Wednesday 5 November 2008

Keynesian Economic Theory Applied to Hotels.


As Sir Winston Churchill once said: “If you put two economists in a room, you get two opinions, unless one of them is Lord (John Maynard) Keynes, in which case you get three opinions.” It seems Sir Winston was not a great admirer of the economist who championed increased government expenditure to stimulate an economy faced with falling demand, rising unemployment and a drop in national income. But his approach is once again being talked of as crucial to recovery.

But what’s it all mean for hoteliers? Apart from the obvious to anyone looking to pick up government business (time to dust off those GOV GDS rates!), it does pose the question that, credit lines permitting, should firms feeling the pinch follow Keynes and spend their way out of the mire?
If we learn our lessons from the downturn post 9/11 it would seem the answer is yes. Hotels that kept up their spend on marketing and training benefited more when business started to return. This was especially true of Terry Holmes at the Stafford (now with Red Carnation). Who spent a great deal of time travelling in and around America and who benefited greatly when the started travelling again.

Certainly don’t think about laying off staff – especially the skilled ones. The story still goes round about the New York Hotel that got rid of its concierge team post 9/11 and is still struggling to repair its damaged reputation. The smart firms will still foot the wage bill as you’ll need those skills to be competitive once the markets pick up again.

The key is to make sure your spend is effective whether it is in marketing or staff. This is where outside specialists can help maximise the 'bang for your buck'. With experience from many sectors and up-to-the-minute knowledge of the most effective online tools a marketing consultancy can help you increase your Share of Voice (SOV) and thus you share of market. They will also help you identify and target the most profitable market segments. A training consultant will help your team to be more efficient thus saving money and also better salespeople thus generating more revenue.
It is advisable to spend your way out of troubled times ... just make sure the spend is effective!