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Economic Impact on the Hospitality
Industry (Second & Third Quarter 2008)
I
In this down-turned economy, many areas of business have
been negatively affected. How are the harder times impacting
the hospitality industry? Chicago-based Hall & Associates,
Ltd, the premier hospitality executive recruiting firm,
has been conducting in-depth research over the last year.
Based upon recent field-survey results, most participants
are being challenged by the current state of the economy
and don’t anticipate seeing an end until summer 2009 or
even winter 2010.
Over 40 hospitality-industry leaders in properties/corporations
from North America and the Caribbean gave feedback.
This group included a publicly-held hotel company
with over 10 brands in its global portfolio, niche-management
companies, individual resorts, urban properties and
suburban, luxury resorts. Executive-level personnel participating
are GMs, EVPs, SVPs, COOs and DOSMs. The survey
received a 43.5% response rate, considered excellent by
current testing standards.
Summary of Findings
The majority of statements below reflect what business
people might expect, yet another important factor was revealed.
While business may be slowing prior to the election,
and some suppliers may put off certain decisions until after
it, none of the key industry leaders believe the outcome of
the election will be an issue.
• Rising gas and food prices are having a negative impact
• There has been a reduction in short-term pick up
• Business and seasonal travel has declined
• Staffing cuts will average 5% across the board
• Middle managers and operations will be hardest hit
• As a strategy, most hoteliers will consolidate and
enhance sales and marketing to get through this
challenging economic period
Economic Impact of Higher Gas and Food Prices
The vast majority (85%) indicated their property or corporation
is feeling the impact of higher gas and food prices. A
lesser number (15%) believed it has not affected them.
Reduction in Short-Term Pick Up
A high number (64%) indicated they have seen a reduction
in short-term pick up as a result of these market influences;
36% have not.
Slowing of Long-Term Pace
Less than half (48%) stated these market influences
have slowed their long-term pace; 26% have not and 26%
are unsure.
By Deborah
A. Hall
Hall and Associates, Ltd
Biggest Economic Impact
Decreases in business and seasonal travel (48%) and increases
in fuel and food prices (37%) are the issues that will
have the biggest economic impact in the next 12 months.
Meeting strategic-growth objectives (5%), and the ability to
find and place qualified talent (5%), were key issues; 5% selected
“none of the above.”
Economy Change in Direction
The majority (75%) indicated the current economic downturn
will change direction in summer 2009; 10% said fall
2008 and 10% winter 2010; 5% are not feeling any impact.
Staff Reduction
A high level (69%) anticipated staffing cuts to get through
this economic downturn; 31% do not foresee the need to
do so.
Severity of Staff Reduction
A fairly-high number (42%) indicated a 5% cut in staff overall;
27% believed there will be none; 16% are looking at 10%;
10% stated 2% and 5% are looking at more than a 10% cut.
Position Hit the Hardest
Close to half (47%) indicated middle management and operations
will be the hardest hit, while 26% stated no positions.
The executive level was not addressed.
Tactics
A large number of the hospitality leaders (48%) will consolidate
and enhance sales and marketing efforts to get through
this challenging economic period; 16% intend to implement
drastic expense-cutting measures; 10% plan to hire stronger/more
experienced leaders; 5% propose implementing
a wage/hiring freeze and 5% will cut prices and/or offer
special discounts. However, 16% stated they are not yet feeling
the impact.
Noted Comments/Trends
In summary, the results showed the following trends and/
or comments:
• Focus on a long-term approach to drastically cutting
expenses instead of staff, as the latter could lower
service standards.
• Year-end revenues are forecast down about 4%. To
date, the corresponding Earnings Before Interest,
Taxes, Depreciation and Amortization (EBITDA) has
been recovered by reviewing expenses such as office
supplies and similar non-critical items.
continued on page 15
14 news & views | september-october 2008 www.mpicac.org