How will you weather the next economic downturn?
— 10 C-Suite executives shared their view
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?
Chief Executive Officer & Owner at NOVUM Hospitality
Not only is the hotel industry ever evolving in regards to emerging trends but it is also very fast-paced in its developments. The European Tourism report recently published by the European Travel Commission (ETC) suggests that despite challenges, the greater part of participating destinations, have demonstrated continued advancement in overnight stays and foreign arrivals. Thus, although a potential next crisis is not likely to be imminent, the key to sustained ascendancy even during down-cycles today primarily lies in a company's adaptability and market attentiveness.
Accordingly, and especially in times of digital revolution and rapid development in electronics and innovation, it is crucial for hospitality providers to put forth overnight accommodation and related services that are catered towards the needs of modern travellers. Likewise, it is important for hotel companies to be able to flexibly adapt to these needs and to consider them when expanding and/or modifying their service portfolio.
Another strategy that has clearly gained popularity over the past few years includes the expansion into less popular C and D locations. With glutted markets, more and more companies have resorted to the development of new emerging regions and in doing so have created new competitive environments.
Taking these measures requires impartiality and open-mindedness towards emerging hotel concepts (such as long-stay solutions), latest trends (e.g. sustainability) and state-of-the-art technology along with a personalized service model and mobile-driven processes. Hence, out of the box thinking and contemporary service development have more than ever become crucial strategic instruments in enhancing customer retention.