Preparing for a Downturn When You’ve Never Been Through One

By Christian Boerger, CRME, CHDM, Corporate Director of Revenue Strategy, Pacific Hospitality Group, and a member of HSMAI’s Revenue Management Advisory Board 

The Great Recession is 10 years past. Millennials and members of Generation Z are projected to make up more than 50 percent of our workforce by 2021. And some type of economic downturn seems to be on the horizon — whether that’s a slowdown, a recession, or a full-on crash.

All of that adds up to a sobering realization: If a downturn does happen, our companies will go through it with many employees who have never experienced one before. On a recent call for HSMAI’s Revenue Management Advisory Board (RMAB), I led a discussion about how we can help prepare our younger colleagues for a bear market. Here are six takeaways from our conversation:

1. Recognizing trends: “The first thing that would be helpful to teach someone who hasn’t necessarily gone through a full economic cycle is early recognition and pressure testing as it relates to our markets,” one RMAB member said. “At what point do we recognize a trend as a risk, or recognize a softening perhaps as incidental? We try to get ahead of overreacting, but also recognizing early and coming to terms with reality.

“There’s a lot of information right now about a slowdown in Chinese growth,” the member continued, “and what we’re finding is that the actual revenue managers [in Chinese hotels] are recognizing, and they’re happy and careful to react to softening conditions. But we’re finding we’re really having to get the message to their leadership, because their ability to execute strategy can sometimes be thwarted by managing directors or asset managers not wanting to agree with or recognize the situation that they’re in. So, giving them tools, talking points, and also support where we step in and validate these trends that they’re seeing.”

2. Reading the data: “In the last downturn, we really relied on more traditional metrics, like a slowdown in conversions,” an RMAB member said. “The difference now is that there’s so much more transparency outside of your own transactional environment. We can see search patterns — all that digital marketing data and behavioral data is what we’re pushing them to look at to be able to start recognizing. That’s one of the things where the progression of technology — the melding of revenue management and digital — will give us a better chance to combat a softening market than we had the last time around. We just have to teach people how to do that.”

This is quite true: Technology has advanced greatly since the last downturn and will be a crucial part of our response to the next one — but only if everyone is familiar with it. We must make sure our teams are fully trained on the latest platforms as well as our processes and procedures. The goal is for everyone to know not just what to do but when and how to do it.

3. Leading vs. following: “We have always said, ‘Don’t be the dumb competitor. Don’t be the one who drags the market down,’” one RMAB member said. “Our regional directors are constantly working with the hotels to ensure that there is that education piece, to say, ‘If you’re seeing softening trends, then we need to have a conversation about some strategies that you could actually put in place that are going to target specific segments or specific channels as opposed to going out with an overreaching strategy.’ It’s our job as people who have lived through this before to educate.”

4. Sharing history: “The more that we can look at historical trends from past downturns and line it up with STAR and your own portfolio trends,” an RMAB member said, “and evaluate how you did and spend some time with them and say, ‘This is what we learned from the last downturn that we’re really trying not to repeat this time around’ — I think that’s going to resonate with them.”

5. Preparing for possibilities: “We’re really encouraging our hotels to ensure that they have completed scenario planning,” one RMAB member said. “So, if X happens, what are we going to do? Or if Y happens? That way, there’s a playbook for different scenarios and they’re being thoughtful about it. They know ahead of time, depending on what type of slowdown happens, everyone’s prepared and has discussed it already and can just start implementing.”

In fact, these tools can be used to help mitigate other external challenges, including natural disasters. Beyond that, for me, the best way to prepare for the worst is to challenge the status quo. The company that does things differently from the rest will be much better off during times of distress.

6. Looking for alternatives: This didn’t come up during our call, but it’s something I think is equally valuable when it comes to preparing for a downturn. We all must impress on our younger colleagues the need to diversify, looking at alternative distribution channels and uncovering new revenue generating opportunities. Indeed, that is good advice no matter how well the economy is performing.

Categories: Revenue Management
Insight Type: Articles