Although an economic recession and hotel industry downturn are far from certain, economic indicators, investor and corporate sentiment, as well as the recent operating performance of hotels in various sectors, point to an impending slowdown.

The current cycle, according to data intelligence firm STR, has continued virtually unabated since March 2010 with year-on-year RevPAR increases occurring in 112 of these 115 months. However, September 2019 was the second month this year when RevPAR results turned negative in the US, as increased supply outpaced demand. Similarly, PWC reports deceleration in the USA, with, for example, Q3 RevPAR growth at less 1%, the lowest figure since the industry began to recover from the 2008 economic crisis.

Some investment analysts suggest that hotel companies may not be adequately prepared for the eventual downturn. Investors and the hotel owners who increasingly rely on firms to operate their hotels may be right to be concerned about what such companies learned from the banking crisis of 2008.

The question, therefore, is how have the strategies of hotel companies changed or evolved over the past decade to help firms survive or even prosper during the next downcycle that may soon be upon us?

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Bill Walshe
Bill Walshe
CEO at Viceroy Hotel Group

As an operator and a brand, we learned a series of lessons during the Great Recession, with the most important takeaway, to remember you are in this for the long run and not be short sighted. During economic downturns, it is easy to get caught up in rate wars, but if rates get cut too low, price integrity long-term is affected, making post-recession a lot more painful.

While as an industry we have matured and become more institutional, the principles of our business remain very simple. We are host firsts and always. Nothing has become clearer than the importance of welcoming and creating a remarkable experience.

In challenging operating environments, it is important to be creative and flexible, pulling different operating levers and cutting back on expenses that don't negatively affect the customer experience.

As we enter a soft stage in the lodging cycle, being able to stay nimble and react in real time will be the difference between surviving and prospering. As an independent operator and [bespoke oriented] brand, we know how to get from idea to execution faster. Here at Viceroy, we operate under that ideology every day.

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