Survival tactics

recessionThe impending economic and social dilemma, not yet identified by our economists as a recession or depression, will have a severe impact for owners and operators in  the tourism industry, as there is already a glaring decline in inbound tourist arrivals, corporate retreats , meetings and incentives. The rhetoric  Everything will be fine, God is a Trini, or any other airy fairy retort, are not solutions for the sector.

Hotel owners and operators are accustomed to cycles of lows and highs, it is a pattern that the industry is familiar with, based on several factors affecting the destination. I sometimes use the expression that the industry can be compared to a  “ride on a roller coaster”, so many turns and twists , highs and lows; before you know it, another year is ahead and you have to get back on the ride to plan for future opportunities.

With the recent comatose state of the country, after the dreaded April 2016 budget review by The Honorable Minister Colm Imbert, for which my interpretation is that there is no guaranteed recovery period for the country, despite the minister’s reassurance of investment initiatives in a new hotel project at Invaders Bay, an all-inclusive project in Tobago, and the extension of the room upgrade program.

I  would not delve into each initiative or it’s expected viability, but i would stress that the industry will be challenged in this present climate with  various negative variables, the silo operation of the destination authorities and the fact that the Government is becoming the largest stakeholder in the tourism sector of foreign brands.

Would competition be fierce? – the answer is yes. Would the competition be fair? – the answer is no. Would independent owners (stakeholders/taxpayers), be offered the same marketing leverage as the branded properties from government? – who knows, the proof would be in the clarion call of  “supporting local”.

The industry is aware of the effects of a recession which is obviously discouraging, however,owners and operators in the sector must consider intelligent survival tactics. I would present a few of my suggestions which the industry should consider if they expect to sell inventory at the right price.

Firstly, it is expected that the initial reaction by owners and operators in the sector would be to slash prices across the board. We have experienced this before, after the state of emergency in 2011, however, this time the discussion on recession is predicated by panic and fear of low profitability and possible foreclosure. Instead of price gouging, operators and owners should consider rate-obscuring tactics for specific periods or through well designed packages; another would be to introduce other income streams into the operation. In this way, the operator maintains brand integrity and price fairness thereby being able to recover from short falls in revenue.

Cost cutting of operational hours or for renovation is another tactic based on the business cash flows. Some hotels already practice this strategy when there is low inbound arrivals to the islands; whilst others including myself reduce operational times.This approach becomes a practical move if operational expenses exceed profitability, however, this must be carefully monitored, and communicated without sacrificing quality of service. From my own experience,  i can affirm that your team compliment, must be aligned to the integrity of the business and they would go the extra mile to ensure they meet service demands.

A rule of thumb is “Cash is King”, and therefore, operators must ensure that monies are collected up-front from the customer, whether it is Public or Private enterprises. Another revenue stream that has been taken for granted is the rental of facilities , that is , conference or meeting spaces. This is real estate, every square foot including dressed tables, chairs and air conditioning has a cost. Once this is understood by all in the industry then this is another way to ensure that the property makes additional income. Obviously, if the cash flow is healthy then operators would be able to reinvest in small upgrades and maintain credit ratings.

It is also worthwhile or sometimes idealistic thinking for operators to start consolidating efforts to better negotiate with suppliers, for better pricing and to assist in cash flow shortfalls. This is a hopeful thought especially for mid/micro sized properties.

Managing your online travel agents (OTA’s) and your social media reviews is important for your business. OTA’s make a killing on commission, however, it is up to the operator to know how to plan rates and promotions, bearing in mind that the US dollar exchange is fluctuating.

Besides trip advisor, almost all  OTA’s have introduced a review button, where customers can lodge comments. This feature can have great responses and sometimes very distasteful ones. Studies have shown that  psychological behaviors of people using this communication rather than speaking directly to the manager is not yet understood. The bottom line is that these features on media channels are on the world wide web, therefore, responding to comments whether good or bad is critical.

Finally, from a macro perspective, industry operators are heavily reliant on the marketing efforts and incentives from authorities that govern the tourism sector. Therefore, I can only  hope that these players operate strategically  charting the course toward a sanguine expectation. After all, aren’t we all in this together!

 

Author: Lisa Shandilya, MBA.(Specialized), CEM., B.Sc., 20 years Practitioner in the Hospitality and Service Sector, Member of THRTA, Speaker on International Hospitality and Service Industry Seminars.
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