Hospitality Health: Mid-year Industry Trends
While the recession may have been declared over some months ago, its affects can still be felt through the hospitality community as operators attempt to move forward with their recovery efforts. To find out more about the pace of recovery for hotels and restaurants, Hospitality Technology polled its readers throughout the month of June with several key goals: first, to determine the pace of recovery and health of the industry overall; second, to pinpoint the business strategies they're most focused on; and third, to identify the technologies that are top-of-mind for the year ahead.
To really get a picture of the speed of recovery, we've compared these results to a similar survey that we conducted at the tail end of 2009 ("Industry Outlook 2010: Hotel & Restaurant Trends for the Year Ahead," which ran as our Nov/Dec 2009 cover), and we present that comparison here.
Finally, we also asked a select group of restaurant and hotel operators to provide detailed answers to some of our burning questions regarding the overall direction of the industry. Things like, what are their go-to strategies for engaging customers? How did technology help them survive the recession? What are their companies' PCI compliance efforts, and what are the point of sale (POS) technology must-haves? These reflections and insights are shared in the "Industry Opinions" section.
Just over six months ago, the recession had the hospitality industry running in several different directions. At the tail end of 2009, we asked readers what initiatives were most important to their companies in the coming 6-12 months. About one-third were trying to attract customers, another third were looking for new ways to generate revenue, and just about a quarter were cutting operating costs. Today, the majority of hotels and restaurants are approaching the path to recovery in a more uniform way: looking for ways to bring in customers.
In fact, more than half (54.9%) of respondents indicate that they are most interested in attracting more customer (chart 1), up 18.5% from the Nov/Dec 2009 survey. This focus is further reflected in how the industry is planning to invest resources in the coming 6-12 and in its interest in emerging technologies; 34.1% of respondents indicate that their companies plan on investing most in customer relationship management/loyalty technologies (chart 4), and 45.1% of respondents' companies are most interested in social networking applications (chart 3).
Coming in at a tie for second, 20.9% of our surveyed operators are concentrating on streamlining operations and seeking out business opportunities (down from 26.8% in Nov/Dec); the same amount are looking for new revenue-generating opportunities (down from 34.9%). Although those looking to invest internally to build company resources increased from 1.9% in Nov/Dec to 3.3% today, it still remains the least important initiative among operators. As companies continue to gain financial stability, this number will likely increase.
In the 2009 survey, we asked operators to tell us where they sat in the emerging recovery period. To track their financial progression, we asked the same question in our June 2010 survey, and here is what we found (chart 2). Six months ago, 31.9% of respondents told us that they were knee-deep in dealing with the impact of the recession. Nearly half were starting to see signs of a turn-around, and another 18.3% indicated that their companies were in a financially healthy position (either in "real recovery" or "largely unaffected"). While these numbers were relatively positive, the latest set of data points to an even brighter outlook for lodging and foodservice companies. The most prominent indication of this upward shift is seen in the percentage of respondents who indicate that they are still knee-deep in dealing with the impact of the recession, moving from 31.9% in Nov/Dec 2009 down to 18.7% today. On the flip side, 56% of respondents are starting to see signs of a turnaround, but are proceeding with caution (compared to 49.8%); 13.2% are experiencing real recovery (compared to 6.5%); and 12.1% indicate that they were unaffected by the recession (compared to 11.8%).
What's more, these positive indications are in alignment with data from other industry sources; PricewaterhouseCoopers' U.S. Lodging Forecast indicates that sustainable recovery of lodging demand has begun as consumers and businesses alike continue to gain confidence in the strength of the economic recovery. Likewise, the National Restaurant Association's Restaurant Performance Index for May points to a positive outlook as capital expenditure activity rose to its highest level in nearly two years.
Respondents were also asked to list which emerging technology was of most interest to their company in the coming 6-12 months (chart 3). Social networking dominated, capturing 45.1% of respondents' votes. New geo-networking sites (i.e. FourSquare) and applications that link loyalty and reservations to Facebook, Twitter, etc, are creating fresh ways to engage customers. They're also helping to create a return on investment for social networking, which has been all but impossible to measure. Social networking is valued for its low overhead, which may play a factor in its high ranking, as other emerging technology initiatives require greater capital investments.
Although it has gained a lot of ground in the past year, only 17.6% of lodging and foodservice operations are interested in mobile phone applications/mobile website browsing. Cloud computing and green/sustainability technologies captured 15.4% and 13.2% of participants' votes, respectively. Lastly, there is comparatively less interest in consumer self-service (5.5%) and open source technology (3.3%).
Coming in at a distant second, 17.6% of respondents told us that the business and personal tax cuts outlined in the Stimulus Bill are most likely to impact their companies. Investment in energy/environmental programs and immigration reform are the least likely to impact hospitality companies, earning just 6.6% and 5.5% of participants' votes respectively.
1. What strategies is your company following to foster customer spending/engagement?
A strong promotional offer on television puts heads in beds. That's why in 2009, we tightened our belts elsewhere in order to increase our marketing and advertising spend by 40 percent over the prior year. This strategy paid off, as Best Western weathered the recession better than our midscale competitors. We are following a similar course in 2010 with an even greater marketing and advertising investment to drive business to our hotels.
Our current strategy is based on the following: 1.) our great food offerings; 2.) our unique and delicious limited time offerings; and 3.) making it fast and easier to be a satisfied customer at Così. We are close to offering online ordering which will make it easier and more convenient to be a Così customer.
2. How has technology played a role in helping your company through the recession?
Matthew Silverman, Executive Chef, Michael Corrigan Restaurant Group, Las Vegas (Vintner Grill, Agave, RoadRunners)
Gibson, Best Western International
3. Looking back on your company's PCI compliance efforts, what is one thing that you have learned that you wished you had known from the onset?
Silverman, Michael Corrigan Restaurant Group
Account for unforeseen budgetary needs. I remember thinking this was going to be a very process-driven initiative; ensuring credit card data is encrypted and putting policies in place to keep the bad guys out. Then came substantial hardware and software expenditures: logging software, software that logs the logging software, software that audits that your software is logging the logging software, etc. Ouch. If you are level one or two, get a QSA engaged as soon as possible after the PCI DSS rules change. In my opinion, this has become too arduous to handle on your own unless you have a regularly-trained member of your staff focusing mainly on PCI compliance.
4. In the world of POS hits and misses, what technology or trend do you identify as being a POS fad; and what do you identify as a POS must-have?
Silverman, Michael Corrigan Restaurant Group
Tenczar, Hard Rock International
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