Ms. Knutson

Sales & Marketing

Backcast Your Hotel’s Future

By Bonnie Knutson, Professor, The School of Hospitality Business/MSU

Not long ago, I was watching a noted economist being interviewed on television. During the interview, the economist was asked to predict the economy five years from now. He stopped, looked at the reporter, cocked his head a little, and slowly but deliberately replied, “We can’t even get tomorrow’s weather right! What makes you think we have any clue about what the economy will be five years out?” This about sums it up. If anyone tells you that they can prophesize what the hotel industry will be like a year from the day you read this, let alone five years into the future, he or she must have a better crystal ball than that economist.

French essayist, Paul Valery, quipped, “The trouble with our times is that the future is not what it used to be.” How true. Chaos seems to be the new normal. Spurred on by globalism and technology, we live in a world that is more interconnected and interdependent than ever before. Countries and communities are increasingly dependent on one another, and technology allows information to spread throughout the world as fast as fingers can tweet or record an event on a mobile phone. While these duel forces can enable extraordinary progress in good economic times, they can also enable a lot of confusion in down economic times. In fact, former Federal Reserve chairman, Alan Greenspan, uses the term The Age of Turbulence and Philip Kotler, an expert in strategic marketing, calls this unprecedented era Chaotics.

Historically, there have always been periods of some turbulence or chaos in economies that have impacted the hotel industry – local, regional, national, or global. They were considered cyclical and part of a natural business cycle. These upheavals generally lasted about seven years and were characterized as a “bull market” or a “bear market.” Their longevity made it easier for managers to anticipate and plan for both upswings and downswings in occupancy, rates, and REVPAR. But in the new normal world, and in the foreseeable future, these cycles are expected to be shorter and steeper. So added to the daily challenges of running your hotel, you will face less certainty and more insecurity in planning. It is this heightened uncertainty that requires you to recognize the changes, understand how they will impact your particular property, and develop innovative strategies that will lead to your property thriving, not just surviving.

There are three critical keys in thriving, not just surviving, in these chaotic turbulent times.

Get your radar up

Benjamin Disraeli warned, “In a progressive country change is constant, change is inevitable." Make sure your radar is constantly up and working to aggressively monitor what is going on in your market that can directly, or indirectly, affect your hotel – demographic, social, economic, technological, and political. Instability can happen anywhere or anytime. If the hotel’s radar is up 24/7, it can detect the first signs of change, giving you time to defend against threats to your marketing efforts or take advantage of opportunities that may present themselves. The biggest dangers to any hotel are the ones management doesn’t see coming, and understanding these threats – and anticipating opportunities – requires strong peripheral vision. In other words, a 360o radar screen.

Make Three Measurements

When I was building anything as a youngster, my dad used to always tell me to measure twice and cut once. Building a marketing strategy in turbulent times requires a similar approach. But instead of measuring two times, you need three measurements. These measurements are actually three different outcome scenarios of what could happen to the hotel based on your radar readings (or Environmental Scanning). I call them the “what if” scenarios. In this method, project three possible outcomes – the most likely, the worst possible, and the best possible. Then attach a probability estimate to each outcome, depending on the nature and severity of the turbulence, the competition’s response, the projected impact on REVPAR, and the impact on hotel’s sustainability. Finally, develop a strategic plan based on each of the final projected outcomes.

Backcast the hotel’s future

The vast majority of managers participate in the annual ritual of forecasting. This is the process of predicting the property’s future based on past and present trends in performance, operational costs, competition, and economic conditions. It is trying to foretell Timefuture from Timepast and Timepresent. It is the process of predicting based on current trend analysis. It’s what the economist was asked to do.

Backcasting, however, takes a different approach. It begins with defining a future scenario and then works backwards to identify what the hotel did to arrive at that future state. It approaches the strategic planning process from the opposite direction. In other words, backcasting looks at the hotel’s current situation from a future vantage point. It cannot reveal or predict what the future will be, but rather to look at a number of possible futures and then map out the steps that would have to happen to take the property to that future. Using this process, a couple of things happen. Some of the psychological barriers that lead to “Well, we can’t do this or that, because… (don’t have the budget, the home office won’t approve, the staff isn’t trained) are eliminate, or at least reduced.” Two, it encourages more creative thinking because it decreases the constraints of today’s resource limitations(i).

The process leads you to ask what the hotel did to reach the various results. Or, in the case of the worst scenario, ask what happened to put the property’s performance on this path and/or what didn’t management do to turn it around. By answering these questions, you make sure that your strategy and tactics are taking your hotel in the direction of its mission. Backcasting complements forecasting, it doesn’t replace it. Although, I once heard backcasting described as a recipe for people who hate to predict. This isn’t a bad recipe considering all the uncertainties that surround the lodging industry. As Alan Keys says, “The best was to predict the future is to invent it.”

Your REVPAR will thank you!

Reference:
(i)Two slide shows are available online that can take you through the backcasting process in more depth. They can be found at www.slideshare.net. Type in “backcasting” in the website’s search bar.

Bonnie J. Knutson is a professor in The School of Hospitality Business in the Broad College of Business at Michigan State University. She is an authority on emerging lifestyle trends and innovative marketing. Her work has been featured in The Wall Street Journal, USA Today, and on PBS and CNN. She has had numerous articles in industry, business, and academic publications. Bonnie is a frequent speaker for executive education as well as business and industry meetings, workshops, and seminars. Dr. Knutson is also editor of the Journal of Hospitality & Leisure Marketing. Ms. Knutson can be contacted at 517-353-9211 or drbonnie@msu.edu Extended Bio...

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