Recession Readiness for Hoteliers - Part 1

I recently delivered a webinar, “Don’t Freak Out: Best Practices for Recession Readiness,” (about how hotels can prepare themselves for recession) to the members of the Asian American Hotel Owners Association.

What follows is a transcript of Part One. In this section, I discuss the current conventional wisdom about how the economy will impact hotels, and I walk hotel owners and leaders through how their staffing plays a role in recession readiness.

If you prefer to watch and listen to the recorded webinar, click here.

Dip, downturn, slump, decline, trough, slowdown.  

What do all of these words have in common? They all mean recession.

In my more than 20 years in the hotel business, I have noticed that people in our industry have a tendency to be afraid of the R word. It's like Voldemort in Harry Potter. We're afraid that saying the word recession will somehow make it happen.  

I'm not an economist, but I've been reading all of the same things you have. And there's definitely some uncertainty out there. The one thing I can be certain of after leading hotel teams through two different recessions is that there are things you can do in your hotels to put yourselves in the very best possible position. If you're proactive, you will be in a much better top line revenue position no matter what happens in the economy.  

The US economy has been on a roll for several years. The hotel industry has experienced record breaking growth and this positive cycle has lasted for a good long time.  

So when will the other shoe drop? There are both positive and negative signs.  In the positive column, consumer confidence is high. Consumers feel like things are going relatively well.  

But still, there's that ever-present worry. When will it end?  

Meanwhile, in the negative column, business confidence is low in large part due to the uncertainty of a trade war. Nobody knows what's going to happen with that and how exactly it will affect our hotels. What we do know is that travel is one of the first expenses to be cut by companies who are feeling the pinch.  

If business confidence is low, will CEOs start to issue mandates that their teams have to start cutting back on expenses?  

How is that going to ripple out to our hotels when they compare the evidence both for and against a recession?  

CBRE concluded that it was more likely than not back in August. But then last week, they put out a video saying things are looking good.  

Recession is officially defined as two consecutive quarters of declining GDP. The bottom line is we aren't going to know what's happening until we're in it.  

I'm not going to try to predict the future for you today. Instead, I'm going to talk about best practices that you can put in place in your hotel right now that will have a positive impact on top line revenue.  

If there's a recession, you're in a better position.  If there is not a recession, you're still in a better position.  

What can you expect from me today? Well, labor productivity, CapEx and expenses are certainly all important, but those are not my area of expertise, so I'm not going to address this today. Today we're talking about top line revenue.  

For the last seven months. I have been doing research on how hotels can best prepare themselves for recession. In addition to my own experience, I dug deep into Cornell's hotel school, academic studies and research projects. And I've also been conducting a survey. The recession readiness stress test to figure out best practices.  

Those best practices land in three areas: staffing, structure and selling.  

Within the pillar of staffing, there are two main actions you can take right now to get ready for whatever the economy throws our way. You need to evaluate your current team, whether that's one person or five people, and you need to make a hypothetical plan for how to replace every single one of them.

While we aren't covering labor and how to save money on labor, I do want to point out the obvious staffing is a huge challenge in our industry. The Bureau of Labor Statistics estimates annual employee turnover of 73.8% in the hotel and motel industry. For comparison, other industries are around 46%.  

Staffing is the biggest challenge all of the hotel owners I work with face, so that's why we're going to talk about it first.  

Start the process by mentally evaluating your team. Are they making goal? Are they engaged at work? Positive attitude. Making prospecting calls.  

If you've got weak spots, you have to decide whether you're going to invest in training now to make them stronger or start the performance improvement plan. Start documenting and managing them out. 

For strong players, think through this for a moment. What would happen if your top sales person won the lottery? Bought an island and never returned to your hotel?  

And for the open positions, don't wait to fill them. Especially don't wait to save money.  

Because as you saw with that turnover number, it's going to take you a long time to fill those positions. So do the hiring process as quickly as you possibly can.  

Once you've thought through each member of your team, even if everyone's an A plus player, it's time to make a list of at least one potential replacement for every member of your team.  

Making the list does not mean you hate your team! It just means that you hope the best for the people you work for and want them to win the lottery, so you're going to make a plan for what to do when they do.

Look both internally and externally. If you've got an existing employee with sales potential, you could start including him or her on site tours or in trainings. It's often easier to teach someone who already understands the hotel business how to be a salesperson than it is to teach a sales person from outside the industry how hotels work.

Here's an example of a bench plan. Externally, you can find bench strength by doing sights at other hotels, attending industry events and connecting with people who impress you. And don't ignore the admins at other hotels. Those sales coordinators could be great candidates for your next opening.