Road to Recovery: The hard lessons learned from the hotel industry's climb out of the downturn

By Mike Kistner President, Chief Executive Officer & Chairman of the Board, Pegasus Solutions | November 20, 2011

At the 2009 American Lodging Investment Summit (ALIS), the overriding sentiment seemed to be relief, relief that we had survived the devastating downturn that hit in September 2008. Never before had we clung so tightly to the numbers to understand our fate – the depth of the downturn, the damage to demand, incredibly shrinking rates. Six months later, we began tracking data from billions of monthly hotel shopping transactions to track industry performance, and ultimately, help the "survivors" understand the road to recovery. Like the major lesson in rate-cutting we all learned post-September 11, 2001, the last three years have taught us some incredibly valuable lessons.

Looking at bookings volume, average daily rates (ADR), revenue, length of stay and booking lead times for approximately 90,000 hotels worldwide, the most recent industry numbers have, for the most part, portended positive growth for both the global distribution systems (GDS) and alternative distribution systems (ADS) channels. Both segments continue to experience increases over 2010 for the next several months, but ours is a market forever at the whim of world events, whether they be financial, political, geographical or social.

Lesson 1: Protect your rates

In July 2009, the overall pace of decline had slowed somewhat since early 2009, but the industry was still in a difficult position compared to the same period in 2008. Year-to-date, there had been a global decline in both channels for reservations, length of stay, ADR and net revenues, with the most dramatic declines occurring at the start of 2009.

The negative influence of depressed ADRs is easing today for many hotels, and has begun to round the bend for others. Whether trying to fan flickering hopes of ADR growth or basking in the warm glow of rising rates, the key to altering the state of the rate to more favorable conditions is to harness the power of strategic pricing.

Better pricing isn't simply about offering the lowest ADR your hotel property can afford, which is what often happens in a downturn. Any salesperson worth their salt knows that price points are simply a tool. They can be used to differentiate your product and maximize your value proposition. We need to consider each consumer as an individual, not a target market, and realize that each has an idea of what they're willing to pay.

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Guest Service: A Culture of YES

In a recent global consumers report, 97% of the participants said that customer service is a major factor in their loyalty to a brand, and 76% said they view customer service as the true test of how much a company values them. And since there is no industry more reliant on customer satisfaction than the hotel industry, managers must be unrelenting in their determination to hire, train and empower the very best people, and to create a culture of exceptional customer service within their organization. Of course, this begins with hiring the right people. There are people who are naturally service-oriented; people who are warm, empathetic, enthusiastic, pleasant, thoughtful and optimistic; people who take pride in their ability to solve problems for the hotel guests they are serving. Then, those same employees must be empowered to solve problems using their own judgment, without having to track down a manager to do it. This is how seamless problem solving and conflict resolution are achieved in guest service. This willingness to empower employees is part of creating a Culture of Yes within an organization.  The goal is to create an environment in which everyone is striving to say “Yes”, rather than figuring out ways to say, “No”. It is essential that this attitude be instilled in all frontline, customer-facing, employees. Finally, in order to ensure that the hotel can generate a consistent level of performance across a wide variety of situations, management must also put in place well-defined systems and standards, and then educate their employees about them. Every employee must be aware of and responsible for every standard that applies in their department. The April issue of the Hotel Business Review will document what some leading hotels are doing to cultivate and manage guest satisfaction in their operations.