How will you weather the next economic downturn?
— 12 C-Suite executives shared their view
view details of this viewpoint
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?
CEO of Kerten Hospitality
There's no one-size-fits-all approach in an industry that isn't cyclical and is heavily impacted by other sectors – be it aviation, banking & finance, construction or retail. Reflecting on the last ten years, it seems the economic slowdown changed the way we collectively address challenges and taught us to turn them into opportunities.
Agile, flexible business/operations models have become pivotal in battling a slowdown. For example, the shift towards personalised experiences with unique tourist journeys, instant delivery of services and ease of doing things. But tomorrow could be entirely different so we need to keep an eye on the future and stay one step ahead because behaviors and preferences change and they change fast. The bigger a hotel chain is, the harder it is to be agile and innovate with evolving services and loyalty offerings.
Looking ahead, a key differentiator will be how hotels unite communities and satisfy today's travelers' needs with 360-degree lifestyle experiences and a combination of brands and value propositions. Diversity is key; if one outlet feels a downturn, capacity building shifts things around i.e. creating a shop within a shop or retail-meets-community events on the ground floor of a hotel.
In tumultuous economic times, the focus will need to shift from luxury add-ons to simplicity across individualised properties and spaces that create more appealing options for guests, long and short-term residents and this is where the industry should focus its growth.