Hospitality in Crisis?
In the current economic climate, individuals are forced to stretch a dollar farther than ever before. When creating a budget, priority is usually given to necessities such as food and shelter, and entertainment is considered less important. This is why the hospitality industry is experiencing a financial downturn. Working Americans simply cannot afford to spend copious amounts of money on entertainment, travel and luxuries. According to Joe Sharkey of the New York Times, there have been significant declines in airline passenger traffic and hotel occupancy. The luxury hotel industry is also experiencing a decline, which is usually not affected by financial crises. The affect on clubs, restaurants and other facilities can be expressed by the simple fact that there is no longer a significant wait time at most restaurants – there isn’t enough business to necessitate a long wait.
The past few years have shown that consumers are willing to take noteworthy chances with their finances. The housing industry went bust because consumers who ordinarily wouldn’t qualify for loans were given mortgages that they couldn’t afford. In fact, many consumers are in debt due to the fact that they refused to give up luxuries they could no longer afford. Under normal circumstances, this would be a good predictor for the hospitality industry – individuals who refuse to give up a yearly new car or designer handbag are also going to continue to travel and eat out. Mark Woodworth, the president of PKF Hospitality Research, does not predict a dismal upcoming year:
When looking at 2008, we believe that U.S. hotel owners and operators will struggle to grow their revenues and profits, but market conditions will not be as damaging as we saw back in 1991 or 2001…(Kalette, 2008)
In order to sustain itself in the current economic recession, the hospitality industry needs to cater to the two consumers it has left – the business traveler and the wealthy. Individuals who travel for business are going to continue to travel. However, they may need to cut back on the frequency or luxury of travel or travel accommodations. Airlines can offer special deals for business travelers, such as two-for-one deals in order to fill up the economy class. Hotels should also offer incentives to business travelers. Rather than giving discounts on the actual room, hotels can offer these individuals amenities such as discounted or free meals, competitive rates on facilities and conference rooms, or free massages or entertainment. Individuals who are wealthy are going to continue to spend money in the same areas as before. They should be offered additional amenities and personalized service in order to demonstrate that their continued patronage is appreciated.
As many individuals and families are no longer making the usual holiday travel plans, airlines and hotels can offer discounts for special events, such as graduations, anniversaries and birthdays. For example, Disneyland will give everyone a free ticket on their birthday in 2009. While the individual gets in free, most people do not go to an amusement park alone. The free ticket is an incentive to sell hundreds or thousands of dollars in tickets, food, hotel stays and merchandise.
The key to getting through the current economic crisis is to be creative in bringing in customers. Americans need an opportunity to forget their financial woes, and the hospitality industry holds the solution. Expansion and renovations will have to wait until the economic crisis is over and Americans can afford to be choosy once again.
Kalette, D (2008 March 08). Moody’s changes stance, sees recession. Retrieved November 23, 2008, from National Investor Web site: http://nreionline.com/industrynews/moody_recession_lower_RevPAR_0311/
Sharkey, J (2008 Oct 6). Travel industry shaken by economic downturn. Retrieved November 23, 2008, from New York Times Web site: http://www.nytimes.com/2008/10/07/business/07outlook.html?_r=1;scp=1;sq=Travel%20Industry%20Shaken%20by%20Economic%20Downturn;st=cse