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Recession

How do you prepare for the recession of 2023 for your hotel?

December 21, 2023
Nathan Baws

As an experienced hotel revenue manager, we have steered properties through economic downturns. With forecasts predicting a potential recession in 2023, now is the time to brace your hotel by implementing proven strategies. While recessions bring industry-wide RevPAR declines, strategic hotels can minimise revenue losses and outperform competitors.

This article will share my insights on navigating previous recessions and actionable steps to future-proof your hotel. You can weather the storm by getting lean, optimising operations, adding value, strengthening revenue management, and investing wisely. While choppy seas are ahead, your hotel can avoid significant turbulence with the proper preparation.

Key Takeaways

- Trim costs proactively without impacting the guest experience.

- Establish an A-team operational task force to boost efficiency. 

- Create and promote recession-resilient packages/offers.

- Leverage data and variable pricing to stimulate demand.

- Invest in effective guest retention and acquisition.

- Maintain service levels through training and communication.

- Forge partnerships that buffer revenue losses.

- Monitor performance daily and pivot strategies as needed.

- Project optimism and exude guest confidence.

- Plan for the upturn to come out stronger.

Leading with calm, empathy, and clarity will provide guests and employees security in uncertain times. Your hotel can thrive through the downturn by collectively tightening belts while retaining brand essence. Let's dive into recession preparation best practices.

Essential Steps to Recession-Proof Your Hotel in 2023

Here are some best practices to save your hotel from the recession of 2023

1. Trim Costs Without Compromising Experience

Renegotiate Contracts

One strategy during an economic recession is reducing operating expenses to improve the bottom line. Begin by renegotiating contracts with vendors and suppliers across departments. Given the circumstances, most will be willing to offer discounts, payment plans, or early termination opportunities. Be tough but fair when negotiating to maximise savings.

Consolidate Positions

Assess team structure for potential consolidation of roles. For instance, consider merging front-of-house functions like concierge and bell services during slower periods—Cross-train staff to handle combined duties cohesively.

Limit new hiring and evaluate natural attrition across teams. Avoid mass layoffs, which negatively impact morale and service quality. Instead, redistribute workload efficiently.

Suspend Non-Essentials

Review all regular expenses to identify non-essential spending to suspend. Pause investments in physical upgrades, amenities, and marketing programs with lower returns. Eliminate excess spending without detrimentally impacting the guest experience.

Emphasise Value

During trying times, travellers seek added value. Demonstrate your commitment through inclusive packages bundling rooms with meals, amenities, and perks. Offer discounted rates for longer stays along with complimentary breakfast.

Highlight value-adds like free Wi-Fi, gym access, shuttle service and kids' activities. Creative, low-cost extras impress guests.

2. Assemble All-Star Operational Task Force

Gather top performers across departments into a recession task force focused on optimising efficiency. Meet regularly to identify issues and devise solutions leveraging staff talents.

Standardise enhanced processes for managing workload with smaller teams. Seek ideas for low-cost service enhancements and revenue opportunities. Discuss ways to reduce waste, streamline operations, improve productivity, control costs, and maintain quality. This cross-functional collaboration is invaluable for sailing through the storm. Reward and recognise task force initiatives that positively impact the bottom line.

Recession

3. Create Recession-Resilient Offers

Analyse historical and forecasted demand data to pinpoint high-potential segments less impacted by economic decline. Develop attractive packages and offers tailored to these resilient segments.

For example, target budget-conscious families with discounted room rates, including free meals for kids and complimentary activities. Or offer remote workers discounted extended stays with free Wi-Fi and office amenities.

Promote these deals through targeted digital campaigns and unique landing pages. Nurturing these resilient segments will help counteract mass demand decreases.

4. Optimise Strategic Pricing 

Vigilant revenue management is vital in a recession. As demand patterns shift, adjust pricing strategies accordingly. Maintain rate integrity for premium segments while offering discounts to price-sensitive groups. Use dynamic pricing tools to respond quickly to demand changes.

Monitor booking pace daily across segments, adjusting rates to stimulate bookings. Capitalise on high-demand dates like holidays or events that attract travellers even in downturns.

When occupancy is desperate, opaque and flash sale sites can provide much-needed (though low-rate) reservation flow. The key is balancing the rate with revenue-driving demand.

5. Invest in Guest Engagement and Acquisition

Since attracting new guests is more costly than nurturing existing ones, focus retention marketing on valuable repeat guests. Send personalised promotions, offers, and VIP amenities to delight loyalists, encouraging future visits.

For acquisition, target your messaging and outreach to tap resilient demand segments. Highlight affordable packages and your unique value proposition. Continue brand marketing at a measured pace to retain visibility and position for the rebound.

6. Maintain Service Levels

During stressful times, guests appreciate stellar service and human connection more than ever. Provide staff with dedicated training for managing their mindset and upholding brand service standards through the downturn.

Foster open communication and empathy. Recognise employees who go above and beyond to support guests and colleagues. By investing in people, you ensure consistent service despite challenges.

7. Forge Strategic Partnerships

Explore partnerships with airlines, OTAs, attractions, tour companies, and DMCs to create attractive bundled offerings that protect revenues. Negotiate discounted blocks of rooms for partners' customers.

Collaborate with neighbouring hotels on reciprocal referral programs, joint packages, and shared shuttle services. Brainstorm creative B2B partnerships that provide value for guests while benefiting both businesses.

8. Monitor Performance and Pivot

Establish transparent reporting to track daily metrics like occupancy, ADR, revenues, booking pace, cancellation rates, website traffic, etc. Closely monitor performance by segment and source to identify issues.

Share reports with department heads to spot downward trends proactively. Convene task force when needed to adjust strategies based on insights. Continuously fine-tune operations and marketing to counteract decreasing revenues.

Recession

9. Project Optimism 

Leaders should remain visibly positive and supportive despite concerns. Reassure employees of their value and reinforce that periods of economic decline are always followed by recovery.

Share news of increased bookings, positive feedback, or team achievements to motivate staff. Celebrate small wins and milestones. Recognise individuals who lift others' spirits. Demonstrating calm optimism provides comfort.

10. Plan for the Upswing

Finally, recessions catalyse fresh perspectives and renew business fundamentals. Use the downturn to clarify brand identity, target audience needs, and competitive advantages.

Prepare for the upturn by overhauling processes, exploring new segments and channels, and brainstorming value-added offerings. With resources aligned for growth, you'll be quickly poised to capitalise when demand rebounds.

Conclusion: Partner with Emersion Wellness to Plan Ahead

While uncertain times loom, taking proactive recession-proofing steps will enable your hotel to withstand revenue declines and outpace competitors. As industry experts in navigating downturns, Emersion Wellness is an invaluable partner for advisory and support.

Contact us today to schedule a consultation. Our team will review your operations and demand trends to provide customised guidance on preparing for the recession while retaining guest loyalty. With prudent planning and agile execution, your hotel can weather the storm and chart a course toward renewed profitability. Let's get ready to ride the waves together.

Frequently Asked Questions

 What are critical areas in hotels that should reduce costs?

Hotels can reduce costs through renegotiating contracts with vendors/suppliers across departments, suspending non-essential spends like excess amenities or marketing programs with lower ROI, consolidating roles and redistributing workload efficiently, limiting new hiring and letting attrition reduce staff costs, minimising waste in operations, and pausing physical upgrades or investments that can wait until after the downturn passes.

How can hotels maintain guest experience despite cuts?

By focusing reductions on backend operations versus front-of-house services, providing value-adds like inclusive packages/deals, bundling rooms with perks, offering creative, low-cost extras like complimentary breakfast or Wi-Fi, and investing in employee training and morale to uphold exemplary service standards despite challenges, hotels can retain a stellar guest experience even while cutting costs.

What pricing strategies help during recessions?

Strategic pricing strategies like targeted discounts or packages for resilient segments less affected by declines, dynamic rates using algorithms to respond quickly to demand shifts, opaque discounted flash sales sites to stimulate new reservations, and bundling with partners like airlines or tour companies to provide affordability all help drive occupancy during demand declines. Rate integrity for premium segments should be maintained while offering variable discounts to more price-sensitive groups based on data insights.

How should hotels market during recessions?

Hotels should target recessions-resilient demand segments like budget-conscious families or remote workers with tailored packages and offers, highlight affordability and value-adds in messaging to incentivise bookings, advance direct booking discounted deals and promotions, amplify retention marketing efforts to nurture valuable repeat guests and maintain brand visibility through cost-effective digital marketing channels to remain top of mind for the rebound.

What operational strategies help hotels during economic downturns?

The assembling of cross-functional teams of top performers to optimise efficiency through collaborating on solutions, monitoring performance daily with rigorous reporting on critical metrics like occupancy and RevPAR to enable rapid response to downward trends, frequently adjusting strategies and operations nimbly based on data insights, and maintaining high service levels through dedicated training and transparent communication to keep employees confident and empowered.

How can hotels boost guest confidence during recessions?

Providing open and empathetic communication about the realities and measures being taken, emphasising value offerings, celebrating positive guest feedback or reviews as a reassurance, leading with optimism from managers that downturns always lead to eventual recovery, recognising employees who uplift others to foster community, and conveying a commitment to delivering meaningful and personal guest experiences even in challenging contexts.

What types of partnerships help hotels in recessions?

Win-win partnerships with complementary travel companies like airlines, online travel agencies, attractions, tour operators, destination management companies, and neighbouring hotels create attractive bundled travel packages that protect revenues by aggregating complementary offerings to incentivise reservations. Partnered packages also add value for recession-wary guests. 

How should hotels prepare for the eventual upswing?

Using reduced business levels during a recession downturn to overhaul processes, explore emerging segments or sales/marketing channels with potential, revisit brand identity and messaging to refine strategic positioning, and brainstorm new value-added amenities, packages, or experiences to introduce post-recession helps hotels prepare for the eventual upswing. With resources aligned for growth, hotels can capitalise quickly when travel demand rebounds.

What data should hotels analyse during recessions?

Key data points like booking pace, cancellations, occupancy rates, ADR, RevPAR, demand levels by market segment, performance by channel, website traffic and KPIs, online sentiment and reviews, acquisition costs, and customer lifetime value help hotels analyse performance and pinpoint issues to enable quick revenue management pivots in response to recession declines.

How can hotels support employee morale during recessions?

Frequent empathetic communication, recognition programs spotlighting wins or excellence, mindfulness training to manage stress, reassurance about the temporary nature of downturns, complete transparency into company performance updates, bipartisan collaboration opportunities, and leading with positivity and care from managers all help maintain employee morale and unity during challenging recessionary periods.

Get in touch for more information.

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Emersion Wellness

Our success is relative to our devotion and attitude towards hard-work and innovation.
7 Leake St Fremantle - 6160 - Perth, Western Australia

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