Changing Rules

(EDITOR’S NOTE: This is the second installment in a three-part series looking at the year that was 2009 and what’s ahead in 2010. Part Wednesday: The New Normal in 2010.)

Those having ridden the economic waves in the past understand the cyclical nature of the ebbs and flows, and were braced for worst-case scenarios. “You get smarter every time you go through a downturn,” says Jeff McIntyre, partner at Gemstone Resorts & Hotels of Park City, UT. Whether the discussion centers on “Black Monday,” the global stock market crash of Oct.19, 1987, the “ shakeout” of March 1, 2000, the events of Sept. 11, 2001, or the second half of 2008, all of our respondents agreed the impact of this cycle was far more profound and widespread than in recent recollection.

Deeming the new economy’s learning curve an “eye opener,” what few counted on was the dip’s pervasiveness or the virulence with which the business travel backlash was played out as nightly cable news fodder. Chief operating officer at Davidson Hotel Company, Pat Lupsha saw the warning signals early and undertook cost containment and contingency planning efforts in May of 2008. Still, he concludes that “the market will take longer to come back than in prior hard times.” Eric Pearson, chief marketing officer at InterContinental Hotels Group, agrees, calling these times the toughest on record.

When the British comedy ensemble Monty Python coined the famous catchphrase, “Nobody expects the Spanish Inquisition,” they might as well have been speaking of the hospitality economy. Some changes were in response to low consumer confidence that greeted 2009 as the new year marked the end of one political era and the inauspicious beginnings of another. Most organizations by then had grown comfortable with forecasting in pencil rather than in permanent ink. Few would fully understand that this practice would become a semi-frequent exercise—at least for the near term.

Airlines also went a long way to “reset” consumer expectations so ridiculously low as skyrocketing fares grew in an inverse relationship to the presence of customary amenities (free snacks, pillows, blankets and two bags per flight). By sheer comparison, those hoteliers that adhered to the most basic tenets of the brand promise looked like heroes midway through 2009. Had the leaders in our sample simply rested on their relative laurels as demand within the travel segment nose dived, there would have been a very different conversation to be had by the fourth quarter of last year. Those interviewed took swift and decisive actions in response to the sweeping changes that ushered in a wholly new era of “on-demand” service. A survey of the proactive short-term measures included:

Hiring freezes. Limits on new hires came with the territory and will thaw as the markets warm. What was surprising in this new era was the selective hiring of marketing and sales talent by some firms. Although hiring freezes can signal tough times, Gemstone worked hard to keep its employee base informed, engaged and contented throughout the process. “We want our employees to be happy today and happy tomorrow and it takes a long-range view to accomplish that goal,” says Gemstone’s McIntyre.

The company also foresaw the decline in early 2008 and took proactive measures to streamline the organization and to consolidate positions. Gemstone discovered how to be aggressive with market research, ecommerce and social media and to ‘do more with less’–without cutting sales and marketing headcount in select markets. Instead, the firm used its powers of innovation to re-imagine how the same dollars might be spent differently. Because the company operates independently, there was greater flexibility to treat each property as a “brand of one,” allowing for more freedom to address specific issues individually. The company cross-trained employees to do multiple jobs and put additional dollars into its employee recognition programs.

Contrary to conventional wisdom, InterContinental Hotels Group boosted sales and marketing headcount by 25 percent because as Pearson believes, “investing in a downturn helps the company to bounce back much faster.”

Operators also took a long-term view to balance staffing needs and operational objectives to ensure guest satisfaction scores remained high. Davidson’s Lupsha also reduced ranks in Q4 ’08 by 10 percent, applied better scheduling schemes and froze hiring except for select sales positions. The company emphasized the importance of right-staffing to keep expenses in line, maintain guest satisfaction, beat the competition and to ensure the profits flowed through to the bottom line. Personal visits by the Davidson Hotel executive team to all of the properties were an important step for encouraging staff. The entire base was brought into the dialog with management recognizing employee sacrifices and commitment.

With similar operational motives in mind, White Lodging used its internal STEPs program to enhance productivity by aligning labor with demand and to curtail extraneous overtime expenses, and to ensure margins were intact and that guest satisfaction scores remained high.

Lesson learned: The world is flat: Drive profitability via efficient, streamlined organizations at proficient staffing rates without hobbling the twin towers of employee and guest satisfaction.

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