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Hotels

A smart approach to economic downturns for hotel chains

Margaret Ady October 14, 2019

Unless you’re living a version of The Truman Show, you’ve seen the word recession floating around the web-o-sphere recently. The Marriotts and Hyatts of the world have been noticed using words like caution in light of the potential for the U.S., Britain, Germany, Japan, and Brazil to see a recession as soon as 2020. Further, North American hospitality and leisure CEOs are reportedly showing a decline in their confidence about revenue growth, according to PwC (AdWeek). From Brexit to various trade wars, to protests in Hong Kong, there’s plenty to be concerned about. But don’t panic; studies show that’s a bad move. It’s most important to start thinking carefully about how to handle a downturn in business if it comes.

After the last big recession, the Harvard Business Review set out to study which companies bounce back afterward. In 2010, a team of researchers scoured the last three global recessions (the 1980 crisis, the 1990 slowdown, and the 2000 bust). They looked for the magic formula that didn’t just help companies survive (they found that 18% didn’t make it at all) but, instead, the strategy that led some companies to recover more quickly to pre-recession levels. The findings: companies that carefully balance cost-cutting measures while also investing in growth have the highest probability of recovery.

The report notes, “One combination has the greatest likelihood of producing post-recession winners: the one pursued by progressive enterprises. These companies’ defensive moves are selective. They cut costs mainly by improving operational efficiency rather than by slashing the number of employees relative to peers (HBR).

This is a particularly important finding for hotel chains, which may be tempted to start cutting costs in a fight-or-flight response to the idea of recession. However, chains must be more measured and conscientious when it comes to cuts—especially the idea of reducing the number of employees, which can have devastating consequences for service and operations. Instead, focusing on efficiencies is far more sustainable. And now is the time to integrate efficiencies for the most long-term impact.

Because hotel chains operate continuously across a large volume of rooms—24/7/365 x 100 rooms x 50 properties—seemingly small shifts, particularly via connectivity and automation, can have big impacts when time or revenue savings are multiplied. Take energy efficiency. Artificial intelligence can respond automatically to guestroom occupancy patterns and can identify how long it will take to heat or cool a room. When you multiply the benefits of the savings per room across an entire property across multiple properties across even just a year what might seem like small savings on a micro-level (i.e., per minute or per hour) becomes a hefty addition to the bottom line. According to Hotel Management, technology that supports energy savings can reduce hotel energy consumption 25 to 35 percent. Bonus: Greta Thunberg would approve.

According to Entrepreneur, a big mistake companies make when trying to create efficiencies is tinkering with things that are already working instead of fixing what’s broken. Among the things frequently broken? Digital integrations. As the article notes, inefficiency in integrations will cause 25% of businesses to lose competitive ranking this year. These inefficiencies can be harder to identify than more conspicuous issues like air conditioning, but any hotel that’s tried to integrate a new technology with a legacy PMS knows, clearly, the amount of time and money required to retool the PMS and get the new tech online. Forward-thinking hotel brands will look toward a PMS that integrates with any technology without fees and within minutes. An API-first technology prioritizes integrations and ensures hotels can integrate all technologies quickly and without additional charges. Further, integrations aren’t just uncomplicated but, instead, are virtually automatic.

In January Forbes published statistics showing 62% of guests are more bothered by unfriendly staff than by lack of amenities, while 38% said a source of frustration was the front desk taking too long. The article went on to say that the two may be tied together—when front desk staff is overburdened with requests from across the property (housekeeping, maintenance, reservation calls, and so forth), they aren’t working at their best. Technologies, such as ALICE, an operations platform spun out of a messaging system that puts guests directly in touch with different departments can reduce communication inefficiencies. Or integrating mobile keys. Or automating the entire check-in/check-out process. Either way, staff is more efficient and better able to respond immediately and, we hope, more pleasantly with guests. This means improved guest service across all departments that benefit from the technology as well as more five-star guest reviews, all of which equal revenue.

From an economic perspective, countries that increase productivity (i.e., countries that increase output without increasing inputs) experience economic growth. The hotel industry can take a cue from economic principles as it weathers even the possibility of a downturn. The more hotels that do better, the better hotels as a whole will do throughout economic shifts. If the industry embraces technologies that will specifically improve efficiencies, it will be able to improve the overall guest experience without adding the expense of more staff (the theoretical input). Ultimately, should the industry bolster itself for a downturn early, while occupancy rates may drop, rate integrity may be maintained at a slightly higher level. And, as the Harvard Business Review study showed, for the individual hotels that embrace efficiency rather than cutting staff or slashing costs across departments, the other side of a downturn will look much brighter.

Margaret Ady

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Margaret Ady
Margaret is a co-founder and CMO of apaleo, responsible for the company’s brand positioning, marketing, and strategic growth. She’s no stranger to travel tech startups, having led marketing for Berlin-based SnapShot, and prior to that, for TrustYou. And, she’s been recognized for it. In 2016, she was awarded HSMAI Europe’s Top 20 Extraordinary Minds in Sales, Marketing and Technology. Before joining the hospitality technology scene, Margaret held leadership roles at The Walt Disney Company and The Oprah Winfrey Network. Margaret has also provided research, branding and marketing consulting services to many companies, including 20th Television (Fox), Nielsen and Red Bull. She graduated from the University of Southern California (go Trojans!) with degrees in Economics and Psychology and a focus in business. During her studies, she was awarded the USC Annenberg Communications Critical Pathway Grant for her research in new technology and its impact on healthcare decision- making.
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