5 strategies that helped hoteliers to overcome major crises in the past
Hardly any other sector is as heavily affected by the coronavirus crisis as the hotel industry. Contact bans and curfews keep hotels, restaurants, spas and conference centres closed. Nobody knows exactly how long this situation will continue which increases the uncertainty furthermore. However now is not the time to despair; the past teaches us that every crisis is also an opportunity for the industry. With 9/11 and SARS 2003 and the "Great Recession", hoteliers can draw on two externally caused events within the last 20 years which really took a toll on tourism and travel. Those crises were also mastered, and astute hoteliers came out of them stronger than before. Why should it be any different this time?
1. See the big picture and keep a clear head
Most hotels had to close over the easter holidays and maybe most restrictions will continue into the summer. Of course this causes great worry among hoteliers and hotel employees. But still, impulse decisions guided by anxiety could cause much more damage in the long run. It is therefore important to look at the current negative figures in a sensible context, e.g. that not all downturns are the same. The economy is recovering much faster from externally caused crises (which undoubtedly includes the corona pandemic) than from those rooted in the system itself. One example: During the SARS crisis of 2003, bed occupancy in China's hotels fell from 80% to 20% in three months, and six months later it was even higher than 80% in some of the regions studied. As a counter example, many economies (i.e. Portugal’s) did not fully recover from the financial crisis of 2007-08 until 2017.
As the economy has "only" come to an orchestrated hold with no damage to infrastructure and system, one can expect quite a speedy recovery due to a strong catch-up business. Won't people feel an extra urge to get out and travel after weeks and months of being demoted to "couch potatoes"?
2. Beware of large-scale discount campaigns!
A typical crisis reaction of companies is to lure the frugal consumers with discount campaigns. While selective discounts make sense, the "everything must go" tactic almost always backfires in the long run. Why? Think about your long-term pricing, your target group and your brand. Are planned all-around discounts in line with these aspects? If not, one thing must be clear to you: Discounts that are untypical for your house do not bring your typical guests into the house, but guests who are gone as soon as the prices return to normal. Meanwhile, your actual target group might not recognize your hotel and move on. Positioning yourself on the market as you wish and normalizing prices could be a long and arduous process.
3. It is worthwhile to find new marketing approaches
Much more effective than large-scale discount campaigns is a creative segmentation of your product. As economists John Quelch and Katherine E. Jocz explain in an issue of Business Review, not all consumers react to crises in the same way. Some are extremely price sensitive, others do not limit themselves despite the delicate situation. For example, economic crises have almost no effect on the spending behaviour of "top 5% earners" or "hedonists". So consider whether you would like to target this particular guest segment more strongly right now.
Of course this only works for some hotels, so if you do want to address price-sensitive guests, try "hidden discounts" in the form of special packages and offers. This way you don't have to turn your hotel's entire pricing strategy upside down. For example, start a "Book Today & Decide Later" campaign, where you give your guests the opportunity to change their arrival and departure dates on a day to day basis.
4. Up, don’t cut your marketing budget
It may contradict common sense, but plenty of research suggest that particularly in times of crisis it is important to invest in marketing. At least since the Great Depression in 1929 numerous studies on the effectiveness of advertising during recession phases have been conducted. They all seem to come to the same conclusion: Companies lose market share and sales if they cut their marketing budget during crises. On the other hand companies who up their expenses in those times have it easier to win market shares and sales even years afterwards.
Marketing researchers Singh and Dev (2015) of Cornell University of Hotel Administration studied this effect specifically for the hotel industry. They came to a similar conclusion: Hotels without cuts in sales & marketing expenditure emerged from the Great Recession of the late 2010s much more stable and with a higher market share than those that dramatically reduced their marketing budgets. However, the researchers stress the importance to consider marketing expenditures as investments. Time and money should be used to train sales and service staff, to strengthen the brand or to connect with your regular customers. It is also the perfect time to create innovative packages, segment your guests and design smart pricing strategies. And do not be cheap on your Social Media and PR spendings, because in times of the corona crisis you want to especially stay in touch with your customers.
5. Service excellence - now more important than ever
In a study conducted in 2010 by Sherri Kimes (Cornell University School of Hotel Administration), hoteliers were asked where, in their opinion, costs should not be cut under any circumstances. A great majority agreed on the “Quality of Service”. Bad times do not last forever and it could take longer for your hotel to recover if customer satisfaction and service quality are negatively affected during the crisis. Carsten K. Rath, hospitality professional, Director and COO of the Center for Service Excellence (CSE) at the University of Koblenz-Landau, also supports this approach: "Service is an attitude and the emotional core of economic success. In these times it is all the more important to know the needs and expectations of your guests and to respond to them. Only those who take this aspect into account and align their corporate structure accordingly will continue to retain customers during the crisis and subsequently celebrate economic success".
Within the framework of online marketing, an excellent service in times of crisis is to get in touch with guests and to show empathy, for example, through statements on the website, special newsletters and social media postings. It is even worthwhile to be particularly accommodating and to offer re-booking options. Such gestures do not go unnoticed and will certainly have a positive impact on guest loyalty and brand image.