8 Hotel Strategies for Navigating Economic Downturns

As a hotelier, an economic downturn can sound like a nightmare for you because it makes your hotel less profitable in 2 ways – your occupancy rates will fall flat, and your average daily rates (ADR) will be significantly reduced. This means your revenue will be less than ever.

While many hoteliers are tempted to slash their room prices to combat these challenges, this isn't a sustainable long-term solution. Although such price reductions might temporarily attract price-conscious guests, they can damage your hotel's reputation in the long run.

As your competitors are finding innovative ways to deal with such a downturn, you risk losing customers by not adapting. Read this blog to discover 7 killer strategies that can help you face this economic downturn.

8 Strategies for preparing your hotel to face economic downturn

Here are the MUST HAVE strategies to follow to prepare your hotel for this downturn-

1. Assess your current financial position

Your hotel’s performance varies throughout the year because it’s influenced by economic conditions and market demand forces, which can either increase or decrease the demand for your services.

During festive seasons like Diwali and Christmas, for example, people are more likely to plan vacations and tend to spend more.

This becomes an opportunity for hoteliers to increase the price of their services and add more zeroes to their net revenue.

Ideally, there is a once in a while scenario where hotel demand is more than its supply.

But how would you assess whether your hotel is making more profit or facing significant loss? You can track the metrics by assessing your hotel’s financial statements as they tell you where the money is coming from (income) and going out (expenditure).

Thus, it's better for a hotelier to prepare for all times, especially when recession comes.

But you can't go with a one-size-fits-all strategy every time because the hospitality industry changes rapidly and there are factors that affect this such as demand, availability of staff, operating hours, etc.

2. Reduce your hotel costs

The other way to face this challenging time is by adopting cost optimization strategies such as-

• Make your hotel more sustainable by using energy-efficient devices such as LED lights that can save electricity and reduce your bill. These power saving devices might seem a daunting expense for the long term, but it will greenify your hotel.

Here's what Tori Trebiascci, Going Coastal Property Management shares her experience on using LED lights to save utility bill-

She uses energy efficient LED lighting and smart thermostats at her vacation rental property.

Though it involved some costs in the short run, it's also true that LED bulbs last longer and consume less electricity. So, it’s a profitable option in the long run.

During that economic downturn, these eco friendly practices provide long term benefits for hoteliers such as lower maintenance costs and increased guest satisfaction. That's how cost efficiency and sustainability go hand in hand.

• Secondly, travelers, especially Gen Z and Millennials, have become environmentally conscious, so they prefer to stay at hotels that use smart devices. Thus, the path towards sustainability drives more bookings.
• Train your hotel staff to perform multiple roles so that in case of absence of anyone employee, the other person can take up the role. This reduces the need for hotel owners to hire additional staff and thus save their recruitment expenses.

Studies state that labor costs account for 45-55% of hotel expenses. This implies that a hotel owner should retain their employees and conduct cross-training programs to improve their skills.

For instance – if your hotel is experiencing off-season and your front desk staff handles the walk-in guests, and if they are free, then you can ask them to help social media and marketing team. Ultimately, you’re saving the cost by getting the most out of existing resources.

• Automation can be a game changer for your hospitality business.

Contactless check-in/check-out technology can enhance your guests' experience by saving their time and energy as they no longer need to wait at the front desk.

Moreover, it frees up your front desk staff as they now focus on serving guests and not on handling administrative tasks.

• Similarly, AI chatbots can help hoteliers deal with an insane number of guest queries. Thus, it reduces the workload on your front desk staff.

For Instance – Hansa hotel uses AI and automation technology to handle their routine guest inquiries. Such automation has reduced their costs by 20% and saves them around €90,000 annually.

3. Don't rely on one revenue stream

It's always recommended that you don't just sell the nest, sell the entire tree. As a hotel owner, your focusisn't just to sell the hotel room but rather to focus on increasing revenue from other sources such as spa services, food and beverages, etc.

During economic downturn, you're looking to increase your hotel revenue; in the same way, guests are looking for attractive deals and packages.

Generally, guests are looking for immersive experiences, and when they find bundled deals or offers, they're more attracted. This way you attract a diverse set of guests which brings more money for your business.

Besides that, you can host some events at your property such as cooking classes or use the unused area for conducting meetings and conferences. This increases your F&B revenue and can help your hotel thrive.

A survey conducted by Oracle Hospitality and Skift states that 18% of hoteliers believe that more than half of their hotel revenue comes from ancillary sources excluding room rates.

Thus, ancillary revenue is one of the best ways of attracting guests. They feel that they get more for their money, and at the same time, it maintains a consistent pipeline of clients for your hotel business.

4. Stay updated with industry trends

As a hotel owner, it's important for you to keep an eye on trends so you can adapt and grow your hospitality business by leaps and bounds.

With the changing travel preferences where personalization is taking center stage, hoteliers can now understand guest needs and provide customized experiences through AI and automation.

Such a level of personalization hasn't just become a major driver for hotels, but it also increases guest satisfaction.

Studies suggest that 74% of travelers consider spending a dime on hotels to get personalized experiences. If you'renot hopping on this trend, then you'remissing out onrevenue opportunities, especially during the tougher times.

But what if you're not aware of these trends and you face revenue loss because guests are not coming to your property?

Let's say you observed that most guests are looking for SPA appointments; then it means you should probably partner with local spas. You can even promote this offer on your socials and hotel's website to get more bookings.

When you stay updated with current trends and adjust your strategies accordingly, you can provide more value to the audience.

5. Focus on providing quality customer service

Just because you're focusing on cost savings doesn't mean you would compromise with the quality of service. Make sure to communicate with guests and inform them about any changes or cancellation policies.

If you run a promotional offer on your website for a limited period, make sure to mention clear terms and conditions about that offer. Such small efforts make guests feel more special as you care about their needs even during the tougher times.

6. Learn from industry professionals

Another strategy you can follow to come out of this economic downturn is by following hospitality leaders on LinkedIn and attending hospitality-focused webinars.

You need to assess the financial standing of your hotel, and if there is room for improvement, consider revamping your strategies.

For instance – if you observed that you get maximum cancellation requests during slow periods then discuss the same with your hotel revenue manager.

In such a case, you can either adjust the room rates based on current market conditions or competitor prices, offer flexible cancellation policies and value-added packages to incentivize guests.

7. Invest in digital marketing

Bad times may hit but the focus should not always be to cut your marketing budget; rather continue attracting more guests and develop more revenue streams.

One of the best ways is to create an online presence for your hotel. You can start by creating a hotel website and optimizing it for SEO purposes. Having an online presence is not just important for creating brand awareness but also for driving direct bookings at your property.

Your focus is not just to serve specific types of demographics but rather to attract different types of guests to your property.

You can even invest in pay-per-click advertising to attract travelers who're searching for accommodation. You can create a buzz on social media by posting user-generated content and encourage your guests to share on social media.

According to Travel Talk by Hotel Guide, here are a few cost-effective digital marketing strategies that you can adopt to face such recession challenges:

• Social media is the lifeline of marketing because this is where 2-way conversations happen between hoteliers and guests.
• Traditional advertising medium like magazines or newspapers, don’t connect hoteliers with guests.That's where hoteliers need to shift away from creating content to now telling stories.
• Video is the most powerful medium for promoting your hotel. Through videos, guests can feel the vibe before they make a reservation.
• Share behind-the-scenes content as people want to see real people doing real things. You can create a reel and tell people about how your hotel staff works, how chefs prepare food, and how they serve their guests. Such raw and unfiltered content provides engaging experiences for guests.
• Make sure to respond back to your guest comments in your posts. Money making deals happen in DMs and comment sections of socials.

8. Use Repurposed material for eye-catching decor

During the economic downturn, your hotel can improve its visual appeal by using creative solutions.

A good example can be repurposing old furniture into eye-catching lobby doors. You can even do local partnerships and showcase art from emerging artists to refresh your gallery spaces.

You can even create a landscaping-like design using plants. Such a cost-effective approach will create a good ambiance in your hotel.

End Notes...

Many hoteliers think that they can make a recession-proof business by either reducing their room rates or launching discounting schemes to attract price-sensitive travelers so that at least they can improve their bottom line.

But the truth is that you don't need to rely on a single strategy to propel your hospitality business.

During this recession, here are some bonus strategies you can use in 2025:

• Offer value-added packages to guests such as 1 free night stay.
• Create a plan B to respond to recession. It could be offering discounts on F&B. But that's just one instance.
• Offer loyalty schemes for existing guests to keep them coming back.
• Never cut corners to compromise with the service level. If there's a drop in your service quality, guests won't give you another chance.
• Don't panic and always have a long-term goal. It's OK if your hotel is facing revenue leaks during this period; don't compare it with good periods, just revamp your strategy.