Nationwide Franchise Assistance for Hotel Owners
Who Me??? Renovate during a Recession???
By Steven J. Belmonte
“Are product upgrades and renovation really needed during these hard economic times?”
In reality, it is a loaded question. But one that you absolutely must consider, even during this particular steep downturn. Truthfully, this question can be best addressed with two different answers.
Firstly, it does not matter whether we are in an economic downturn or the most robust business environment. Regardless of your operating environment, reality dictates that if your product does not meet guest expectations and/or is inferior to other products in your marketplace that are in the same general price-point, upgrades are required regardless of the economic climate. In fact, failing to upgrade the hotel’s public spaces and guestrooms could lead to an irreversible decline in guest satisfaction and loyalty. And with more hotels in your neighborhood than ever before, that can spell certain danger to the bottom line.
Each and every General Manager and Owner must have in-depth insight relative to their products’ competitive position in the marketplace. If your product doesn’t cut the mustard, your future will certainly be a slow death. So you have to take a good and honest look at the quality of your product. Ask yourself, does it stand up to the ever increasingly sophisticated traveler of today? How does it compare to the nearby and much newer hotels.
Owners and Managers who face this reality cannot defer upgrades by using the excuse that we are in an economic downturn. The truth is your guests don’t care and they won’t be back. If you find yourself in this position, because of the economic downturn and the unavailability of funding to improve the product, Owners and Managers should seriously reconsider repositioning their product in the marketplace. It’s not something to be ashamed of, and there are many more economy focused products available. It may be the right decision that keeps guest expectations in check while also eliminating the need to invest what could be millions of dollars. When complete, guest expectations can be better managed. Of course, this is not an easy choice. Your average daily rate will certainly be negatively affected, but in some cases, it may be your only viable alternative. After all it’s better to reposition to a lower tier than to have your guests’ position you out of business.
Secondly, I mentioned earlier that this was a two- part answer. Not all hotels need to be thinking about a renovation right now. Properties that have their product in order and are indeed competitive in their marketplace, should in my humble opinion, defer any major improvements until a recovery cycle is underway. As a matter of fact, 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 purveyors, linen companies, insurance companies, etc. All too often Managers get comfortable dealing with one company but then are amazed at the money they could have saved if they were competitively bidding 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 implementing expensive upgrade mandates until a recovery period is underway. They are realizing some changes could be so onerous in this operating environment their franchisees simply can’t afford it, or don’t need certain upgrades. I applaud that decision by the franchise giants and think that it makes good business sense. However, it is important that once a recovery period is obvious, that upgrades be done early on so that you can reap the benefit of higher levels of customer satisfaction, repeat business, and customer loyalty.
Finally, regardless of what scenario you fall under, don’t skimp on employee training and customer service focus. Those efforts should remain firm and steady regardless of the economic climate we are experiencing. Making an investment in your employees, such as treating them like business partners and creating a culture within your property where your people are trained and confident to respond to guest issues, will pay off big in both good and bad times.
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