Responding to the present 2009-2012 global financial crisis

(GA 2009)

The present global financial & economic crises will help us to do “more with less” in the future and an opportunity to reengineer processes, structures and how we deal with our internal and external customers.
The crisis will bring to force the emergence of a new breed of leader:  “The ethical leader with their feet on the ground” and not the greedy and irresponsible ones.

We are heading to a new world and to succeed in the new world, all business must strive to transform and go back to the basics – corporations and individuals alike must learn to accept that “social responsibility is as important as financial responsibility” and face head on that “everyone from everywhere is competing for everything” in a world that is being changed affecting all industries, hotels included.  Testing times ahead.

This is a time to focus on building trust-based relationships with our colleagues and customers.  A time to develop a trustworthy and harmonious atmosphere in the team.  It is the time when one-team-one-way towards progress and long term business sustainability is critical.  This is not a time to spend time in managing egos or ambitions, it is a time for balanced and practical visionaries not dreamers.

A time to look at expanding into new products, services or geographies responding to the changing demand.  A time for lean and efficient organizations and a time to adjust our offering products based on markets and supply & demand.

This is a time for us hoteliers to face the “Austere Traveler” who tends to stay away from luxury and select hotels based on dependable brands and uniform levels of service across locations.  “Value for Money” becomes more and more important.

This is a time for hotels to use their best revenue management skills and technology by offering flexible rates without being seen to offer discount.  During this time, it is not wise to drop rates as it will take three to four years to recoup when travel conditions eventually improves.

This is a time to truly “wow” the customers with recognition by responding to his needs and develops that long lasting relationship and trust.  Managing customer relationship during these times becomes of paramount importance.

We are faced with a global crisis, not only regional, therefore we have to come up with added value for our customers and be innovative.  This requires creativity and focus.  The creativity is in the packaging and the focus is on the customer.  Look at all possible value added services and amenities available and those that can enhance the guest’s experience for little cost to the hotel i.e.: free upgrades, 4 nights for the price of 3, late check-outs, free parking, F&B certificates double or triple points, etc.  Also look at outside the hotel partners to come up with some useful free services.  It is important that these packages stand out and you are not lowering the rates much.

Also it is important that you don’t cut advertising during the crisis as you don’t want to create empty space in consumers’ minds.  The special offers / packages need to be communicated in a way that potential customers see the value.

Put in use all available channels to promote your facilities: centralized marketing database, direct sales, word-of-mouth advertising and others.
Smart leaders know that outperforming competition in a recessing environment is an absolute imperative!

Trends that we are experiencing:

  • Shorter business trips and travelers in general are expected to downgrade to less expensive services.
  • Travelers now are switching from luxury and concentrating to hotels that deliver the basics.
  • Business travelers are reluctant with the unknown, preferring trusted brands.
  • Despite the downturn, executives still expect a good night’s sleep and a minimum and efficient level of services.
  • Leisure trips are in general delayed to better times.
  • Overall the hotel industry is faced with “Fewer, cheaper, shorter” stays.

The main focus of the hotel management team during this challenging time is first focus on attracting business / revenue enhancement and second on cost savings (revenue first, costs second).

Attracting New Business
So while many hotels focus primarily on attracting new customers – heads in bed – the more profitable ones have a balanced approach towards customer acquisition and retention and are actively managing customer relationships to create loyalty.  In the end they look to maximize the lifetime value of each guest.
Managing customer relationships is becoming increasingly sophisticated and requires a tremendous amount of coordination and marketing discipline.  It also requires a global plan for how all the various marketing disciplines will work together to help move individuals through the customer lifecycle from awareness to loyalty.
Communicate value – During recessionary times people are looking to get the most value they can from every dollar they spend.  Value, therefore is an important message to build into marketing campaigns in a downturn.
Create emotional appeals – This is an especially important to marketers of luxury goods and services.  They should use emotional appeals, emphasizing the need for emotional release or comfort in difficult times.

Operating Costs:  Develop a contingency plan focusing on reducing operating cost with the principle of “Cutting the fat but not the bone”.  Actions to consider: temporary closing of room floors based on demand, consolidation of some F&B outlets and services, delay / reschedule of some large purchases, operating the laundry on alternative days, eliminate all non-essential travel, re-negotiation of service / maintenance contracts, application of best practices for engineering and utilities savings, lobbying to government /authorities for rescue assistance in terms of fees,
licenses, taxes, utilities charges, tariff concessions, etc.  In principle, look at all possible savings without impact on the quality of services provided to the customers.

Labor: We all know that labor cost is perhaps the highest operating cost of a hotel, however it is strongly advised not to do layoffs and / or retrenchments.  Cutting jobs through layoffs may seem the fastest, easiest way to manage in a recession, but if you analysis it in detail, it is one of the most expensive ways to go and definitely not recommended.  You must consider the morale costs, the brand equity costs and the rehiring and retraining costs when the business environment improves. It is always recommend to reduce headcount if necessary by non replacement of employees who leaves of retire.
The labor cost could be managed in many ways i.e.: clearance of accumulated annual leave, advance leave, some unpaid leave, freeze all hiring, elimination of overtime and casual labor, postponement of staff activities, shortened work-week with reduced pay (4 days pay), temporary salary reduction of hotel’s executives till business improves and others as it may apply in specific hotels / locations.
It is very important to be close to both the customers and the employees during this time to develop a sense of belonging.  Rewards will come.

Renovations / Upgrades: If the company / hotel’s cash flow permits, this is a most appropriate time to do renovations and upgrades with objective to have a better physical product when the business environment improves and maximize on yields at that time.