Stay sharp and be ready for the downturn

Han Solo said it best: “Don’t get cocky, kid.” 

And while I may be rightfully accused of using Star Wars references, it doesn’t take away from that critical message, which of course is that I have yet to see Episode VII a second time. 

Wait, that’s not it. The real message is one the industry must internalize or it will face deeper problems when market dynamics reverse current positive financial trends. And it may be happening sooner than we’d like to think.

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Today I am issuing a big warning because I have seen the same thing happen in the past in other facets of life. People get too confident, then blow it. Just like a fallen despot, or the New England Patriots. That’s right, I said it (send hate mail to [email protected]).

Fact is, the hotel industry is surely in the sweetest sweet spot of all time. It’s the best fundamentals the industry has even seen, and it’s keeping people pumped with (misguided?) optimism. Things have been so good for so long, it’s hard to remember the bad times, though politicians and major media outlets are trying their darndest to convince us we are moments from the start of End Times. 

For more than five years now, the industry has been seeing gains on a monthly basis, making mincemeat of seemingly unbreakable records. When final numbers were tallied for 2014, 2007 records fell fast and hard, And 2015 crushed 2014 in all critical industry benchmarks.

So with everything as incredibly amazing as it has been in the hotel industry, Mother Nature may start playing tricks on you. It’s true. When things are going oh so well, as they are during these heady record-breaking times, people have a tendency to unintentionally slip off their game. 

Not in a serious way, but in little bits here and there. Once pored-over details start garnering less attention. Opportunity can be missed or ignored. As important as it is to stay focused when times are tough, it’s equally important to stay sharp when the industry is experiencing pinnacle profits. That’s the surest bet to maximize profits in a sky-high market while limiting the downside when the market eventually abates.  

After all, we want you sharp and successful; not fat and lazy. Kind of like Kirstie Alley is every couple of years after she miraculously cashes in with another amazing weight loss scheme lauded by Oprah.  

Plus, there are more challenges coming in 2016 that could off-balance some companies. At ALIS last week, I started to hear the first rumblings of imminent industry peak, followed by what consensus is calling a “soft landing.”

One person staying hyper focused on the details this year is Andy Alexander, president of Red Roof Inn. He’s facing the challenge of balancing the pricing power of today with long-term desire to keep those customers engaged throughout all parts of the industry cycle. He is also facing a unique challenge because half his business comes from business travelers, rather than 20 percent as is seen by competing brands, according to Alexander. 

“We only have one lever to pull, rate. For us, it’s better to have occupancy than rate, especially in our segment. San Francisco, for example, ran occupancy in the upper mid-90s all year. All you can do in that case is raise rate. But the trick will be finding ways to keep a base of business travelers at the highest rate possible without them abandoning the brand during downtimes,” Alexander said. 

Keen insight for a market he, too, sees as perhaps past its peak, but headed for that proverbial soft landing. Alexander keenly understands his biggest challenge this year while also acknowledging that no matter how good it’s been, you need to stay sharp.

The big question you have to answer for yourself is what is your company’s Achilles heel, and what are you going to do about it? What’s your stay strong strategy for 2016? Let me know at [email protected] or @TravelingGlenn

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