As a regular reader of Hospitality Marketing Blog you know we have recommended hotels Advertise Aggressively in a Recession. We wrote an article about it on February 16, 2009 and followed it up with Advertise Aggressively in a Recession – Part 2 two days later.

There are numerous other articles on this blog, all full of research and case studies on how to survive in difficult times. A list appears at the bottom of this article.

So in the interest of piling on, let’s add another piece of research. This is a recently published Cornell University Study of nearly 1,000 hotels from around the world. Written by Sheryl E. Kimes the study is titled, “Successful Tactics for surviving an Economic Downturn.”

Cornell Study Findings – a Summary

• Discounting was the number-one tactic used to offset the effects of the recession. Most hotels that cut  prices agreed discounting was not particularly successful in maintaining revenue.
• One of the keys to success in a down market is to avoid offering across-the-board price cuts.
• Luxury hotels with an ADR higher than  competitors have the same or slightly lower occupancies, but have a 8- to 14-percent higher RevPAR than their competitive set.
• Hotels used 13 different marketing tactics which Dr. Kimes separated into four basic categories – Discounting, Rate-Obscuring, Marketing and Cost-Cutting.
• Performance – respondents were asked to evaluate the performance of each tactic on a 1 to 7 scale, where 7 = very effective. Marketing tactics were considered to be the most effective strategy (4.99). Responses did not vary by world region or hotel star level.

Questions for Hospitality Marketing Professionals

• If marketing is the most effective way to increase revenue in a steep recession why is it one of the first line items to be slashed when things get tough? There is more than ample research indicating it’s the wrong approach.
• If discounting is the least productive way to survive a recession why do so many hotels do it? My hypothesis? Far too many hoteliers think price is the only thing that matters to consumers.

The last thing any business should do is get into a price war with a competitor that doesn’t care what they sell their product for. But that’s exactly what hotels do in a recession.

Now I have to admit that Dr. Kimes’s study really doesn’t conclude that, “It’s Time For Hotels To Start Marketing.” Her research only says the most effective way to survive a recession is through marketing.

Isn’t it logical then to surmise that the best way to prosper during a recover is through marketing?

Let me know what you think.  Safe travels.  Madigan Pratt

Articles on How to Survive a Recession

Here is more ammunition for hospitality marketing professionals can use to defend their marketing budgets:

• Marketing to Succeed in Difficult Economic Times – published Feb. 13, 2009. Sounds very similar to Dr. Kimes Study doesn’t it?
• Lessons in Recession Marketing for Hotels – Published January 28, 2009.
• Wharton B-School’s Crash Course on Recession Marketing - Published December 9, 2008
• Marketing in a Recession – Retailers Respond - Published December 3, 2008
• Recession Lessons for Hotels – Published November 17, 2008

As promised – here’s the Nisbet Plantation Case Study that Jamie Holmes and I presented at the Caribbean Hotel and Tourism Association meeting in St. Thomas last month.

It’s good news that proves you can market your way around a recession.

Here’s what Nisbet Plantation Beach Club, an intimate luxury resort in the Caribbean, did to outperform other hotels in the region. As a result of following best practices and adhering to customer relationship marketing, Nisbet is also well positioned to flourish as the recession subsides.

You can download the complete article here.  Here’s a top-line summary.

• Focus on Marketing Basics – A recession is not the time to experiment – especially if you have a very limited marketing budget. Make sure your 4-P’s of Marketing – Product, Place, Price and Promotion – are performing perfectly. Experiment only if there are any opportunistic funds left in your budget.

• Don’t Deep Discount – Study after study show deep discounting is easily copied, doesn’t stimulate demand and hurts RevPAR over the short term.Long term revenue also suffers. STR estimates it will take between five to ten years for hotels to return to pre-recession pricing once inflation is factored in. Used to cheap rates, the trade and consumers will resist your attempts to raise them.

• Deliver a Great Guest Experience/Provide Value – Hotels need to cut expenses, but caution needs to be taken to cut those that will least impact the overall guest experience.Cutting staff to skeleton crews, draining the pool, closing the spa and shuttering restaurants are not what a guest expects. And most likely their displeasure will be shared with others on TripAdvisor.

• Maintain Marketing Spending – Hospitality marketing budgets are always easy targets for budget reductions in recessionary times. It is the tool that will help convince potential guests that your hotel is better than competition, provides good value and is certainly worth a few more dollars a night than the other hotels that are using Price as their primary marketing tool.McGraw-Hill did a study of companies during the last Great Recession of 1981-82 and found that those who maintained or increased advertising spending outperformed competition during the recession and recovered more quickly than those who cut spending.

Click here for the complete Nisbet Plantation Hotel Case Study.

Safe Travels – Madigan Pratt

The Social Security Administration recently held its first conference since 2001 which included 700 attendees at the Arizona Biltmore in Phoenix.   Perhaps you heard about it because of the brouhaha raised by ABC News when they offered a totally unflattering report. If not, you can read and see it here.

Just in case you think the media is unbiased, let it be known the ABC Report was filled with a full array of half truths intended to sensationalize the conference and embarrass the SSA.  In the process it is perpetuating the AIG effect that is devastating the meetings and conventions business, slashing revenues at resort hotels and causing lay offs of thousands of dedicated workers.  Shame on you ABC!

Here’s a few examples of what ABC reported and the truth of what went on:

• ABC Reported -  The SSA spent $700,000 for 700 people to attend a three day conference.  What they didn’t say was the SSA shopped around for the best price and was able to secure a room rate of $85 per night.  What would you expect for Phoenix in the summer?  They got a great deal!
• ABC Reported – Some of the government managers brought along relatives.  Imagine that! Husbands and wives going to a conference with their spouses.  Now that’s real news.
• ABC reported – There was a night excursion to a local casino.  What they didn’t say was SSA employees (and not the government) have to pick up their own entertainment expenses including trips to casinos.
• ABC reported – The conference included a performance by a motivational dance company. Isn’t increasing employee motivation and thus performance one reasons to have a conference?   What ABC didn’t say was most attendees sit in windowless conference rooms from 8m to 6pm.
• ABC interviewed someone from the watchdog Citizens Against Government Waste group who scoffed at  SSA claims the conference was put on as inexpensively as possible.  They claimed if the SSA wanted to do that it would have held a video conference!  I like what Steve Moore, president of the Greater Phoenix CVB had to say about that – “What’s next?  Thanksgiving online?”

Phoenix is a city with many resort hotels that have been hard hit by the current recession and huge drop off in meeting and convention business.  Several hotels have gone bankrupt and others are on the verge.

Biased and sensationalized reports like this are hurting every hotel and resort that receives even a tiny portion of their revenue from meetings and conventions.  In some cases reports like this are killing resorts and increasing unemployment.

If you are as incensed as I am about the way the media is piling on and demonizing meetings and conventions I encourage you to speak out.  Let the media know “Meetings Mean Business.”  They also mean jobs to a lot of low income individuals who really do need a job right now.

Leave a comment.  Let others know what you think.  Forward this link to others in the industry.  If you’re a blogger speak out!

Safe travels – Madigan Pratt

The article “Marketing to Succeed in Difficult Economic Times” mentions how Wharton Professors recommend increasing advertising to build share and revenue in recessionary times. (see previous post)

Walmart is obviously a believer in this strategy.  According to AdAge Magazine:

“The retail behemoth, long known for its penny-pinching prowess, has gone on a massive media-spending spree in the past year, hiking measured media outlays some $300 million while much of the market pulled back.”

This is obviously an extreme example, but shows how aggressively one marketer is approaching this recession.  But is it working?

Let’s see.  The fourth quarter of 2008 was one of the worst for the retail industry in over 20 years with many companies experiencing double-digit declines.  Walmart, on the other hand, has seen same-store-sales grow in recent months by 2% to 3%.

It’s not easy being in hospitality marketing these days.  The need to reduce spending is omnipresent – but, if you’re thinking of cutting back on your marketing budget, you might want to think again.  Consider listening the professors at Wharton or following the example of Walmart and be a much more aggressive advertiser.

The Wharton profs also point out the more aggressive marketers in the severe 1981-82 recession fared much better during the recession, but also emerged from it much quicker than their timid competitors.

What do you think?  Safe Travels – Madigan Pratt

The article “Marketing to Succeed in Difficult Economic Times” mentions how Wharton Professors recommend increasing advertising to build share and revenue in recessionary times. (see previous post)

Walmart is obviously a believer in this strategy.  According to AdAge Magazine:

“The retail behemoth, long known for its penny-pinching prowess, has gone on a massive media-spending spree in the past year, hiking measured media outlays some $300 million while much of the market pulled back.”

This is obviously an extreme example, but shows how aggressively one marketer is approaching this recession.  But is it working?

Let’s see.  The fourth quarter of 2008 was one of the worst for the retail industry in over 20 years with many companies experiencing double-digit declines.  Walmart, on the other hand, has seen same-store-sales grow in recent months by 2% to 3%.

It’s not easy being in hospitality marketing these days.  The need to reduce spending is omnipresent – but, if you’re thinking of cutting back on your marketing budget, you might want to think again.  Consider listening the professors at Wharton or following the example of Walmart and be a much more aggressive advertiser.

The Wharton profs also point out the more aggressive marketers in the severe 1981-82 recession fared much better during the recession, but also emerged from it much quicker than their timid competitors.

What do you think?  Safe Travels – Madigan Pratt

“Every sector of business, including hospitality, faces momentous challenges stemming from the global recession. Occupancy is suffering, and all indications are that the deterioration will persist for quite some time. The latest Blue Chip Economic Indicators Report, a composite forecast of 52 economists, projects the worst recession since World War II with an upturn not beginning until late 2009. Some predict it may take longer.”

This is the first paragraph of my most recently published article.  While every hotel is being adversely affected by this global recession some hotels will fare significantly better than their competitors.  Successful hotels will experience a much milder dip in occupancy and revenue and will recover much faster as the recession wanes – which thank heavens it will.

So what makes these successful hotels different?  The article details six strategic drivers of the marketing programs you will find in the more successful hotels.

• Focus on delivering value
• Maintain marketing pressure
• Manage customer relationships
• Build a centralized marketing database
• Get strong database and direct marketing support
• Maximize word-of-mouth advertising

You can find the article on Hospitality Net.

I’m sure readers would appreciate hearing your comments.  I would too – join the conversation and add a comment.

Safe travels – Madigan Pratt

Hospitality marketing professionals narrowly focused on surviving this recession may be overlooking important and successful hotel marketing lessons from the recession of 2001-2002.

While 2001/02 wasn’t as bad as the current economic downturn,  still there were winners and losers back then as well.

So what did the winners do to succeed that their competitors did not?  We identified 5 Traits of Successful Marketers, including:

1. Provide a consistently high quality product at a fair and reasonable price
2. Create a 1-to-1 dialog with customers and prospects
3. Stay ahead of the curve
4. Take a long-term view of marketing
5. Don’t chase every customer and don’t compete on price

In other words – follow the disciplines of Customer Relationship Marketing (CRM).

All 5 traits are discussed in detail in an article written and published in several magazines including Travel Agent in May 2002.  Read the full article in Travel Marketing Decisions Magazine.

Hopefully knowing what worked yesterday will help you today.  Enjoy and let me know what you think.

Safe travels – Madigan Pratt