Recession Readiness for Hoteliers - Part 2
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 Two. In this section, I talk about the second and third pillars of recession readiness: Structure and Selling. (Part One covers the first pillar, Staffing.)
If you prefer to watch and listen to the recorded webinar, click here.
OK, so you've taken your temperature on staffing and you've built a plan for how you will find backfill for every member of the team. Your next mission is to look at the business practices and meetings that are in place at your hotel and make any adjustments you might need. It is easier to make changes in good times than it is in bad by developing the very best possible structure. Now, this will already be a positive habit for later, whether or not there is a downturn.
I remember using a gigantic red book to record reservations, meeting space bookings, all that stuff in pencil by hand at my first hotel.
Internet access was new in general and we were not allowed to have it because the controller thought we were going to spend the day shopping online, I guess.
When I think about all of the tools that hotels have now, I almost feel like those days of the Big Red Book were a bad dream. Can you even imagine doing business without email now?
I've worked with almost 200 hotels and more than 70 markets in five countries, and the most consistent thing I see is they don't use the tools they have. There are tools that we pay for like Agency 360 or a reader board service like Knowland. Their tools just sitting in your office waiting to be used like a cabinet full of old files. And then of course, there is this: Anything that you want to know is available to you for free just by Googling it!
One tool that I think is really important is some sort of written guideline for how your team should make business decisions.
Some hotels may have automated tools like this, but whether you do or you don't need that, you can just put it all on a piece of paper, create open selling guidelines that do the same thing.
Giving your sales manager rules of thumb to follow will make it easier for them to respond to clients quickly. It doesn't mean you turn down anything outside of the guidelines, just that you discuss that business first.
In this example, I have how much to charge for meeting space. What the space release policy is group sealing rooms to space ratio year can include and should include anything and everything that our house rules at your hotel.
In addition to using your tools. A key part of the structure of your readiness for a recession is routine. Why routine? Well, when you don't have a routine, life just happens to you. The day gets wasted because you don't know what to do with yourself or you end up getting distracted in me wants the needs of everybody else.
The routines that add the most value to your hop, the hotel top line revenue efforts are listed here. The one that I think is the very most important is a daily meeting, preferably first thing in the morning. It sets the tone for the day. So Daily Business Review allows you to prioritize business and hold your team accountable.
It can also save time if everyone's together once a day – you can communicate strategies and priorities really efficiently and the people in the meeting learn as much from each other as they will from leaders in your hotel. DBR is a good time to hold the team accountable for prospecting activity.
The other meetings I recommend are weekly, starting with a weekly sales meeting that includes training (not just reviewing numbers). You should also include a weekly review of the prospects and tentative in your pipeline and a weekly review of lost and turned down business. And those three things can be combined into one meeting. But I think it's important that you check all of those things off the list.
One last thing to say about structure. If your hotel is structured in such a way that you pull the sales manager out of the office to do a shuttle run or clear breakfast dishes or beds, you have a problem. Emergencies happen. But this should not be a regular occurrence. Keep sales people selling when you allow your revenue generators to spend their time in the operation. You give them all the excuses they need for missing goal.
The third and final pillar of recession readiness is selling sell. Something seems obvious, right? If you're multitasking, come back to me. Selling may seem like an obvious point, but there are three key things to think about that are particularly applicable to being prepared for a recession.
These are diversification, proactivity and rate integrity.
If one account vertical industry or booking channel makes up more than 20 percent of your business, you need to diversify. Think through how you would replace business if your top account has a travel freeze. Ask yourself those what if questions before something happens rather than waiting for it to show up on your P&L. A great free tool to use to determine how to best diversify your business as FINVIZ.com.
On this site, you can get a visual representation of how various industries are performing. It's measured by their market capitalization. And so in this screenshot you're seeing a year to date picture of the S&P 500. Green indicates growth, red indicates decline. So a company like Amazon is experiencing growth right now, where over here in the healthcare industry, we're seeing a little bit of pain and suffering.
I clicked into one of the really red boxes, and we can see this is Pfizer. They've lost 18.83% of market cap as of October 1st. What would happen to you if 20% of your hotel's business came from Pfizer or, you know, just from the hotel health care industry as a whole?
If you're getting all of your business from an industry that is declining in value, you might want to think about seeking out business from a different industry so you're not left holding the bag if, for example, Pfizer decides to do a travel freeze to make up for all the value they're losing.
Thinking through diversification is one way of being proactive, but there is another far more important one. Most of your team members have probably never had to sell in an environment where they didn't have enough incoming leads to fill the pipeline. They've been able to rely on those incoming leads for the last several years.
So it's time to get back in the habit or to build a habit from scratch, making proactive prospecting calls. The most common excuse I hear for not doing prospecting is not having enough time.
First I'll talk about the reality of time, both our time inside hotels and our clients time so we can figure out how to do more prospecting. When you think about the calendar for the work week, you probably mentally picture a blank page that's just waiting to be filled. But in reality, we all know that hotels are crazy!
As the week progresses, we lose control over larger and larger chunks of our time. We push finishing report off to tomorrow because we had somebody call out sick today or we find out about a guest issue and that takes priority over following up on a wedding for next year. And then, of course, there are meetings after meetings after meetings.
Even the day that we have the most control over, which is Monday, typically it's tough because it's the worst day to make prospects and calls. Clients are shell shocked from the weekend. They don't want to be back at work. They're too stressed out to be nice. And of course, no business ever gets done on Fridays. I'm kidding about that -- you better be doing business on Fridays! But Fridays aren't a great day to call either.
We're left with this slice of time in the middle of the week where conditions are more in our favor. That's when we both have time to make calls and when our clients are more receptive to taking them. It's imperative that we keep this time open for proactive selling and don't throw a bunch of fire drills at the sales manager.
This phenomenon is probably going to sound familiar to you. You've probably experienced it before. That which is easiest to postpone, is easiest to ignore. Since prospecting doesn't have a hard deadline like an RFP or a report does, it's incredibly easy to keep kicking the can and telling yourself you'll do it tomorrow. Do the thing that is easiest to postpone first.
Sellers tell me that having enough time or not wanting to interrupt people are their reasons why they don't make prospecting calls. But I know and you know that these are just excuses. The biggest obstacle to being proactive and picking up the phone is fear.
In my company, most of my business comes from prospecting. And so I know in my heart that that fear is real. But I also know the best way to overcome the fear.
OK, so you've theoretically you've made the decision that you're going to at least keep those midweek mornings open for prospecting and you're going to start having a daily meeting that you use to hold your salespeople accountable for the prospecting they need to do.
But if they're still scared, what do you do?
To tell you something that you don't want to hear, or at least your team doesn't want to hear? Yes. Prospecting training can be very valuable. And there are tons of great books about it. I particularly like fanatical prospecting by job blunt. I got a new tip for an idea every time I teach a prospecting class or read a new book about sales. But training isn't everything.
Here are some tips for overcoming the fear of prospecting.
You should not be trying to sell something on a first call with a potential client. Instead, you should be building trust, trying to get them to come for a site, learning about their business, their sourcing process. You should not be trying to close business on our first call. So that takes some of that fear pressure off, right?
Another way to soften the scariness of prospecting is to make prospecting appointments. What would happen if you called someone and said, “Hi, Steve? I know I'm not on your calendar today. So I wondered if we could set up 15 minutes in the next week to talk about how you use hotels.” You set up an appointment, and then the client expects your call and you have time to prepare and research.
That research part is important. Two high-quality, well-researched calls that result in site tours or business are far more valuable than 200 calls when you leave a voicemail that nobody ever returns your call. Quality is more important than quantity.
But quantity is better than nothing. And this leads me to my most important tip for getting over the fear of prospecting. Practice.
The more you do it, the easier it gets and the better you get at it. If you want to start a new prospecting at your hotel, start now while the stakes are lower and you still have incoming leads. The best way to overcome the fear of prospecting is to do prospecting.
There's one last thing I must say about preparing for a downturn.
When I was doing research to prepare our recession readiness stress test, I read lots of very technical, dry academic papers from Cornell. And I came across this study about how to set rates when times are tough.
Remembering what both 2001 and then 2009 were like in the hotels I was leading at the time, I was kind of expecting this study to show a specific percentage that hotels needed to drop their rates in order to stay afloat during a recession.
But I was surprised to learn the opposite. The authors of the study crunched numbers from thousands of hotels and what they figured out is that dropping rates does not drive enough occupancy to make it worth it in terms of RevPAR.
So my parting advice to you is to maintain your rate integrity. You may feel an occupancy drop, especially in highly rate-driven markets, but you'll maintain your RevPAR and therefore the value of your asset if you hold the line on rate. Stay strong!
Thank you so much for joining me!