Industry Update
Opinion Article17 October 2016

The Steps You Have to Take Now to Prepare for the End of the Hotel Growth Cycle

By Babs Harrison, Managing director of Phoenix based Babs Harrison and Partners

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Expert opinion is coming together: many now point to mid-2017 as the end of the current boom cycle in the hotel and resort business and, no, few experts anticipate anything like a crash or the mayhem of the recent Great Recession. But the good times, and the forever upwards urge of RevPAR, probably is indeed coming to a halt within nine or ten months.

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You see that also in the increased reluctance to do M&A deals. There's just mounting hesitation as awareness grows that - in the forever cyclical hotel business - we are entering a down period.

So, what do you need to do, pronto? My advice - with an eye on jumpstarting profits and revenues - is to ignore what the many will do.

You can do better, smarter.

For one thing - put away that Excel spreadsheet where hoteliers nibble away at expenses when they see a downturn looming. I have seen too many very good hotels slide into mediocrity as owners and managers pare costs well below a point where it makes any sense. A luxury hotel is defined by, what, luxury and that means in service, setting and finishings.

Pull plush cotton sheets in favor of a cheaper cotton/poly blend that also needs no ironing to cut costs and, well, stop right there. Bad move in a luxury hotel.

Laying off housekeeping staff does not result in cleaner, tidier rooms. Does it?

Cutting costs also sets a hotel up for bad online reviews and, guess what, that will accelerate RevPAR loss. It's a vicious circle. Cuts lead to cuts.

In fact: for now, just stop thinking about cost cutting. There are much more important tasks to be done and, if done well, just may position you to ride through the coming slowdown on top of the game.

What should you do? As we near the cycle's end smart hoteliers will be taking the aggressive steps needed to come out ahead. Like what?

Focus on three Ss to find your path to success.

-Service. As competitors cut service as they cut costs, do the opposite. Rally staff around the concept of rising to the very top of the service hierarchy as competitors slide down. They will want to be "the best" and they have a very real opportunity to do so.

Oh, and what triggers the majority of bad TripAdvisor reviews that I see? Service lapses.

What happens more as staff is cut? Service lapses.

QED. Cutting staff is the shortcut to lower TripAdvisor ratings.

Do the opposite. Wow your guests with service. And reap the praise.

-Special experiences. Now is the exact perfect moment to begin investing in truly special experiences that will give guests what more of them want nowadays. This is exactly how to compete with Airbnb, but it is how to give 21st century guests what they want.

They don't want just a relaxing long weekend in the Valley of the Sun. They also want experiences they can talk about, post about on Facebook, document visually on Instagram, and, yes, mention in reviews on TripAdvisor.

Come up with a menu of distinctive experiences that reflect what you stand for and also help capture the essence of your locality.

Know that very probably your competitive set is trimming its experiences. That sets you up to succeed.

-Spend on success. As others pinch pennies, be ready to spend on making stays very right for all your guests. Smart hotels already are on this but many just aren't that smart. Be among the ones that get it.

Is that crazy in a period of RevPAR stagnation? Nope. That's because you are expecting to go the other direction, that is you are spending as an investment for success.

Your competitive set will not be taking these steps.

And that is why you are setting yourself up for success, in 2017 and beyond.

Babs Harrison

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