When a crisis strikes an industry, most hunker down to reduce damage. Amid the chaos, it's easy to overlook the opportunities a crisis turns up.
As a hotelier, you don't have to sit back and absorb financial hits. There are ways to go on the offense.
We've picked out six ways to transform unexpected market turns into profit and exit a crisis in a stronger financial position than ever.
Turning a Crisis into an Opportunity
In the middle of a panic, there's a simple fact most hoteliers overlook: If you can quickly adjust to the new conditions, you'll be set up to outdo the competition. Here's how:
1. Establish a Baseline
By turning inward during a crisis, hoteliers can not only get through downturns, but they can also revamp the whole operation toward more profit.
Start by getting a handle on the basic occupancy rates and revenue needs of the hotel. By finding a break-even point, hoteliers can see how much wiggle room they really have during a crisis. When you nail down your immediate needs, the operation becomes agile. In turn, hoteliers have the flexibility to adjust and profit off the shifting market.
2. Fix Your Sights on Long-Term Gains
Crisis is unavoidable, but preparing for disasters falls squarely on a hotelier's shoulders. One of the best ways hoteliers can prepare for a crisis is to set their gaze toward long-term rewards. Here's what to focus on to drive the operation toward more profit when the unexpected strikes:
- Stronger Service Recovery: In the long run, customer satisfaction can drive profit higher at a lower cost to hoteliers. In fact, it's five times less expensive to keep an existing customer than it is to attract a new one. That's why effective service recovery is critical to long-term profit.
Service recovery accounts for how well a team handles customer concerns. Especially in the hospitality industry, the more quickly and thoroughly the hotel staff is able to address visitor concerns, the more loyal customers will be. That's why focusing on service recovery is a major key to maintaining a steadfast customer base that outlasts a crisis.
- More Customer Loyalty and Recognition: When customers feel the squeeze of a financial crisis or the fear of a health crisis, they'll naturally limit their spending. However, their needs don't disappear. When they do go out, they'll stick with brands they find useful and trustworthy. That's why hoteliers should focus on building out a positive image and putting programs in place to fortify customer loyalty. In turn, visitors will reward the hotel with their patronage, even in economic downturns.
- Better Customer Reviews: Even when businesses shut down, online communication remains crucial. And online reviews can drastically affect a hotel's reputation. During a crisis, when money is leaking out of an operation, reviews may seem like a small concern, but they contribute to long-term business and can lead to a revenue uptick when hotel demand picks back up.
3. Pore Over Expenses
When a crisis hits most businesses, the initial reaction is to cut costs and tweak operations. In the hotel industry, reducing costs may help in the short term when revenue is weak. It also may not. The only way to know where to invest and where to cut back is to gain a crystal-clear view of costs.
Wondering where to start?
A good jumping-off point requires diving into common expenses. Here are a few expenses to examine:
- Property & Maintenance
- Cost of food sales
- Operational expenses
As the competition blindly hacks at programs that may be in more demand than ever, hoteliers with a firm grasp on spending data can see which departments are eating into their budget and which are chugging ahead at a bargain.
4. Adjust for Long-Term Profit
Generally, a crisis will result in dried-up revenue. By adjusting the hotel for higher operational efficiency, it's possible to bring in more profit during revenue dry spells.
Remember, revenue is just one piece of a hotel's financial picture. It only accounts for the money coming in. This means that during a crisis, hoteliers can come out ahead by tweaking operations for profit.
Start by measuring deep profit metrics, such as gross operating profit per available room (GOPPAR). This metric will reveal how much money is running all the way through the hotel's operations and making it to the bottom line. By cutting back and shifting investments for more profit, hoteliers can rev up returns during a crisis. Plus, when the economy turns back on, that extra cash will flow directly into the hotelier's pocket.
5. Get a Head Start by Uncovering New Demand
When a crisis plows through a market, it leaves deep trenches that open up new trends. In most industries, business leaders don't notice these new demands until long after the crisis has been forgotten. However, hoteliers who examine metrics can spot shifting demand right away.
For instance, the COVID-19 pandemic stamped out demand for in-person services, such as spa operations. At the same time, it seems to have bolstered demand for outdoor recreation, including golf operations. The sooner a hotelier recognizes these new trends in demand, the further they can pull ahead of the competition.
Again, this means hoteliers need to break down operational numbers. Start by digging into revenue by department. From there, you can see how that demand relates to the bigger hotel picture by stacking numbers up against total revenue per available room (TRevPAR).
By viewing departmental demand alongside total revenue, it's easier to see which departments are struggling and which are picking up steam. With that, hoteliers have a blueprint for profit-driving decisions.
6. Use Benchmarking to Pull Ahead During a Crisis
During a crisis, hoteliers can get their feet on the ground, gauge demand and predict trends with data. In order to find opportunities in any crisis, hoteliers first need to access hotel profit benchmarking. With deep insights in view, you'll have the roadmap that leads to more opportunities in chaotic times.