Over the years I have lived and worked through numerous crisis’s that have led to economic downturns – Gulf War (early 90’s), 9/11, SARS, the Housing Crisis in 2008, etc… and now COVID-19. I have made my share of mistakes, learned from those mistakes and also had my share of successes.
Planning During SARS
Let me tell you about one of those successes. When the SARS virus hit our city hard in spring 2003, we had our biggest hotels go from occupancy levels around 85% to 18%. Panic had set in across North America and travelers were fearful of coming to our city.
My boss came to me and asked me to put together some marketing programs to help mitigate the problem. My first reaction was that this wasn’t an occupancy problem but a health problem and if we simply did as asked we would have used up our marketing budget trying to attract customers who weren’t going to travel to our city regardless of how good the deal was He pushed me a bit to consider some options.
As I asked the Directors of Marketing to join me in a brainstorming session, I realized that there might be something we could do. But before we could come up with ideas to increase business, we had to be realistic about our problem:
- Groups were canceling at a very quick pace
- Business & Leisure travelers were disappearing
- Television stations around North America were basically suggesting to people not to come to our city
- We had no control over how the problem was caused or how it was going to be resolved
- People in our city knew that they were NOT going to get SARS
We needed a short-term plan (SARS is still with us) and a long-term plan (SARS has started to significantly subside).
It’s important to note that SARS and COVID-19 are very different and therefore our short-term SARS solutions would not work with COVID-19.
Actions We Took During SARS
We listened to what our local Director of Public Health said, not to what the business experts said. The CDC can be a great guide for you as you plan your strategies.
Short-term – we focused on the people who knew that they were safe by offering special deals (discounted rates plus value add-on’s) for them to get in their cars and drive 20-60 minutes and stay with us to enjoy a night away from home at a great price. As SARS slowly started to subside, we expanded our customer geographic location circle. We didn’t get our occupancies back to where they were but we were able to generate some additional cash flow, cover fixed costs and keep many employees from getting laid off.
Long-term – we knew that all the hotels in our city were getting clobbered and that we’d all be competing fiercely for business. Groups would rebook but not before next year. Leisure travelers would be very nervous. Therefore, we focused on our highly profitable business travelers. Our defined goal was to get a higher STR index than our competitors in the first few months of post SARS travel. I met with a major airline and put together a flight/hotel prize that was a trip to anywhere in the world where our airline partner flew and we had a hotel/resort. The more a frequent traveler stayed in our hotels the more chances they had to win. The results were:
- We beat our competitors in STR index
- Our business returned to normal much faster than our competitors
Remember it’s important to note that each crisis and economic downturn has its own unique characteristics and there is no universal solution that fits across the board. Ultimately the solutions need to focus on those unique characteristics and be tailored market by market.
Short Term Do’s and Don’ts for COVID19:
- Don’t stress over your occupancy levels. There is absolutely nothing you can do to incent more customers to stay in your hotel – no rate discount, no creative package, no special services will overcome the outside influence that you are facing.
- Do focus on customer relations and long-term good will. Have a liberal cancellation policy – in fact, I would recommend a full refund with no strings attached.
- Do focus on employee relations. Make every effort to keep as many staff employed as possible. Even if it requires make work projects – projects that you have been meaning to do that can now be done by idle staff.
- Do enlist members of your team to help associates apply for benefits that may now be available – unemployment insurance, rent relief, debt relief, etc…
Mid-Term Do’s and Don’ts for COVID19:
- Do focus on customer segments that may continue to travel and use your facilities despite the health concerns.
- Do promote to locals who understand the true environment – always a good idea. Offer them a package that creates a desire to get out of the house – good room rate and value adds such has F&B and Spa discounts. They weren’t thinking of doing anything, but your package made them change their minds. (when CDC, WHO and local regulations allow)
- Don’t sacrifice your pricing Integrity – if you decide to lower your rates, make sure there is a rational reason for do so which will allow you to raise your rates when the reason changes i.e. higher demand. In other words, don’t go overboard with discounting and be aggressive when the opportunity arises.
- Don’t sacrifice customer good will: Have a liberal cancellation policy that focuses on maintaining customer Good Will. The long-term value of your customer relations is much more important the few extra dollars you will collect in cancellation fees.
- Don’t lay off members of your core Sales Team: It is never a good idea to lay off sales people to save a few dollars. They are the ones working on your future.
Long Term Do’s and Don’ts for COVID19:
Start thinking about your recovery plan now:
- What customer segments will return the fastest? What can we offer to incent them to stay with us?
- Create a relationship with every customer that cancelled a reservation. With every cancellation confirmation include a bounce back offer for a future stay – no strings attached and no prior to language – who knows when this will end. Hopefully, you have a lot of customer data…use it wisely.
- Contact all your group customers who cancelled and offer an incentive to rebook at a later date. Get some futures on the books and offer flexible cancellations policies should the situation take longer to resolve.
- Prepare your promotional messages now and plan to release them as things begin to normalize. Also prepare to release updates on operations and protocols to meet new guest expectations.
- Sales Team: Your sales team should be working harder and longer than ever before. Be sure they use the hotel down time to focus on the future.
- Hit the ground running when the time is right and beat your competitors out of the starting block.
In the short term and mid-term your goal is to maintain customer relations, generate incremental cash flow where possible, cover fixed costs and keep as many people employed as possible. In the long term your goal is to recover and scale back up faster than the competitive set and if successful all stakeholders will be pleased – employees, management team, the brand and owners.
Also, take this significant down time to consider reorganizing departments structures, explore new financial models for future success, more formal training etc.
Business will return and the more you do now in terms of planning effective strategies, the more business you will get which in turn will create more employee satisfaction leading to improved customer retention.
Gordon Carncross is a partner and consultant at Cayuga Hospitality Consultants. Previously, Gordon was a long-term sales and marketing executive with both Marriott and Starwood hotels. He was the former Chair of Tourism Toronto marketing committee, board and executive member of Tourism Toronto and served on the Prime Minister’s Toronto ’03
Alliance – SARS recovery committee.