In an economic recession, many Hoteliers may be hesitant to risk jeopardizing their revenue post-crisis by investing in marketing campaigns. If you are part of this crowd, we have one question: “Do you want prospective customers to remember you when ‘Revenge Travel’ strikes?”
NB: This is an article from GuestCentric
As our CEO Pedro Colaco says, “Hotel Marketing is not about selling, but generating demand”, history tells us that periods of low demand give hotels the opportunity to ramp up marketing in preparation for the upturn. When looking back at the crises of the past, it’s important to understand which strategies hotels implemented that ensured a faster and stronger recovery. This will ultimately help you make the right business decisions today, for a profitable tomorrow.
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In this article, we look at a study conducted during the crisis of 2008, and what differentiated the winners from the losers in the upturn that followed.
What does History tell us About Hotels Marketing during Economic Recovery?
As is the case today, hotels and the wider hospitality industry suffered dearly in the crisis of 2008. Most of the developed economies (particularly in North America, South America, and Europe) felt the greatest impact, falling into severe, sustained recession.
But if there is anything the hospitality industry can learn from economic recession history, hotels that made strategic decisions and marketing investments emerged as winners in the long term. To back up this assertion, we analyze a study by Cornell Hospitality about hotel performance during the crisis of 2008 to 2009.
The research, published in the article Winners and Losers during the Great Recession: The Positive Impact of Marketing Expenditures, revealed what strategies enabled some hotels to emerge stronger from the crisis in the long-term. The study analyzed 416 US hotels (a mix of independent, branded hotels, extended-stay properties, and luxury hotels), and revealed a group of 100 winners to 106 losers (and 210 average performers), based on financial performance during the economic downturn.
In 2009, during the worst year of the recession, both the winners and losers in this study suffered declines in occupancy and ADR (as did all hotels). But when analyzing key metrics such as ADR, RevPAR, Occupancy, and NOIPAR (Net Operating Profit Per Available Room), the ‘Winners’ significantly outperformed the ‘Losers’ and were better positioned for the upturn and pent-up demand that followed. In fact, the Losers group suffered a 43% decline in NOIPAR compared with a 27% percent drop for the winners.
Although both groups reduced costs (in equal measures) for room expenses, administrative and general expenses, maintenance expenses, and utility expenses, the Losers group made one notable cost reduction: Marketing Investment. The Winners group, on the other hand, actually increased Marketing investment during the recession.
Read rest of the article at GuestCentric