offerings, get in touch with your contacts, or market to your most loyal customers.
Work with your vendors and business partners on various aspects of your operation. For property maintenance you should have a schedule of things like landscaping, painting, and furniture replacement that is coordinated with your providers. On the technology side, whether it is rezstream or someone else, you should have dialogs around how to increase bookings, boost organic website traffic, drive email marketing sales, create and optimize content to successfully increase your revenue.
Apply Powerful Tactics to Nurture Your Future and Past Guests
The focus of your marketing and advertising should not be solely on attracting new customers. If the “Pareto Principal” (80/20 rule) is true at your business, a majority of your profits are generated by a minority of your customers. You need marketing strategies that nurture your relationship with your past guests continuously. Don’t let them forget about your property, so they’ll keep coming back.
- Send regular newsletters and e-blasts to your subscriber list using email marketing.
- Direct mail helps you find new customers and increase business.
- Boost guest communication at pre/post-booking, during their stay, and post-departure.
- Promote and build your brand with social media.
- Communicate important updates with guests via text.
Track Your Marketing
Let’s talk about your marketing budget. It is crucial to market your business during a downturn to attract new customers. Unfortunately, cutting your marketing budget during a recession is a common mistake that many owners make when adjusting their strategy. You should never completely cut out marketing as it is typically more expensive to stop/start than it is to modify. Instead, you can reduce your budget in “nice to have” areas while allocating the remaining budget to areas with the greatest opportunities. Example, during COVID some hotels and resorts cut their paid advertising cost on Google which over time pushed them down in search rankings. This in turn impacted their website traffic and direct bookings negatively. Conversely, for those businesses that kept paid advertising going, they saw cheaper terms to bid (lower cost per click) on thus allowed them to use the same budget to generate more clicks, website traffic, and high-margin direct bookings. Or, they were able to trim a portion of the paid advertising budget to maintain similar clicks, traffic, and bookings while allocating more of the budget to other marketing channels.
You should also keep track of your campaigns to determine which strategies and messages are most effective. Make sure you invest in marketing campaigns and technology that drive the best ROI (return on investment). You should receive detailed email marketing reports and analyze the results. You will get the highest-performing ads with A/B testing for paid advertising. And you should engage with performance reports for social media.
Be Smart With Discounted Room Rates
Specialized pricing can motivate consumers to take advantage of unique offers while they are available. If you’re considering discounts, keep in mind that they should maintain brand consistency and should not negatively impact your hotel’s reputation. Be on the lookout for price wars between competing properties, and plan how you will respond to them.
Rate Plans, Rates, and Seasons can get complex and hard to manage if you offer a variety of rates and/or discounts. Partner with a vendor like rezStream who can support several discount types including base rate discounts, stay-based rates, and time-based rates. Discounts can also be restricted by days of the week, calendar dates, or unit types. You can even create special promo codes.
Learn more about why you need a rate checker on your website.
Build Effective Marketing Campaigns
- Focus on special marketing initiatives to develop new market segments, along with discounts and special pricing.
- Here’s a list of ideas to make your campaigns more effective
- Pursue guests seeking unique, affordable travel experiences for business travel, conferences, or events.
- Analyze where the market is taking dips, how air travel and car rentals are performing, and car rentals are affected.
- Determine who is more likely to make purchases during this time and then identify your next promotional plan.
Create Bundled Offerings
Create hotel package ideas that your guests will want to book. To sweeten your offerings, you can create value-added packages that include discounted amenities or you can reduce room rates for booking a certain number of days at once. This can help to obscure the cost of rooms while still giving consumers an exclusive deal. Here are a few package ideas to get you started.
- Wellness packages
- Family friendly discounts
- Beer crawls or wine tours
- Coffee tastings
- Local delicacy tours
Consider Expenses and Seek Efficiencies
Probably the least preferred way of future-proofing your property for recession is cost cutting. No one likes to have to make budget cuts, but sometimes it’s necessary to create financial wiggle room and preserve the long-term survival of your property. This can mean reducing the staff you have at a property, decreasing hours, or improving efficiencies.
Here’s some cost-cutting and efficiency ideas for your property to increase profits.
- Get the best PMS (Property Management System) software in the industry to streamline operations.
- Enable mobile technology that helps staff communication with front desk.
- Be strategic about having staff at the property during peak times.
- Optimize your marketing to get the most out of free marketing channels on social media.
Focus on Loyalty Programs
Focus on loyalty programs that benefit your existing clientele and encourage new guests to regularly stay with you. Create benefits that excite your guests and drive how they take advantage of special discounts and bundles. Make sure you create unforgettable guest experiences, so they encourage others to take part in your program.
Conclusion
Economies go up and they go down. To prepare for those eventual downturns, hotels need to plan in advance. It can seem counterintuitive to spend extra time and money adopting new technology at your hotel to help prepare for a recession—but streamlining property processes, empowering existing employees, and improving overall efficiency are some of the best things you can do to stay prepared for financial changes. rezStream helps to increase bookings and manage your property in a way that drives revenues, reduces operational costs, and boosts efficiency. Find out more at rezStream.com.
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