Whether or not we are poised for a recession by 2021 is the subject of much debate but we seem to be trending in that direction. In the wake of the coronavirus, the Federal Reserve just cut interest rates to 0% – a 50-year low. With coronavirus headlines changing by the hour, Bloomberg Economics most recent estimate puts the chance of a U.S. recession within the next year at fifty-three percent.
Hotels are extremely susceptible to changes in economic cycles, geopolitics, health scares as well as things like weather issues and terrorist attacks. Regardless of whether or not we see a recession in 2020 or 2021, as a hotel owner, you should be taking steps now to recession-proof your hotel. In this article, we share three tips for how to do that.
Recession-Proofing Strategy #1: Book to the Future
It’s an easy trap to fall into – focusing on filling rooms today without a strategic eye on booking groups in the future. Booking room blocks is an excellent recession-proofing strategy because it locks in revenue. If you don’t book groups in favor of leveraging late-booking demand, you may be in for a rude awakening. If there is a downturn in the future, at the very least you can count on that pre-booked group revenue to keep you afloat. That’s why it’s important to have one eye on bookings for tonight and the other on securing bookings for six months down the road.
Actively reach out to regional and strategic partners and offer them competitive rates to host that board meeting, special event or holiday party. Then fill in the gaps with your base business instead of the other way around. This is a savvy strategy that helps even out the highs and lows and creates some padding for a future economic low.
Recession-Proofing Strategy #2: Staff Up with Purpose
One of the most critical aspects of a hotel’s profitability is the cost of labor and there are ways to assess it now so you are prepared for a future downturn. The first step is to ensure you have the right team in place in every area. From back of the house kitchen staff to your guest-facing staff at the front desk; make sure you have the right people in place now before a recession hits.
Who are the right people? Those who have not only shown loyalty to you as an employer, but have also shown loyalty to your guests in the form of a “whatever it takes” attitude toward customer service. In addition, the right people possess a positive attitude even during tough times and the openness to being cross-trained for other areas. If you have these people employed throughout the hotel, they will stick with you through the lean times; adapting by taking on additional responsibilities for a while. This is how you recession-proof your staff..by planning for future re-balancing of staff.
Recession-Proofing Strategy #3: Strengthen Your Digital Presence
According to industry experts like Alex Cao, a Director of Revenue Management for Sceptre Hospitality Resources, “I would say it’s important to review and adjust your digital presence no matter what lies ahead. In a downturn, guests are going to be shopping for deals. Ensuring your websites have the best appeal with a favorable impression is important to maximizing sort order. It increases your odds of being one of the top options of accommodation venues.” What is the current state of your website? Is it winning you business or losing it? Could a refresh help you stay relevant and more competitive? Then do that now before you actually need it.
And keep in mind, digital presence extends to your social media as well. Bernard Baumohl, Chief Global Economist of the Economic Outlook Group (EOG) said during a downturn, the best-positioned hotels will be those with aggressive, forwarding-thinking marketing plans, strong social media platforms, and contingency plans.
Whether or not a recession is looming may still be up for debate, but your recession-proofing strategy shouldn’t be.