Mr. Escoffier

Food & Beverage

A New President Equals a New Day for Hotel Management: Or Maybe Not

By Marcel Escoffier, Associate Professor, FIU School of Hospitality Management

Mercifully, the election is over.

By the time you read this column, we have a new President. At least I hope so. I'm embarrassed to admit that I live in Florida, and, like the last couple of elections, we may still be trying to figure out who won our vote.

Kidding aside, and with my fingers crossed, we have elected someone. Of course, writing this as I am in July, of 2009 I don't know who it will be. But I do know what the consequences of our choice will be. So bear with me as I tell you what to be on the lookout for over the next four years.

Irrespective of who won, the fact that someone won is going to change some things

For a very long time, political observers have noticed that the general mood of America changes when the Presidential elections are finally over and we have a new leader. During the election process businesses faced a general level of uncertainty, people were made even more confused than usual by the speeches from both candidates, and, in general the country has gone through a period of high anxiety. In this election, the level of anxiety has been heightened even further by a series of financial upheavals that have everyone nervously anticipating the new Administration's plans to get us "back on track."

A period of stressful anxiety waiting for a decision to be made usually ends when a decision is announced resulting in a collective sigh of relief. Except for the most partisan political junkies, the American people will express euphoria over an outcome to this election cycle, any outcome will do. So, regardless of which side won, some results will be the same; a general feeling of relief that we are finally on the road to solving the pressing problems of the day, and a desire on the part of the election-weary populace to unwind or forget about the recent election turbulence.

This gives the savvy F+B Director an opportunity to tap into the twin emotions of relief and hope in some meaningful way. It also means that, at least for a month or two (actually, until about two months after the new President takes office) the menu emphasis should be on celebration. It is going to be a heck of a New Years party! "Happy days are here again" will be the theme at many such events. Of course, as with any election, some people's choice for President will lose, so there will also be a need to drown their sorrows as well.

But in addition to having a great New Years celebration, let's tap into this general euphoria for more than one single night. Weekend packages should sell well throughout this period. The theme of the moment is renewal. Renewing our faith in America is the renewal the President will push, but renewal in general is the theme we should be using. Marriage renewal, business renewal (i.e., small meetings to get the troops motivated for the new and improved economic outlook) and a host of other renewals all come to mind as themes.

Also, menu specials should tap into this mood of good times. "Surf and turf" type items rather than "let's not spend too much tonight" specials should be the norm. Hotels with sports bar / TGI Friday's type outlets should be looking at this theme of "Let the Good Times Roll" as well. Hotels offer the ideal weekend get away. This euphoria gives people the extra reason to come to your property, either for the night (a celebratory dinner) or a long weekend. Gas prices will not have gone down sufficiently to make long vacations attractive, and the airlines would be too slow to react to any positive economic changes anyway. So, the market to get locals (say, arbitrarily, people in about a 100 mile or so radius) to have a brief interlude at your hotel is a wise marketing opportunity.

Don't spend too much time or money cranking up the F+B operation's marketing in this regard. Remember, "this, too, shall pass" and rather quickly. Come March (unless the new Administration has some uniquely well publicized successes) this euphoria will start to subside and we will be back to the pre-election concerns that we have been facing for a few years, namely The War and The Economy.

There is a distinct Republican versus Democratic way to addressing our nation's issues

Republicans see the world differently from the Democrats. While what I am about to say is true of the general emotional / socio-cognitive positions of the two parties (translation from professor-speak: what the "typical" Republican or Democrat believes), you, the Republican or Democrat that you may be, may not subscribe to every one of these beliefs.

Political scientists say that Republicans, as a party, see a top-down form of policy making as the natural order of things. Wealthy people are wealthy because they are smarter and more able than the general public to appraise a situation and act upon it to their benefit and the benefit of everyone (an example, the "trickle down" theory of economics.) Democratic thinkers see things from the perspective of fairness of opportunity. Even a relatively poor person can come up with good ideas, and people acting as a group can make a difference. (I am abbreviating this somewhat. The actual philosophical differences are much more subtle.)

OK, "So What"? Well, at the risk of taking this line of reasoning too far, one could say that there are two kinds of hotels in the United States; one kind reflects the Republican ideals while the other reflects Democratic principles. Well, yes, this is a bit of an over statement, but the general principle is true; some types of hotels will have an easier time of it if our new President is a Republican while other kinds of hotels will experience a better economic growth pattern were the President to be from the Democratic party. Bear with me for a few more paragraphs, and you will see what I mean.

Issues that WILL come up

You don't need to be a College Professor to know that we need to address certain national issues. The War is one, the Economy is another. But there are also the "ghosts of politics past" that will come up for debate.

An economic issue Congress and the President will have to address will be the Income Tax Code. Many tax provisions will "sunset" over the next couple of years. Estates and Gifts taxation, for example, has the rather odd provision that, if the wealthy person were to die in 2010, there would be no estate tax. (Republicans call this the "Death Tax".) Pundits joke that a whole lot of elderly wealthy folks will be going to their ultimate reward that year. More serious tax policy makers know that this is but one issue Congress will have to address in 2009. How this and other tax issues are decided will affect the hotel industry. A Republican administration (more surely assuming a Republican congress) will push for a continuation of the current tax laws. In other words, the rich will continue to see their income sheltered from any meaningful additional tax burden. The top down hotels will continue to do well under this circumstance. A Democratic administration will probably end many tax benefits for the very wealthy (defined as those people earning more than about $225,000 a year) and implement some tax relief for the more modestly paid workers (the so-called "middle class".) Were this to occur, the more modestly priced hotels should benefit.

Of more immediate concern to F+B Directors will be immigration issues. While both candidates expressed differing views concerning this issue, something will have to be done. Having tens of millions of illegal aliens residing in the United States is not good. Depending on the party in power, the resolution of this issue will have an important effect upon how we do business. Mr. McCain has run on an anti-immigration policy, but I don't think that he is very enthusiastic about that stance. Clearly Mr. Obama would aggressively confront this issue.

Energy is, once again, an issue. I favor the "shotgun" approach, funding more oil exploration and development, more fuel economy, and incentives to encourage greater use of alternative energy. The Republican party favors Big Oil solutions, the Democrats less so. Don't count on your utility bills going down, or even staying the same. Energy costs will rise. Whether the power companies spend money building power plants that use alternative energy or have to pay to build more efficient traditional plants, the power companies will get that money through your energy bill. An aggressive energy conservation campaign should be enacted at your hotel right away.

The minimum wage will probably become a contentious issue in 2009. The law is up for review, I'd be surprised if the minimum wage doesn't go up. Given the decline in tip receipts in the first half of 2008, the various labor advocacy groups will push for eliminating the tip credit. My bet would be that the National Restaurant Association will fight valiantly, but a Democratic administration will probably either reduce the credit or eliminate it.

Other labor laws will be liberalized under a Democratic administration, although you can bet that the most contentious issue will be the health care proposals both parties are pushing. Either one will increase your labor costs, both proposals are very nebulous in how they will work and be financed. Watch this issue closely, I have seen estimates of this costing employers upwards of $250 per employee per month! (Over whatever you are paying out currently.)

There is also the issue of gasohol. Taking food out of your mouth and putting it into your gas tank makes little sense. Unless you have more food than you know what to do with. The world does not have a food surplus (well, really, a surplus of the food that is used to manufacture gasohol.) A large part of the increase to your food cost bill is because of this ill thought out program. America (indeed, most of the World) is on a corn-based economy. Our meat supply relies on corn (beef, pork, chickens, even catfish all are fed corn.) Most farm animals could be fed other stuff, but at a higher cost both in terms of the cost of the feed but also in the decrease in their growth rates. Unless we all become vegetarians, I can see no solution other than to tone down or eliminate this program.

What this all means for the business or managing a hotel

Most importantly, all this means that you, the F+B Director will have a very busy year. You will have to keep abreast of events as they change over time. "Cautious Optimism" might be the key phrase here. No matter what the politicians do, the economy will remain relatively stagnate for at least the first half of 2009. Even if the new Administration comes up with some Earth-shattering economic stimulus proposals, given the time it will take to enact the legislation, and the time it will take for the economy to react to the new policies, it is a safe bet that we will not see a measurable economic turn around for at least six months. Caution is advised because along with whatever helpful ideas put forward in Washington, a ton of downright stupid ideas will also be floated. The F+B Director who plans strategies given every new idea floated in Washington will soon find himself worn out.

Here is a possible game plan for your hotel. If your property's clientele is primarily the business market, count on an initial pull back in guest stays. Just like you, all other businesses will be waiting to see what the Administration will be doing. Now would be a good time to work with the marketing department to come up with what you will do once the economy heads in a specific direction. For example, if a Democratic Administration were to follow through on their campaign promises to "Bring jobs back home to America," count on some long term stays while the local factories are re-tooled and re-opened.

Vacation (Tour and Travel) oriented hotels will have to contend with fluctuating gas prices. This would mean an even greater emphasis on value menus, spiced up with a few "what the heck... I'm on vacation" menu items that allow guests to splurge at least once during their stay.

Higher end properties will see a growing market in the "Once in a lifetime" family event banquet business. The middle class market that is really being affected by the economic slowdown will especially want to book their family's Big Event at a high-end hotel. The old New Orleans French Quarter hotels were especially good at this. They could but on a very elegant looking wedding reception but at a cost that was just barely affordable by the local middle class. The key here is to adopt an attitude that does not come across as looking down your nose at these prospective banquet guests.

Surprises that probably will come up

Americans are known throughout the world as eternal optimists. The current economic hard times will come to an end. Along the way, the F+B Director will have to look out for some surprises. Watch out for government to enact legislation mandating one or another kind of energy saving scheme. Carbon usage, percentages of alternative energy use, outlawed machines or cooking techniques, increased filtration all are being enacted in one location or another. Our uniquely American belief that food is somehow poisonous or at least bad for you can be translated into all kinds of legislative initiatives. Just as our choice of cooking oils have been mandated, it is easy to see how we will have certain seafood items outlawed. Now would be a good time to get yourself involved in heading off some of the more wacky ideas. If you are not a member of the local hotel association, Google them right now and join!

Some things will never change

Aside from the common wisdom in Washington, life goes on, in spite of politics. People will get married, have Bar Mitzvah celebrations, attend conferences and conventions and otherwise want to meet their fellow citizens. The banquet business will continue on as before the election.

Once the public becomes used to the new Administration, they will again take up addressing their current situation. The economy will see continued inflation, coupled with additional layoffs. Unemployment is not the only measure of the labor market. Many who lose their relatively well paying factory or executive jobs will find employment in the service sector. Generally, this will mean a decline in spendable income. Credit will continue to be tight, especially since the housing market will generally still be in the doldrums.

As prices go up and income goes down, and with the economic cushion many had with their homes gone, it will be another period of belt tightening. Hotels generally respond to the result of these conditions through drastic rate reductions in order to fill their rooms. The F+B Director will have to do the same regarding menu prices.

As we reduce portion sizes, use less expensive ingredients, and otherwise try to get our food costs as low as possible, it will be necessary to become more creative in what we offer. Recent menu marketing studies say that the American public wants spicier foods. This is a good thing. Starches, the least expensive ingredients, need a spicier framework in order to be attractive to the guest. As butter fats (cheeses, milk, butter, etc.) rise in price, we will have to look to the cuisines of the more tropical climates. Take out a map of the world. Draw lines marking the Tropic of Cancer and Tropic of Capricorn. All those cuisines that lie between the two are fair game for menu ideas.

Under-utilized cuisines such as Indonesian, Indian, the cuisines of the Mid-East and Africa can give the enterprising chef hundreds of good recipes. By the way, the particular (and, often, peculiar) cooking apparatus used in some of these cuisines are largely unnecessary. Just as we Americans have for years enjoyed tortillas that are not pressed by hand and baked over coals, we don't really need most of the cooking utensils used in these cuisines.

I close by reminding you that the ethnic group that is growing the fastest in the United States are the Latino populations from Central and South America. They have a fine set of similar, but intriguingly varied national dishes. Here is the ideal solution to our costing problem: we probably have the kitchen staff who cook these foods at home, and the foods that they cook are usually quite good and quite inexpensive. Let's give them a chance to teach all of us a thing or two!

Marcel R. Escoffier was an Associate Professor at the School of Hospitality Management Florida International University. He had over thirty years experience in hotels and restaurants throughout the U.S. Unfortunately, Mr. Escoffier passed away in September, 2009. We at HotelExecutive.com would like to continue publishing Marcel's articles on our website as a tribute to this brilliant man. The one thing we loved most about him most was his sense of humor. He would always make light of any serious situation, and this was reflected often in the articles he wrote for the Hotel Business Review. Mr. Escoffier can be contacted at editor@hotelexecutive.com Extended Bio...

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