Cutting Marketing and Slashing Room Rates Aren’t the Answer for Hotels

We are facing truly unprecedented times. Months ago, a recession looked inevitable but little did we know how bad things were about to become. Now, with COVID-19, travelers are canceling vacations, employees are being asked to stay home, and events are being canceled or postponed. While there is certainly cause for worry, now is not the time to act impulsively. Instead, hotels should take a calm and measured approach that focuses on the long term. While Hotels’ first impulse might be to cut marketing expenses and drive bookings with lower rates, it’s a risky move.

Once your rates are so low, it will be very difficult to build them back again from scratch. In a recent article, STR showed how long it takes ADR to rebound following a recession. The article notes, “Dropping ADR is easy, while gaining ADR is difficult. Post-9/11 room rates declined swiftly for 12 months, but it took double that time to return back to the 12MMA ADR of September 2001.” It’s important for hotels to maintain their ADR in times of trouble, despite the fear and challenges. 

In addition to holding ADR, investing in marketing is a strategy that has been proven to work during recessions. A Cornell University School of Hotel Administration study found that hotels that invested in marketing during the great recession were the ones that came out ahead when the recession ended. The study concludes, “These data lead to the conclusion that firms that ‘invest’ in marketing, especially in tough times, can achieve a payoff via various revenue drivers (e.g., trade shows) and will realize gains beyond just the short term.” 

Here are five ideas that will help you think about new ways to drive revenue in this difficult time. Some of the ideas were developed in our war room and some pinched from our partners and friends. We hope these spur some creative thinking or at least help you feel more in control of your rates, knowing that you can drive revenue in ways that won’t jeopardize your future success. 

1. Double Down on Email Marketing

In these challenging times, communicating with your guests is more important than ever, even if just to stay top of mind for when travel and tourism recovers. Where to start? Use channels that don’t have high acquisition costs. For the majority of hoteliers, email marketing is going to be your cheapest and most effective means of driving direct bookings, much more effective than social media and other marketing channels you might typically use.

2. Make use of Upgrades

You might have fewer guests when people begin traveling again, but you can work harder to improve their experience and drive upsell revenue. A targeted upsell offer, sent before check-in, can drive room upgrades, parking, spa or breakfast sales. Get creative. Here are some ideas.

3. Reward Loyal Guests

Without discounting ADR, hotels can still offer deals to loyal guests by offering free upgrades, resort credit or other perks. By offering these promotions only to guests that have stayed with you before, you can reward loyalty and drive revenue at the same time.

4. Repurpose Your Banquet Services

Phocuswire suggests that convention hotels, which are qualified as outside catering businesses, can drive revenue through catering services while they wait for their business to rebound. It takes marketing and logistics, but could be an excellent moneymaker as hotels look at new ways to monetize.

5. Soften Cancellation Policies

Many hotels are softening their policies to encourage guests to book hotels and travel as normal. One practice that caught our eye is allowing guests that prepay their hotel stay to cancel within 24-hours for a full refund. 

Remember, history has shown that hospitality always rebounds. In fact, we dug up a HotelNewsNow article about hotels that flourished during the great recession to provide some inspiration for you. While it’s easy to get discouraged during the rough times, hospitality leaders have weathered many difficult storms. Richard Lewis, CEO, Northern Powerhouse Developments Hotels reminds us, “Great planning includes flexibility at all levels. When implemented with sensitivity and empathy, our industry has proven to be extraordinarily resilient. Time after time.”

And as always, if you need help or guidance navigating this uncertain time, you can always reach out to our team or refer to our Coronavirus hub with the latest updates, tips and tactics to help you respond.