As economic conditions continue to fluctuate around the world, more and more businesses are facing the prospect of an economic downturn or a recession. If you are a hotel owner or manager, it is important to be prepared for this challenging time by developing strategies that will help protect your business and keep it running smoothly. Some key strategies to consider include increasing your marketing efforts, cutting costs where possible, and improving your customer service and operational efficiency. With the right approach, you can help ensure that your hotel remains viable and successful even in times of economic uncertainty.
1. Review your current financial situation
Running a hotel can be expensive and frustrating as it is more often than not at the mercy of external factors. These could be economic cycles, political instability, terrorist attacks, weather, or for a recent example, the recent onset of a global pandemic.
Ideally, a successful hotel should have more demand than supply, but that is not always the case. A pragmatic appraisal of your hotel finances should help you decide where and how costs can be cut down when the demand falls.
Don’t use a one size fits all strategy while planning your budget. Be proactive for all potential disruptions in the industry by implementing a dynamic budget strategy that incorporates flexible operating models based on demand, staff availability, operating hours and liquidity in hand.
This should help create financial flexibility that will give you a breathing room for implementing a contingency plan during a recession. It can also help you weather the storm without breaking your balance sheet.
2. Consider implementing cost-cutting measures
Cost-cutting measures are a no-brainer strategy against battling a recession. Using an asset-light approach that reduces capital intensity also helps in efficient allocation of limited resources.
Some cost-cutting measures you could adopt are:
- Invest in energy-efficiency solutions and green practices like smart lighting and sustainable products. These can significantly increase savings while maintaining a good standard of service.
- Renew your partner ecosystem by drawing up and renegotiating contracts in accordance to the changing demands.
- Cross-train your staff for effective utilisation of your staff and to maintain the standard of service.
- Embrace automation to reduce the workload of your staff while ensuring sustained high quality of service.
- Conduct a technology audit to assess the performance of your software stack, website, and other technologies. This helps identify areas where performance can be boosted and where cuts can be made.
3. Look for ways to increase revenue
When witnessing periods of low occupancy triggered by low demand, your revenue diminishes while expenses continue as usual. To prevent a cash crisis, it is critical to explore ways to increase revenue despite the low demand.
An effective way to increase revenue during an economic downturn is by implementing promotions and discounts. This might seem counter productive, but this approach will help your business in the long-term. For example, you could offer discounted rates for advance bookings or loyalty programs for return customers, which will help attract more guests in. To offset the gap in income and expenditure, look for additional avenues to increase your revenue.
For example, though the pandemic saw scores of bookings getting canceled amid a period of uncertainty, the industry made billions in the sale of gift vouchers and transforming pantries into grab-and-go models.
Offering promotional services for guests and non-guests like spa discounts, restaurant vouchers, discounted rates for conference rooms etc. can help attract revenue.
As a hotelier, you could diversify your income by expanding your services into areas such as event management, food delivery and takeaways, spa services, beauty services, entertainment halls etc. This will help you tap into new revenue streams beyond the traditional room booking model.
4. Stay up-to-date on industry trends and adapt
Keep a sharp eye out for industry trends and be quick to adapt and adopt them to stay in the competition.
For example, during the pandemic, when hotels were gasping to survive, large chains were found divesting their assets. They used the resultant capital to invest in their back-of the room services and provide new services in the form of food delivery and takeaways.
You could always take a leaf out of this book and use them to creatively expand your business during such periods of economic downturn to conjure new avenues of revenue. For example, if your hotel is known for its excellent spa services, you could partner with local spas to market their offerings on your website and social media profiles. This can help bring in more customers looking for alternative methods of entertainment.
To stay ahead of competition during a recession, it is important to always keep yourself updated on industry trends and stay ahead of the curve in terms of adopting these new trends and offering innovative services to your customers. This can help you maintain a steady stream of revenue even during challenging economic times, and set yourself apart from other hotels in the market.
5. Encourage and prioritise good customer service
Even if your hotel is weathering a financial storm, your guests will not tolerate shoddy customer service. As a hotelier, you must ensure that your cost-cutting measures do not interfere with the quality of service you provide.
One of the best ways to maintain customer loyalty during a downturn is by prioritising excellent customer service and creating a positive guest experience. Be swift and accurate during communication with your guests to let them know of any changes, delays or cancellations. For example, if you are conducting a promotional offer on your website or social media profiles, provide accurate information regarding the terms and conditions of participation. This will help create an overall positive experience for guests as they see that you are committed to providing high quality service even during challenging times.
Your guests will appreciate your sustained high standards of service and reward with loyalty that helps weather any potential downturn.
Also, focus on retaining your most valuable and loyal customers by offering exclusive discounts, rewards and targeted promotional offers. This can help you weather a downturn and maintain profitability in the long run.
6. Seek advice from industry experts
Listen to the words of industry experts who can help suggest measures that will sustain your business during the lean periods. Sometimes experts can predict fluctuations in the industry and knowing them before can help you plan accordingly.
Regularly communicate and assess the situation with your team to understand the financial standings of your business and figuring out where you have room for improvement. This can help you make tactical changes to stay afloat and grow during a downturn. For example, if your hotel has seen an uptick in cancellations, you might need to review your room rates or offer discounts to incentivise guests to book with you.
In addition to seeking advice from industry experts, it is also important to consult with your team regularly. This can help surface new ideas and innovative solutions that you may not have thought of on your own. By working together as a team, you can all play a part in ensuring the success of your hotel during economic downturns.
7. Adopt technologies now that automate processes
The advent of the digital era has brought with it technological advancements that are cost-effective yet confoundingly efficient. Embrace automation to reduce the workload of staff during peak season while also weathering staff shortage during the lean periods.
For example, implementing an automated cloud-based PMS allows seamless booking, remote monitoring and data storage. It also reduces the need for manual data entry by staff and improves operational efficiency. You can scale-up or scale-down the model depending on the fluctuating demand. If you’d like to try this tactic, we suggest signing up for a free Preno trial. Preno puts your hotel on auto-pilot by automating hours of important administration and in turn, enables you to spend more time with your guests.
Additionally, adopting technologies that improve marketing efforts can help you stay ahead of competitors during challenging times. For example, using tools such as search engine optimisation (SEO), paid advertising tactics, or social media campaigns can help to increase traffic to your hotel website or social media pages and drive bookings.
For driving in revenue, you also need to amp up the demand. Use digital marketing tactics like retargeting, email marketing, social media promotions to communicate with your guests and potential guests. For instance, you can send targeted email and social media promotions to your existing guests in a bid to drive an increase in bookings.
Automating all of these processes should help in creating a sustained marketing campaign that will reap huge rewards in the long term.
8. Explore partnership opportunities
As a hotelier, you must already know you survive better as a community.
Partnering up with local businesses/organisations and offering collaborative services such as tourism packages, food delivery, fun activities etc. can help in upselling your packages without worrying about additional planning and management.
You could support your local artisans, farmers and artists by displaying their work/produce either for the procurement of your guests or for marketing purposes. Or, you could engage in joint social impact projects that are of interest to the local community, such as raising funds for a school or orphanage.
In addition, establishing an effective relationship with your partners will allow you to tap into their existing network and garner more exposure for your hotel. For example, partnering with travel agents and tour operators can help you tap into the large network of their customers and gain more business.
This model of mutual coexistence and cooperation helps build a concerted effort against an economic downturn.
In conclusion, to survive and thrive during an economic downturn, it is important to focus on maintaining quality service while optimising your costs. You must also build relationships with industry experts and explore partnership opportunities with local businesses or organisations. Embracing automation and digital marketing strategies can help drive in revenue while reducing workloads. By taking these steps, you can weather the economic downturn and emerge stronger than ever.