Nationwide Franchise Assistance for Hotel Owners
FEBRUARY 11, 2010 — "Are product upgrades and renovations really needed during hard economic times?"
That’s a question I used to get asked a lot. But, as always, things change—and, obviously, not for the better, at least economically speaking these days. And so the question has changed. In these almost unprecedented hard economic times, the question isn’t so much whether a renovation is needed—rather, it’s whether a renovation is, first, viable and, second, whether it’s a smart thing to do.
This is a question you absolutely must ask yourself, especially in this incredibly tough financial environment. As for the answer… well, here’s what I think: There are two answers to this crucial question—and they both add up to an emphatic "Yes!"
First of all, it doesn’t matter whether you’re operating in a recession or in the most robust economy imaginable. The fact is that if your hotel doesn’t meet guest expectations, if it’s inferior to other, similarly priced properties in your market - well then, you need to upgrade. In fact, if you think you’re being fiscally responsible by not upgrading your hotel’s public spaces and guestrooms right now, you’re mistaken. Failing to renovate could lead to an irreversible decline in guest satisfaction and loyalty—and that scenario, obviously, will destroy your bottom line.
Here’s another piece of advice for hotel owners and operators: It’s crucial that you have in-depth knowledge of your property’s competitive position in the market. You have to take a thoughtful—and brutally honest—look at the quality of your hotel. Ask yourself if the property meets the needs of today’s increasingly demanding guest. How does your hotel compare with nearby (and perhaps much newer) properties? If your hotel isn’t cutting the mustard quality-wise, its future - and yours - is looking very dim.
In short, you can’t afford to defer upgrades because of the poor economy. To put it another way, you can’t afford not to invest in an upgrade, regardless of the economy’s strength (or lack of it). The truth is, your guests don’t care if the economy is in bad shape, as long as your hotel is in good shape - and if it isn’t, they won’t be back.
Now because of the economic downturn and the resultant difficulty in getting a loan, you may be wondering how you could possibly afford to upgrade when business is down and cash flow has been reduced to a trickle. One thing to consider is repositioning your product in the marketplace. Don’t let your ego get in the way - there’s nothing to be ashamed of in repositioning to a “lower” segment, and there are many economy-focused products available. It may be the right decision, one that keeps guest expectations in check while eliminating the need to invest what could be millions of dollars to upgrade in order to meet high expectations. Granted, this is not an easy choice: Your average daily rate will be negatively affected, but it may be your only viable alternative. After all, isn’t it better to reposition to a lower tier than to have your guests dissatisfied because their expectations are not being met? Think about it.
I mentioned earlier that there are two answers to the question, “Is renovation viable in a tough economy, and is it a smart thing to do?”. Here’s the second answer, and it differs from the first in that it relates to hotels that do not need to be upgraded.
In my humble opinion, owners and operators whose properties are in order and competitive in their marketplace should defer major improvements until the economic recovery is well under way. In these tough economic times, I advocate taking a hard look at every line item on your profit-and-loss statement. Put everything out for competitive bid, whether it is to technology vendors, linen companies, insurance firms, f&b suppliers, you name it. All too often, managers get comfortable dealing with one company - but you’d be amazed at the money you can save by inviting competitive bidding for services and products on a regular basis. It’s a great way to increase cash flow without affecting customer service.
I believe most of the major franchise companies have, to a degree (and some more than others), backed off from mandating expensive upgrades until the economy is on a strong upswing. Franchisors are realizing that in today’s economic environment, such a mandate is onerous simply because their franchisees simply can’t afford, or perhaps don’t need, certain upgrades. I applaud this mandate-backoff by the franchise giants—it makes good business sense. However, this backoff policy should be rescinded once it is obvious that the recovery is a sure thing.
It’s hard to crystal-ball such a thing, but now that things may be looking better on Wall Street - if not on Main Street - perhaps it is time to at least begin thinking about upgrades and renovations. The earlier they can be done, the sooner owners and operators will be able to reap the benefit of higher levels of customer satisfaction, repeat business and renewed customer loyalty.
Here’s a final word of advice: Regardless of what category your hotel falls into - whether you need an immediate upgrade or not, whether you need to reposition or don’t need to - the very last items you should scrimp on are employee training and customer-service focus. Those efforts should remain firm and steady regardless of the economic climate. Invest in your employees. Treat them like business partners. Create a culture within your company, your group or your hotel that emphasizes training so that your employees—your business partners—are confident in their abilities and empowered to respond to any issue a guest might have. Do this and it will pay off big for you, your guests, your staff and your bottom line—no matter how up or down the economy happens to be.
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