Industry Update
Opinion Article13 August 2019

10 Questions to Ask Before The Next Travel Recession Strikes

By Chuck Kelley, Lodging Operations Consultant & Partner with Cayuga Hospitality consultants

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Have you thought about the next travel recession or are you just enjoying the good times?

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Get Your Contingency Plan Ready For a Crisis

We know the hotel business is cyclical, so why are we always surprised when it is upon us? How many hotel recessions have you been through? Personally, I have lost count.

While putting a contingency plan for hotels in place it may seem like a daunting task. However, the consequences of not having a plan in place can be devastating. You need to be ready for the inevitable whether the downturn is caused by a catastrophic event or self-inflicted by our insistence to keep building new product until our market is oversupplied. But we never are - we wait for the s**t to hit the fan, jump into reactive mode and make time-sensitive bad decisions with a short term perspective.

Sound familiar?

Contingency Planning for the "what if's"

It should come as no surprise to you that there are tourism industry trends. We all know this "stuff happens". Plan for the "what if's".

Make contingency planning part of the annual budget process or the next step after your budget has been approved.

Ask yourself what you would do if suddenly your hospitality business declined by 5%, 10%, 15%, etc.

This will happen as the result of normal tourism business cycles. Let's say during the next great travel recession that you lose a major client and have a significant mix shift or new competition just opening at the start of a downturn. What will you do?

I can't tell you how many times that has happened to one of our hotels. This could also involve a catastrophic event such as:

A Bottom Up Approach to Contingency Planning

Contingency planning must be a bottom up approach. Each department is asked to develop department contingency plans focusing on staffing levels (management & hourly), guest services, amenities, pricing, what are we giving away that needs to be eliminated.

Questions each department should consider:

10 Questions to Ask When Planning for a Travel Recession

  • How can we reduce our operating costs and maintain the same or similar operating margins?
  • Should we just cut costs across the board or are there areas where we should continue to spend? Cutting costs across the board is the easy answer and is often hurts the bottom line in the long term.
  • Should we cut direct sales and advertising expenses when we need them the most?
  • What service reductions will our customers understand due to the travel recession?
  • Do we continue to provide the extras to our loyal customers?
  • Can we treat our loyalty segment differently?
  • What concessions can we negotiate from our vendors?
  • What opportunity/alternative markets in the tourism industry could we solicit to fill the holes?
  • What is the right balance between prudent cost management and maintaining guest service levels that will pay long term dividends?
  • What is our recovery plan? Equally as important as the contingency plan.
  • How do we phase back in services and staffing?

Tip: Create Travel Recession Category Levels

Develop plans for the next travel recession in category levels similar to hurricane ratings, from level 1 to 5.

Category 1 means shelter in place with minimal disruptions and Category 5 means full scale evacuation.

Depending on Department Head experience levels there may be a need for some coaching prior to beginning the exercise.

Developing a Contingency Plan

Once the department plans are drafted for the next travel recession and recovery, Department Heads then present their draft plans to the Executive Committee for review and approval.

Consider having a joint staff meeting attended by all Department Heads so each department can get a sense of what others are considering during the tourism recession. Take advantage of cross department learning.

The Executive Committee focus is on consistent approaches across all departments and the right mix of cost management and guest services. Targets should be set by departments for acceptable department margins and acceptable guest services scores.

Recovery plans should have a similar focus. Department Heads then finalize their plans based on Executive Committee input. Don't forget to address the Undistributed Expenses as these aren't fixed costs - A&G, IT, S&M, HL&P, R&M - before you finalize your contingency plan.

How Often Should You Update your Contingency Plan?

Update your travel recession contingency plan on an annual basis - once you go through the initial process you will only need to tweak your plan based on more current information.

The key is to have a plan to effectively manage what you control regardless of market conditions and that includes everything down to the Gross Operating Profit line.

Plan to manage the plan implementation through weekly or monthly reviews. Tweak the plan as necessary and set aside some money to celebrate success.

Results of an Effective Travel Recession Plan

The end result of the bottoms up approach vs. a top down mandate will be a hotel crisis management plan with total buy in. Because you have done advance travel recession planning and aren't being reactionary, additional benefits include:

  • Smoother execution
  • More effective results
  • Less impact on customers and staff
  • Less damage to brand/property integrity and a simpler and shorter recovery period

All stakeholders will be pleased that you have a contingency plan - your owners, your brand, your hotel team, and your customers. Everyone knows that "stuff happens" and your stakeholders will be thrilled that you handled things better than others during an travel recession.

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Chuck Kelley

Chuck is a Partner with Cayuga Hospitality consultants a network of independent consultants specializing in hospitality/lodging. He spent 32 years with Marriott International, beginning as an Assistant Restaurant Manager and worked his way up to Executive Vice President responsible for Marriott’s Caribbean/Latin America Region.

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