Spend Less and Deliver More?

By Juli Jones, CAE, Vice President, Hospitality Sales & Marketing Association International (HSMAI)

With many companies in the process of planning their budgets for 2020, HSMAI’s Marketing Advisory Board (MAB) recently discussed the possibility of an economic downturn and what that would mean for hotel marketers in the coming year. Here are three takeaways from the conversation:

1. Reading the numbers: When you analyze the hotel industry’s stats, you see that ADR, RevPAR, and occupancy have fallen since the first quarter. The statistics look similar to those in the late 2000s as we approached the last recession. An MAB member noted: “When this downturn hits, … we’ll have to see if the industry hangs in and keeps rate integrity, or if they just decide to push rate to move volume. If that happens, you’re going to have another big dip.”

2. Customer experience: Focusing on the customer experience is the best way to come out ahead during a downturn — and a better customer experience can be used to justify charging more than competitors. “When the entire block or street goes down to $95 a night, it’s hard not to, unless you have something that’s holding you up,” one MAB member said. “It has to be built over time. It can’t be done when the downturn starts. It has to have been done before.”

Another member added: “If you have better reviews, that should be a measure of the quality of the experience you’re producing. That should yield some sort of price premium. So, the key is focusing on guest satisfactions.”

3. Upside vs. downside: Several MAB members were concerned that marketing budgets were going to be cut and are thinking about cost savings in their budgets in case of a downturn. Opinions were split over the positives and negatives of potentially shrinking budgets. “There may be an upside, actually, to a downturn,” one member said. “When people are looking at shrinking expenses and doing more with less, you’re going to have to break down the silos a bit. What we’ll end up with is a little bit better integration of digital and revenue management.”

Another member agreed: “If you can get your act together and reinforce yourself and solidify your position during the downturn, you will have an opportunity. You can position yourself well to come out of it.”

But at least one MAB member is worried that a downturn will have the opposite effect because companies will take fewer risks. “The people that I work with aren’t panicking,” the member said. “They’re just starting to be a little bit more cautious, which is kind of a drag, because they’re being less innovative, because they’re afraid of risk. I’m seeing that people are starting to be less willing to try anything new: ‘Let’s pull back a little bit, be a little more conservative, shift our channels.’ That’s what I’ve seen.”

“It’s a different type of innovation,” another member said. “Having to find ways to spend less and deliver more.”

Categories: Marketing, Forecast
Insight Type: Articles