Everyone repeat after me: “I will not cut prices nor panic sell because it does not stimulate incremental demand and only serves to drive down prices.” Perhaps this chant will soon need to become a morning ritual to overcome these temptations for potentially panicked hoteliers in the United States if a recession is deeper than expected, if a loss in corporate confidence induces a downward spiral in demand and if overleveraged consumers decide to cut back on holidays. Then, what usually follows are similar hotel slumps in Europe, Latin America and potentially elsewhere. But then again, maybe the industry’s glorious rise is not really about to come to a meaningful end, maybe industry fundamentals are too strong and hotel balance sheets are so solid they can certainly weather short-term consumer confidence issues. For further reassurance, look back at the last severe recession some 12 years ago when no noteworthy hotel group went under and the industry continued to generate positive cash flow. Keep all of that in mind next time you get the urge to discount more than is probably necessary.

Of course, we all like the manageable recession scenario, but one headline-grabbing, promotions-minded hotel reservations brand managing director based in London floated a forecast last month that said in a matter of months the start of a downward spiral in demand could last years. Niels Pedersen of Supranational Hotels, which represents hotels in more than 70 countries and generates GDS reservations valued at US$200 million annually, has boldly and, some would say irresponsibly, predicted the return of a buyers’ market that could last five years. He said the coming lean period will “counter-balance the recent buoyancy that has led to a complacency toward costs and unsustainable increases in tariffs (rates).” He further envisions a worsening of trading in 2009 and 2010, when hotels presently under construction in key locations come online. And by the way, he also said there will be a strong revival in the use of troubleshooting travel agents.

While Pedersen seems to have an obvious agenda, the industry is whispering about a slowdown that, at least, stops rate growth as opposed to significantly decreasing rates. “During normal economic cycles and recessions, there is no general pattern of price cutting,” says Bjorn Hanson, Pricewaterhouse-Coopers, New York City. “There are typically more special rates and packages as consumers become more cautious about discretionary spending and businesses seek ways to reduce expenses.”

What property-level and corporate executives have to resist this time will be dumping inventory, forgetting about the revenue management skills they have been honing these last six or seven years, and letting small to moderate decreases in occupancy lead them down the path to panic selling. “I can only hope that today’s professionals have learned from the mistakes of the past, look at the extraordinarily long-term, healthy fundamentals of our business and calmly and methodically plan for any and all challenges that lie ahead,” says Laurence Geller, the ever-quotable CEO of Strategic Hotels & Resorts, Chicago. “These same professionals then must equally calmly and methodically execute these plans through the vicissitudes of today’s volatile environment.” I told you he was quotable.

So, remember and repeat after me: “I will not cut prices nor panic sell because it does not stimulate incremental demand and only serves to drive down prices.”