Sensible Marketing in Tough Times

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March 01, 2009
Marketing
Cindy Estis Green

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© 2009 Hospitality Upgrade. No reproduction without written permission.

What is the best way to manage this period, conserving limited resources when revenue is scarce, while retaining a position to take advantage of the rebound when it occurs?

These 10 points may expand thinking beyond cost cutting into a broader array of options. Costs should not be cut in absolute terms without a clearly documented plan for the revenue side of the equation. Some segments are great candidates for investment. Marketing in a downturn should be laser surgery, not wholesale amputation.

1. Avoid across-the-board discounting. Conventional wisdom holds that reducing prices stimulates demand, however, this approach is flawed. A study of the post-9/11 period (reinforced by data from many prior recessionary periods) indicates that those hotels who lowered rates during the downturn took years to restore their ADRs to prerecession levels. Widespread marketing of lowered rates through the online travel agencies in 2001-2003 put hotel ADRs in a tailspin and took until 2006 to recover. An alternative would be to hold base rates firm and allow discounting on tightly controlled timeframes with defined conditions for each offer.

2. Give your customers a reason to book now. Jay Rasulo, president of Walt Disney World, announced the “What will you celebrate?” campaign that assumes a special occasion purchase is less dispensable than the annual vacation. Some will choose to make that trip because it may “never be that cheap again.” Or they might do it because they would rather trade down to a drive-to destination or a slightly lower rated property than miss it entirely. Seth Godin, author and marketing guru suggests that marketers need to change the story they project in order to give the consumer a story they can tell themselves. Before 2009, if Starbucks was the $4 habit of a confident person who felt they deserved it, now it may be the indulgence taken by the person who recently had to trade down to a one-bedroom rental while they work temp jobs.

3. Create more points of entry. Examine the offers available for your hotel in all the channels in which you are sold. Like most hotels over the last three to four years, the rate levels were buoyant and rising annually. Come up with a few alternative price points to try the hotel or visit at off-season rates. If the opening rates can attract attention, leave it to the reservation sales team to add value that yields more revenue from those interested. These offers can be limited-time offers or available during off-season or slower parts of the week, but they may allow a few more prospective customers to experience your product and service.

4. Would you like some fries with that? Some hotels decide to suspend all training during a down economy. However, one of the greatest potential benefits from customer service is incremental revenue. Happy customers may tell friends and colleagues about the experience or they may return themselves. Like the simple courtesy to suggest fries with the burger, line staff can provide service that delivers direct revenue. “Our chocolate spa treatment is divine...you ought to try the mini-massage to see what I mean. In fact, here is a $10 coupon for the service.” A more basic offer is to upgrade to a premium room type for a small additional fee. If fees are added at every point of contact, hundreds of interactions can add up in the course of a month. You may find you can raise more revenue with training than you save by cutting it out. 

5. Focus on retention and existing customers. One of the fundamentals of marketing in a downturn is to weigh resources more heavily toward higher yielding programs for existing customers, rather than the acquisition of new customers. Offering incentives to return and value-added benefits are likely to resonate with a returning guest. A Colorado ski resort created a golden passport for all returning guests that makes them eligible for fast track lines on the ski lifts, weekly receptions with celebrity skiers and other points of recognition. There is no card, no points, no number to remember. They are identified when they make their reservation, flagged when they check in for a room or to get lift tickets, and then the surprises begin. There is nothing like recognition and a thank you to delight customers; another example of moving back to marketing basics.

6. Coming soon... deprivation fatigue. There comes a time in every recession when consumers get tired of being deprived of those experiences or products they once enjoyed regularly. How long can a family put off a vacation? How many meetings or business trips can be delayed or cancelled? They may trade down (see point No. 2) but they will need to recharge their batteries. The story they tell themselves is about the need for family/friend bonding or to be more productive in their work. The hotel industry should be ready with offers and messaging for this boomerang effect. In some markets, this may happen sooner than the summer.

7. Make ROI a central tenet of all efforts. A common refrain from operations and finance is that marketing efforts are not always justified by clear return on investments. For example, how do you justify retention efforts? There is always a metric that can be devised, even if it is just the number of contacts with past guests. A smart marketer can track how many contacts it takes to get a sale and how much these contacts cost per revenue earned.  Everything should be measured and although it may cost time to build the evaluation models, every action can have numbers to support its implementation.

8. Experiment wisely. Better than hunkering down with 2001 tactics, there are simple and inexpensive tools that can be highly productive for the retention of past guests such as blogs, message boards and forums. Now is the time to try them out. Virtual trade shows and virtual meetings with clients are all creative and low-cost ways to reach out and take advantage of some innovative marketing techniques.
Typically called A/B testing, marketers can also systematically test headlines, body copy, subject lines and graphic images to find out which ones yield the best results. Marketers should pursue experimentation as long as it is done with evaluation.

9. Examine online and offline marketing efforts. The marketing budget can be audited carefully to find opportunities to reduce expenses as well as improve results. The Center for Media Research study of Top Marketing Trends 2009 reported that more emphasis is being put on retention, brand loyalty and ROI-based programs. The areas of online marketing that are on the rise are paid search, organic search and direct marketing through e-mail. There is a widespread reduction in traditional advertising in all industries while online spending is either holding steady or rising.

10. The AIG effect and the group market—take action. Curtailed by reductions in corporate spending, the group/meetings market was dealt another staggering blow when AIG, upon receiving its bailout billions, decided to take its incentive trip to a California resort.

U.S. Travel Association is launching a campaign called Travel Makes Sense (www.ustravel.org), and HSMAI has a plan called Meetings Mean Business (www.hsmai.org). HSMAI’s toolkit helps with local press, provides talking points when facing resistance from meeting planners, and supplies statistics illustrating the value of meetings to the economy. Any hotel with group business should take a proactive stance through these industry groups to resuscitate this segment and get companies traveling again.

The overriding theme is back to basics with laser precision. While cost savings can be easier across the board, they are more effective when performed surgically. There may be revenue streams that are still strong. Test, test, test is a better mantra than cut, cut, cut. Examining each segment by time period and deciding how and when to open and close access to funds and personnel can be the best plan to combat a recession.

Cindy Estis Green is managing partner of the hospitality marketing consultancy The Estis Group and recently launched a new Web site showcasing innovation and best practices in sales and marketing www.drivingrevenue.travel.

 

Avoiding the Scorched Earth Policy

1. Reduce head count of sales staff by 20 percent.
2. Reduce trade show attendance.
3. Limit advertising to tactical short-term, offer-based programs only.
4. Limit staff training to virtual webinars only.
5. Cut out all market research.
6. Freeze spending for online efforts.
7. Do not experiment with techniques that have an ambiguous ROI.

If this sounds familiar, it is the refrain heard in many hotels throughout the world in preparing the 2009 budget. Only it may be more of a scorched earth reaction to the dismal state of the economy than a well thought-out plan for combating a short-term downturn. Every recession for the last 40 years has ended with a recovery followed by a rebound. Eventually, the volume will come back and the marketplace dynamic will shift favorably.

www.drivingrevenue.travel

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