Thinking Strategically in this Recession

In this time of recession, there has been widespread panic throughout the hotel industry.  With much lower occupancy forecasts, hotel managers have been trying to prepare for 2009 as it seems like it will be a grim year.  But what are some of these managers doing?  Some hotels have been laying off employees to meet the demand, finding any way to cut some costs, and even working hourly shifts themselves to save some money.  But is this really the right way to do things?  We will provide you with a new perspective and maybe you will begin to look at your operations in a new light.  You will find that your job as a manager should mean more than trying to catch up to the present.

If you think about your job description as a manager, what does it contain?  Is it to remedy situations and deal with issues as they arise?  Or is it to strategically plan and steadily improve the hotel as a whole in the long term?  If it was written well, your job description should include a combination of both of these areas.  Unfortunately, at a time of a worsening economy and with the uncertainty of where your next dollar of revenue will come from, it is hard for managers to think of anything else than the short-term.  They begin cutting employee shifts, finding cheaper supplies, and doing anything they can to make that bottom line more attractive.  Though yes, some of the cost-cutting is necessary to meet the lower demands, do the managers have the correct mentality when they are going about these profit-saving measures?  My guess is no.  The managers are usually just thinking, “How can I get this month’s P&L looking good even though we are not getting any business?”  Newsflash!  If you have no revenues, your profit line will not look good no matter what you try to do!


Think of it this way… at this time, you know two things for certain; 1) We are in a recession where it is hard to find business and generate revenues, and 2) We will come out of the recession sometime in the “near” future (if the recession continues to get worse and does not end, you have bigger things to worry about).  If we know that the recession will not last forever and business will begin to return, then think about what exactly you are doing when you are only focused on cutting costs.  Keep in mind that your hotel’s ability to gain more revenues than the other hotels in your competitive set relies solely on your guest service.  This is what we call your competitive advantage, and hopefully, you have it.  You can argue that it also has to do with the pricing, amenities, and hotel look/feel, but in this era of the internet and the consumer review websites, even one bad review can turn hundreds, if not thousands of potential customers away.  Ultimately, it all boils down to how your hotel performs with customers that will determine the level of repeat business that you will receive; a necessity for generating revenues.

Now think about what you are really doing when you are trying to find all the different ways to cut costs around your hotel.  Though part of the cost-cutting is making your operation more efficient, it will eventually get to the point where you are putting your guest service levels in danger.  Why drive away your existing, small amount of customers by providing bad service?  Consider, for example, the hotel we mentioned above that is having managers take hourly shifts from employees.  What is really happening here?  The guest service in those areas may have improved a little bit for the time being, but what happens when business begins to return?  What is going to be the cost of hiring and training the new employees to meet the new demand?  What will the effects be on guest service when newer, inexperienced employees are sent to deal with guest problems?

Though unconventional, think about it… Isn’t this the time that your hotel needs to continue to spend money?  Have you ever heard of a company that makes revenues without spending money?  To make more money, you have to spend more money!  This is not to say go out and spend more money than you were spending during the good times, but shift your focus from just cutting costs to trying to find ways to generate more revenue.  When business picks back up, you will be on the good end of the demand, instead of trying to find ways to attract the new business.

Operations managers are probably saying now, “What does that have to do with me?  That’s a sales issue!  True, it is a sales issue, but the operations departments have as much to do with the sales process as the sales department does.  The operations of your hotel have to equal or exceed the expectations that your sales departments projects towards prospective customers.  It does not matter how good your salespeople are if your guest service is lousy.  Remember, the bulk of your revenues must come from repeat business; there is only a limited amount of new business to be found.

With all this in mind, what is the balance that you must achieve?  Yes, in this time of slow business, you must cut costs to achieve efficiency.  DO NOT go over the line of effectiveness.  You must continue to provide a high level of guest service in order to successfully compete against the other hotels.  In addition to finding efficiency, find ways that will help you generate new and repeat business.  Depending on your department, this can mean different things.  In sales, you will have to work a little harder and probably spend a little more money on getting your hotel’s name out there.  In operations, it is taking the extra time that you have now to improve your guest service and continue to provide it at a high level, even when it is not very busy.  It also consists of making sure that the little amount of money you are making now is not walking out the door.  If it is a tough time for your hotel, it is definitely a tough time for your employees, especially the tipped ones.  Though we like to assume that most people are honest, we have encountered many servers and bartenders that steal, even in good times.  What could be happening under your nose in these ugly times?  Continuing to do regular mystery shopping is a great way to accomplish both of these objectives.  It will provide you with a great look at how your hotel’s service is doing when you are not around, as well as show any holes in your internal control processes.

Whenever you make your decisions, make sure that you are balancing the short-term with the long-term.  DO NOT allow the short-term benefits to prevent you from seeing any long-term repercussions, and vice versa.  Remember, as managers, you were hired to guide your hotels to financial growth and guest service improvement.  This is definitely not the time to try to “get the highest score” by any means necessary.