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Short-term action, long term strategy
What’s the key to success now that we are in the middle of the most damaging recession in recent times?
At the recent Master Innholders’ conference all was not gloom. True, there is an almost uniform loss of confidence in the industry but the main message to emerge was that businesses will survive – and will survive better if they raise, not reduce service levels. Dennis Hearn, who in his career helped steer Trusthouse Forte and then Forte through a number of recessions, summed it up succinctly: take short term action and adopt a long-term strategy – by which he meant, adapt the business to present circumstances but make sure you still have a strategy that aims for long-term growth. His message: don’t cut back on training and marketing – the two areas that are often cut back first.
So what short-term action should businesses take? Advertisements in the national newspapers currently promote a wide range of discounted hotel rooms and or other special offers. But is discounting a short-term solution to falling demand? Although there are many cries that hotels should not discount – and some hotels will not on principle and, indeed, may not need to - sensible discounting can generate new business and still yield profit. It can also encourage customers who might not have used you.
Certainly, discounted rooms yield lower profits but for a business that has already cut costs to the bone (and still not compromised on standards) any room that yields some revenue is infinitely better then an empty room that just represents cost and lost income. And if the present recession is more about survival than growth, then lower profits are certainly better than empty rooms. So discounting is not to be dismissed out-of-hand; handled sensibly, it’s here to stay for as long as the recession lasts.
But as in all industries, there are dangers. In the hotel sector, the danger of the budget hotel is all too apparent. Grant Hearn, Travelodge’s chief executive (and Dennis’ son) made it plain at the conference that he wouldn’t waver in attacking the traditional hotel market with his £19 room offer – a level at which he said he was still making a return on his investment. Price (and, more important, value) is critical at a time when the hospitality industry faces its worst recession in 50 years. But operators must remember that some measures can make matters worse.
Adding value may be a better alternative than just cutting prices. Staff levels might be reduced but those who remain need to raise levels of service and improve standards – not just maintain them. Indeed, standards are more important now than they ever were before. So training must continue in order to ensure that the remaining staff are better skilled (and, in doing so, perhaps numbers can be reduced even more without affecting standards). As Dennis Hearn said, surviving the recession demands short-term action but a long-term strategy. We shouldn’t forget either.