Contrarian Strategies for Hotel Sales Departments to Thrive in an Economic Downturn
This is the time for bold strategies and actions - when everyone else is ‘hunkered down' it is time to get aggressive - if you go on the defensive in this economy, you're toast! Despite the dire predictions that are hitting us every day, there are hotels out there that are making money, on track with last year - a position that every hotel would welcome at this point.
In the latest forecast from PKF, they are predicting that REVPAR will decline by 7.8% nationwide next year. "The expected 2.5 percent fall off in demand, combined with a 2.9 percent increase in supply, will result in a 2009 year-end occupancy level of 57.6 percent. This represents a 5.3 percent decline in occupancy, and is 5.1 percentage points below the long-term average occupancy level for U.S. hotels tracked by STR of 62.7 percent. "The combination of above average net increases of supply occurring simultaneously with dramatic declines in demand is something we have not seen in recent industry recessions. This is what makes this downturn so severe," Woodworth said. (December 9, 2008)
Smith Travel in conjunction with e-forecasting.com declares the industry to have a 99.9% chance of slipping into recession. Chief Economist Evangelos Simos of e-forecasting.com said, "Using the NBER methodology to identify the peaks and troughs of the business cycle, the peak was in November of 2007 for the industry. Since then, the index has been declining and so far the recession is 13 months old. Looking further at the six month growth rate, at this time, the recession appears to be similar to what the industry felt in late 1979 through early 1980, but not yet quite as bad as 2001." (Smith Travel, December 9, 2008)
The most effected markets are those that have the greatest entry of new hotel supply in the market, those that are dependent on airlift and have had capacities cut severely as well as leisure resorts that rely on disposable income, such as many of the ski resort areas. However, even the properties located in these areas can have an impact on their business by not buying into the ‘doom and gloom' chicken little syndrome that the nation and the industry has fallen victim to.
There is a saying in the theatre that when everyone else on stag e is standing still, move if you want to be noticed. A contrarian strategy is similar in that when everyone else is paring down their expectations of the sales and marketing efforts, the contrarian strategy is to do the opposite.
What are some of the contrarian best practices that successful hotels are implementing?
· Staff up the sales effort. Many hotels were running fairly lean in the sales area when business was plentiful - no need for a lot of sales people when the phones were ringing off the hook. Add quality people to the sales staff, build an awesome team to get business during the recession so that when the economy turns you will already have a solid market share penetration that will enable you to drive rate as demand rebounds.
· ‘Sell into' the recession. Don't just keep calling the same accounts in the obvious verticals in the database - you can only mine the database for so long. It is time to actively and aggressively find new verticals and the prospects within those verticals. For example, we know which market sectors are suffering - there are others that are doing well that either a) we didn't bother to identify in the past or b) we felt that that the rates and or the type of business didn't fit the revenue management strategy. They probably would meet those qualifications now!
· Locate all accounts in the database in ‘healthy' market sectors. Map these accounts to ensure that you are getting all of the business. Don't stop at asking your contact for a referral to another department, ask what industry, trade or professional associations they belong to and who their representative(s) are. Solicit government agencies that oversee or regulate these industries.
· Enable aggressive internet marketing campaigns. Get aggressive about pay per click advertising. We all know that the OTAs and aggregators sites appear on the first page of a key word search. Pay per clicks can position your hotel to be at the top or on the first page of the pay per clicks for those key words. Monitor and measure - step up the budget for those that work and abandon those that don't.
The contrarian strategy is that in these times it is not enough to just do more of ‘business as usual' but to succeed new strategies must be developed based on economic realities in the market place. This is an opportunity to learn new methods of targeting and selling that will serve the hotel and the individual sales person well in the New Year and beyond!
Check out the new Hotel Sales and Revenue Management Book 2.0
Happy holidays to all of you and let's make the New Year bright!