5 tips to help your hotel survive a crisis

Bruno

As with any service-industry business, the financial well-being of a hotel can be determined as much by micro economic factors, as by internal management decisions.

The reason for this is that in a downturn, consumer sentiment/confidence plummets, disposable income dries up (or people with the same level of income simply stop spending), and non-discretionary spend is cut from household budgets.

And the effect is domino-like because people work and play in groups, they mirror each other’s behaviour and they are therefore heavily influenced by their peers.

All of this means that, very quickly, people simply stop spending money on luxury items (ie things they love but don’t need), which includes eating out, staying overnight at hotels, drinks, and even coffees and snacks.

So what’s the solution and what should you do when an external financial crisis hits?

Very often an economic crisis leads to outright panic amongst those working in the hospitality and leisure industry: all they can see is less money coming in, while business costs remaining exactly the same.

But instead of reaching for the panic button straight-off, here are 5 simple and highly practical tips which will help you survive a crisis, without damaging your business in the longer term.

1 Don’t obsess about cutting costs

Ok, this may sound simplistic but hey, aren’t the best solutions always the most simple ones?

Think about it: if you have been running a really good business during good times, you will already have built up an excellent reputation and attract many regular returning guests (what every hotel strives for) who choose to stay with you because they know and value the service that you offer.

However, what if – at the first sign of an economic downturn – the only solution that comes to your mind is to cut costs, beginning with staff redundancies?

On the face of it this will certainly result in significant cost savings for you business, but the real question is, what will the repercussions be for your business and for your brand, in the longer term?

The answer is simple: with fewer staff, your high customer service standard will invariably deteriorate.

This in turn will lead to the loss of long-standing customers (many of whom will never return), resulting in reduced revenues, significant and lasting reputational damage that will result in lower occupancy rates into the future, and perhaps even a lower room booking rate.

2 Find new ways of generating revenue

Being a good hotel manager means being creative: you have got to keep on evolving your service offering in order to meet the ever-changing tastes and demands of your customers.

What we’re really saying is that standing still is simply not an option in the hotel sector. Good hotels understand the need for constant innovation and experimentation in order to get more guests through the door and achieve new revenue channels.

So, during the onset of a macro economic crisis, instead of going into panic mode, why not sit down with your management team and together identify new revenue possibilities/ product offerings that will give you a competitive advantage?

Remember, the best hotels will always find a way to survive a crisis and come out the other side because the fact is, no matter the economic climate, people will always need somewhere to eat and sleep, whether for business or leisure purposes.

3 Dare to be different

Just because every other hotel is laying off staff in order to reduce their cost base, that doesn’t mean you have to.

Ultimately, you will know your business better than anyone else does so always act in the best interests of your business, your brand, and your customer base, rather than on the basis of what other hotels are doing.

Essentially, what we are saying is that all decisions must be made based on a review of your specific business needs and if this means doing the complete opposite of your competitors (you zag while they zig) then that is what you must have the confidence to do.

4 Recognise that a crisis has no set end-date

Sometimes there is a tendency to regard a crisis as ‘the new norm’, and to mistakenly think that the economic sands have suddenly shifted forever.

But of course, the reality is very different because a crisis is an extreme occurrence that is cyclical, and has no timeline to determine how long it will last or when it will end.

Recognising this is vital when it comes to making cost-based decisions for your business. Why? Because the reality is that you cannot keep on cutting your business costs indefinitely and still expect your business to survive.

That’s why identifying new ways of increasing your revenue is a much more positive approach to take in a crisis situation.

5 Focus on increasing room occupancy rates

Apart from hearing talk of doom and gloom wherever you turn, a sudden increase in negative consumer sentiment will become obvious right throughout your business: from room occupancy rates, to restaurant covers, and right through to corporate functions and weddings.

But when it comes down to brass tacks, your rooms are your bread and butter because it is staying guests who will spend money in other areas of the business: in the bar, in the restaurant, on room service, in the leisure centre…

With this in mind, remember that empty rooms add nothing to your business so when room occupancy rates plummet in a crisis, it is your job to come up with some creative ways of enticing more guests to stay!

Remember, even in a financial downturn, there is always opportunity: people still socialise, celebrate occasions, meet up with friends, and enjoy a good night out.

So, although consumers collectively become more price conscious and cost aware during an economic crisis, simply by understanding your USP and your audience, you will still be able to deliver value-for-money offers that will sustain your business through the crisis.

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