Lessons Learned in a Downturn:
Revenue Hides a Multitude of Sins

By Dr. Dan Mount

One of the good things about aging is that I can benefit from my previous experiences. I have now been through quite a few economic downturns and while each may have its unique characteristics, many things don’t change from one to the other. Without fail, an economic downturn will lead hotel managers to reevaluate their costs, labor productivity, and amenities offered to guests. Managers will scrutinize each line item on a P&L statement to a level that has not been seen since, well, the last economic downturn. Productivities will be gained, staffing levels will be more efficient, and costs will be maintained—all with an emphasis on creating real value as perceived by the guest. And then the recovery comes along, revenues return, and the focus is lost. Revenue hides a multitude of sins.

The latest UniFocus industry study found that “managing labor more efficiently” is the second most cited item in response to “what are you doing differently in 2010?” What managers must take with them through the recovery is that this focus on efficiency, productivity and cost control should not diminish in the good times. All of the special measures taken over the last few years should be reconsidered, reevaluated, and reinforced during the rebound, so that whenever the question comes up again about what is being done differently that this item should no longer be a “most frequently cited item” in the years ahead. Rather, these measures will continue to enhance profit margins (that are sure to be affected by slower-recovering average rates).

The first most cited item in the UniFocus study as to what managers are doing differently in 2010 is “giving more attention to guests/meeting planners.” It does take a downturn to get us to recognize the value of each and every guest. Let me replace one word in that sentence. It shouldn’t take a downturn to get us to recognize the value of each and every guest. But unfortunately, the appreciation and recognition of each guest is, again, sometimes lost in periods of high occupancy. And then we miss them when they are gone.

Most every company has a frequent guest program, but I don’t believe that is the kind of attention we are talking about above. Paying more attention to guests speaks more to creating loyal customers through relationships and satisfaction rather than through obligation to a frequent guest program. Relationship building is a skill, one that can be taught and encouraged. Relationship building is about reaching out to guests and meeting planners, reducing the number of different contact points throughout the hotel, and maintaining a customer focus through guest feedback and relationship management systems.

One GM that I spoke to (a few downturns ago) said he was going to write a welcome letter of acknowledgement for every returning guest, thanking them for their repeat stay. It was a form letter of course, different from the standard welcome letter, but with content that showed that the hotel realized and appreciated the fact that a guest had chosen to make a return visit. It is a simple practice, but also a vital one that starts a relationship that could reap rewards down the road.

Dr. Daniel Mount, CHA is Associate Professor in the School of Hospitality Management at Penn State University and also an honored UniFocus Advisory Board member.