I am not an economist, so don’t pretend to have in-depth knowledge of the breadth and scope of what is to come. What I firmly believe, as I am sure many of you reading this do as well, is that a recession is inevitable, probably as early as 2020. According to a recent Duke University/CFO Global Business Outlook survey more than 80% of U.S. chief financial officers share this opinion. No one seems willing or able to say if it will be a blip of an adjustment or a major recession.
A downturn seems obvious, if only because what goes up must come down, and mostly because this unprecedented period of growth and employment is simply not sustainable. Add to this actual economic factors that even a lay person such as myself recognizes as problematic, such as the stock market losing traction, interest rates rising, too much personal and government debt as well as ongoing trade tensions, and the theory seems confirmed. So, how do we, in the hospitality industry, a field that has perhaps optimistically overextended itself with too many new builds (and therefore an overabundance of rooms to let even in the best of times) and an ever-tightening labor market prepare for this?
The general consensus seems to be that hotels must simply look at the lessons learned by the industry during the 2008 recession and apply them again: spending now to strengthen brand awareness and implementing strategic marketing programs that will see the company through the hard times, investing in guest loyalty platforms now and maintaining service levels come what may in order to retain customers and attract them once the recession is over - these are solutions that I am hearing from key players in the hotel industry.
I have also been reading about what experts believe will work best when the slump does come – should companies cut room rates to try to maintain occupancy, or maintain rates but add value through strategic promotional items such as adding plane tickets or car rentals to hotel stay packages or the offer of bonus free nights? In my opinion, there is no clear proof of the strength of one of these solutions over the other. The overlying conclusion of all of these articles, however, seems to be that a customer-centric approach to avoid losing market share to competitors during a recession is imperative.
While I know that the hotel industry is nothing without customers, it is also nothing without its employees, and I am a bit concerned that I am hearing nothing about them in all the data and the dross generated by the topic of recession and its potential impact on the hospitality industry. Perhaps I am naive but surely companies need to take their labor force into serious consideration in order to weather the storm ahead, whatever its size?
Because it has been abused and misused, “culture” has become a dirty word in the industry. I am firmly convinced that a responsive company culture is necessary to a company’s growth and stability and that those with skilled, humane executives who are flexible and able to see beyond the scope of what they have always done to new ways of working, who invest in their associates, cross-train them and teach them new skills so they can be slotted into different positions if needed, create programs to keep them engaged and therefore flexible during leaner times, make them feel valued, keep them aware of the decisions being made rather than treating them as replaceable cogs in the machine, are the ones who will survive a recession relatively unscathed. I also believe that employees who work in a company with a company culture that places them front and center will drive better customer service efforts and strengthen a company’s brand organically, two of the elements often mentioned as key ways of weathering a recession.
The CFOs interviewed for the study above said that their biggest present-day concern is their difficulty in hiring and retaining qualified employees. Companies need to act now to bring the executives who will effect positive change on board, and to implement programs to keep the qualified associates that they already have in their employ. For this they need a company culture that values people and training as well as dedicated retained search recruiters like me who can find the executives they need to implement - in the immediate - the cultural adjustments their companies require to succeed.
Do these things, and do them well, and perhaps 2020 will end up being just another strategic year, rather than one filled with more and more worrisome monthly P&L statements and a plethora of pink slips.