Survival strategies for a tough economy

This month I’ve travelled to Florida and Hawaii, I’ve read countless articles and statistics and talked to many people—everyone is asking how to survive and thrive in these volatile economic times.

Here are some of the things I’ve learned in my travels, conversations and the many materials that come across my desk.

The glass is half full: An optimistic outlook seems to be key to weathering the storm.  Whether it is the vacation ownership industry or Best Western International, the approach seemed to be to look at what’s good about your industry.
 
In the case of vacation ownership companies at the VOIC conference in Florida, it was the fact that owners are buying their weeks or fractional  ownerships. This means that cash flow for the timeshare industry is far more reliable than in other, more discretionary industries.

Best Western’s executives pointed out that the mid-priced hotel segment has been very resilient in weathering the 10 recessions that have occurred during the chain’s 62-year history.

Don’t cut rates: “The worst thing we can do is to panic and discount our rates indiscriminately,” Best Western president and CEO David Kong told the hotel chain’s annual conference. I studied the past 30 years of hotel industry performance. Do you know how many times occupancy went down in those 30 years? 16 times.Do you know how many times the average rate went down in those 30 years? Twice—in 2001 and 2002. Do you know how many times RevPAR went down? Only 3 times—in 1991, 2001, and 2002. Occupancy drops don’t necessarily cause the RevPAR to decline.

“However, discounting our rates indiscriminately will likely cause a drop in RevPAR. Cornell University released a study recently. They found hotels that discounted more than three percent actually lost revenue. Let’s not panic and discount unnecessarily.”

Keep in mind the past few years have been ones of unprecedented growth. Ken Chupinsky, CFO of Consolidated Resorts, told the Interval International conference that the vacation ownership industry is used to being superb and that “we’re not comfortable with just being good.” But good is much better than many industries—things could be  a lot worse.

Don’t skimp on customer service: In his latest article, “In Challenging Times, Service Matters Most!” customer service guru Ron Kaufman outlines how, in hard economic times, customers want to make sure they are getting the most for their money. Kaufman recommends adopting customer service principles such as: understanding how customers’ expectations are rising and changing; bouncing back with effective service recovery; and seeing the world from each customer’s point of view.

Look to Gen X and Gen Y: In the past few years it’s been all about the boomers.  But while they are still a decisive force, both Best Western executives and Bellstar president Ed Romanowski pointed out that these are the business and leisure travellers of the future—and in many cases the employees hotels want to hire and retain. Understand what makes them tick. They are in tune with issues like global warming and world hunger, and are more eager to stay or work at a hotel that has a green energy ethic and a social conscience.

Just keep going: And finally, Craig Nash, CEO of Interval Leisure Group provided some encouraging advice at VOIC. He said, “Don’t be overly aggressive; stay conservative and just keep going.”