(This is the second of a two-part blog post: Yesterday’s post offers some important perspective drawing from demand shocks of the past 20 years, including SARS, 9/11 and the 2008 financial crisis.)
How do we know we’ve reached the bottom and are in a period of recovery? There are six economic indicators that signal the economy is starting to turn around, according to Kiplingers Personal Finance:
Jobless claims: This is the earliest indicator that the pace of layoffs is slowing down. Watch the four-week moving average to see if the claims stop declining, as this is a sign that companies have stopped cutting jobs.
Durable goods: This indicates that business executives have committed to making big purchases because the anticipate increased demand. Look for two- or three-month upward trends in orders (however, exclude defense items like aircraft and other transportation equipment).
Consumer confidence: Consumers stop spending money when they are worried about the future. When the index moves into the 60s or higher, it usually indicates consumers are starting to loosen their purse strings.
Existing-home sales: Housing is an important part of the U.S. economy, and the economy won’t grow until consumers feel confident about their home values. Look for two or three months of consecutive growth in the housing market.
Retail sales: Consumer spending accounts for about 70% of the U.S. economy, and retail sales account for about half of that number. Look for two or three months of straight increases in sales.
Interest rate spread: A narrowing of the interest rate gap is usually a good signal of improving health in the banking system. However, this indicator can be a bit tricky with all the adjustments the Fed is currently making to interest rates.
No single indicator is a sign that the economy is turning around, but keeping an eye on several of these indicators can help you make better forecasts and may help inform both your promotional and pricing strategies.
What should revenue management practitioners do in the meantime?
Now is an ideal time to ensure you have a strong foundation from which to launch your property’s recovery. The best way to accomplish this is to focus on the fundamentals and to take the time to think through your emergence strategies.
Rate plans and production: Where practical, clean up your systems by getting rid of unused rate plans. Doublecheck to ensure that negotiated rates and group rates are loaded properly (by channel and validity date if applicable) and remember to review year-to-date production levels to ensure they match your expectations.
Pricing: Think through your pricing strategy from a consumer’s perspective. Ensure it is rational, simple to understand and that the value proposition for each of your offerings is clear, appropriate and differentiated. Also take this time to review your competitors’ offerings and assess both your market presence and positioning in general and also by unit type.
Inventory: Did you close all or a portion of your property during this period? If so, ensure that availability and any applicable stay restrictions are doublechecked. This is an excellent time to review any group rebookings and inventory allocations.
Content: Take a close look at your written and graphic content on both your proprietary and third-party channels. Consider adding elements relating to safety, cleanliness and available guest amenities, plus other services and resources. Think through what you would like to know if you were the one traveling. Remember, gaining guests’ confidence is the key to a rapid recovery. Anything you can do to contribute to that objective will help you outpace your competitors.
Channel management: Now may be an excellent time to think through your distribution strategy and to determine which channels you will rely on to help support your recovery post-crisis. Make certain you fully consider true costs, revenue and profit contribution by channel. This will help you prioritize when you get busy again. Now may also be an excellent time to leverage technology to create additional efficiencies.
Data analysis: If you have extra time, review the data available to you through your PMS, CRS, POS, sales and catering, and other systems. You may be surprised to find certain patterns and correlations that will assist you greatly in defining revenue strategies moving forward.
Action planning: Collaborate with your sales and marketing team to develop a cohesive post-crisis action plan. Think through any advertising initiatives, marketing campaigns, target audiences, feeder markets and sales activity, for example. Appropriate messaging and pricing will be vital contributors towards early success. And don’t forget about your front-line associates at the front desk or in reservations. They need to understand the plan so that they can actively support the strategies you have created.
As Abraham Lincoln once quoted “this too shall pass.” The secret, then, is not how quickly this will pass, but what we as revenue management professionals do to ensure our properties are set up for success as we emerge from these dark days.
William Perry contributed to this blog post.