REPORT FROM THE U.S.—Ten years ago, the United States economy was in a financial crisis, which took a toll on many industries including the hotel industry.
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Looking back, hoteliers shared their memories from the 2008 recession and what they learned from it that could be applied in another economic downturn, whenever it might occur.
Hotel News Now asked, via email: “What’s the biggest lesson the industry has learned following the 2008 recession?”
Ron Mehringer, director of revenue management, Sunridge Hotel Group
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“I recall sitting down with my ownership group once we realized that 2008 would be a very long year. I remember them asking what revenue strategies we can implement to overcome this obstacle. I recall sitting back in my chair and saying if we’re going to make any money while we go through this little hiccup, it’s going to be on the bottom line and not the top. It’s going to be in controlling our expenditures more than dropping a rate and starting a rate war within our comp set. By not taking away from the customer experience, (like) putting less on the breakfast or reducing their guest expectation by cutting items that they’re normally used to having, but by working with each employee and having them take ownership in ways of optimizing our expenditures (while) still focusing on our guest service scores. In revenue management, it’s very easy to look at the revenue director and say, ‘What are you going to do to increase or maintain our revenue year over year when a recession does happen?’ Sometimes it’s very easy to shift the blame for one department to another. And I believe that’s why revenue management is so important today and continues to change and evolve more than any other department within this industry.
“From 2008 until now, and until the next recession, revenue managers are and will be forced to look at the total guest experience and employee/hotel impact when dealing with rates, whether from transient or groups. To look at how that might impact not just other guests, not just the revenue that it produces but also the displacement of what will occur and the impact on the bottom line. Revenue managers are forced to look at this as more with respect to bottom-line producing revenue. it’s very easy to book a large group and look at what that revenue will produce, but for the revenue manager to be part of the overall team that will inevitably produce the bottom-line revenue, he or she must look at the impact of what they do daily—how the impact of their rates sets the change for the overall guest experience from housekeeping all the way up to finance.
“The biggest lesson from 2008? To learn that it will happen again. To maintain and enforce an ownership-like culture from all departments in the growth of our guest experience. To make it known that revenue management isn’t one person or one department, but that it’s a culture that needs to be part of every department from housekeeping to front desk to engineering, because with proper planning and daily monitoring of each department taking ownership of the bottom line, this is what will make the next industry hiccup much more bearable.”
Mary Beth Cutshall, SVP and chief business development officer, Hospitality Ventures Management Group
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“Leading into the Great Recession, many owners and operators had become lackadaisical with their expenses, from overstaffing to overpaying for third-party services. The Great Recession brought with it the reality of lower corporate travel budgets and fewer leisure travelers on the road. Hoteliers had to become creative to stay in business. While some of the ensuing tactics were more self-preservation than others, many actually resulted in net-positive gains for hotels, guests and the planet. For example, allowing guests to opt in or out of daily room cleaning and/or towel replacement originated from trying to better schedule a more limited number of housekeepers, yet ended up also reducing water consumption. This type of outside-the-box thinking taught us the most important lesson of all, which was how to do more with less.”
Karen DiFulgo, chief people officer, Benchmark Hospitality
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“The longer we remain in a period of growth and prosperity—roughly about nine years—the harder it is to remind people of the lessons that we all so painfully survived, and to stay focused on the fundamentals of our business. It is important to remain aware of the signals and to manage our business accordingly.
“From an operations perspective: Continually focus on labor and FTE management—never add a position to the team without a (return on investment); expense and amenity creep—evaluate every purchase and only add what the customer wants and needs; and underwrite assets with realistic expectations for the future.
“From a (human resources) perspective, HR needs to be a strategic partner in the business, and ensure that decisions are being made with a look at both short- and long-term impact. With a consistent focus on tracking metrics—productivity, recruitment, compensation, training, etc.—HR can be a lead indicator that a recession is forthcoming and begin to plan accordingly. HR should partner with operations and ensure that performance issues are being addressed, that the organization is maximizing its resources—both internally and externally—and that the flexibility is present in the labor models to maximize efficiencies. HR leaders need to be asking, ‘What can we eliminate, automate and or outsource?’ In a downturn, avoid recurring layoffs. Prepare adequately and only do it once. Multiple layoffs create fear and instability for the remaining staff, and in turn causes loss of focus and productivity. … Always remember that the people of the organization are the heartbeat and ensure that no decision, short- or long-term, dilutes the culture.”
Richard Warnick, managing director and co-chairman, CHM Warnick
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“The biggest lesson is actually one that was not learned by the industry but, rather, imposed on it by lenders—namely financial discipline. Lower financial leverage and generally more difficult financing for new construction has helped keep a lid on new supply. As for the biggest lesson the industry has learned on its own, I think it’s the value of professional asset management. Unfortunately, the gap alignment of interest between owners and operators has continued to grow. Having an expert’s set of eyes can level the playing field for owners and keep brands and operators from being overly self-interested, complacent, indifferent or simply making well-intended errors in judgment.
“I should add that, in addition to optimizing operator performance, asset managers help protect against numerous external threats like disruptors and uninvited intermediaries. It’s hard to overstate their impact on individual hotels and investors, quite frankly, the industry at large.”
Janis Cannon, SVP, upscale brands, Choice Hotels International
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“The biggest lesson is that you must have a plan that can withstand all economic conditions. The successful hotel companies are ones that are committed to a sustained development strategy with brands that are clearly defined and appeal to owners and guests, in addition to having capital build through a downturn. I’m fortunate enough to be part of Choice Hotels, which understands this. In the upscale segment, we have brands tailored to today’s modern travelers that offer a unique sense of place and space: the Ascend Hotel Collection, the industry’s first and largest soft brand; and Cambria Hotels, a brand in which Choice made an unprecedented capital investment aimed at building relevant, profitable hotels in the right locations, through all phases of the lodging cycle.”
Tom Corcoran, president and CEO, TCOR Hotel Partners
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“The Great Recession taught all of us to be prepared for events you can’t control. Don’t panic! The mortgage crisis did not cause overbuilding but did cause a decrease in demand. The most important lesson is to have low debt levels to withstand the decrease in revenue. The 10 years has taught us that demand came back stronger than ever.”