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No More Maydays as May Shows Rebound In Sight Consumer confidence is up and economists see an end to the recession. It’s time to get ready for a lodging industry upturn. Wednesday, May 27, 2009 Glenn Haussman

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The seeds of a turnaround have been sown. And it’s about time.  With recession woes dampening the spirits of even the most upbeat hoteliers, there are clear signs both inside and outside the hotel business indicating the bloodbath is over. Let the healing begin.

Though some might be skeptical the end of the recession is near, let me posit this for you:  The economy is stabilizing, consumer confidence is up and more individuals are saying they’ve got the desire to travel. Sure, it may be a little premature to dream about raising rates like the halcyon days of 2005 through the first half of 2008, but here’s the proof you need to start thinking positive.

“My sense is we have hit bottom,” said Jonathan Tisch, chief executive of Loews Hotels.  “I don't feel it getting worse.”

Comments like that make us here at Hotel Interactive very happy.

And in order for the lodging industry cycle to start moving back into black, it’s got to hit bottom. If you recall we also recently reported that Mark Lommano, president of STR Global, a company that tracks hotel occupancy and rates, made a similar comment as Tisch. Lommano said: “There is a good case to be made that demand has troughed. It is not getting any worse; it’s not yet getting better, but not getting worse. It’s probably as bad now as it is going to get. We feel demand has stabilized, though average daily rate (ADR) hasn’t yet.” (See that article here)

So far so good, but here is where things are really starting to look up. According to a report released this morning by the National Association of Business Economics, which surveyed dozens of leading economists, the recession is winding down.

“While the overall tone remains soft, there are emerging signs that the economy is stabilizing,” according to NABE’s latest survey and its president, Chris Varvares, who is also president of Macroeconomic Advisers. “The survey found that business economists look for the recession to end soon.”

The report said that, following a sharp 6.1 percent (annual rate) contraction in the first quarter of this year and another 1.8 percent drop in the second quarter, NABE forecasters expect real GDP to rise 1.2 percent rate in the second half of 2009. “The good news is that the NABE panel expects economic growth to turn positive in the second half of this year, with the pace of job losses narrowing sharply over the remainder of this year and employment turning up in early 2010,” said Varvares, noting that GDP should rise 2.7 percent on a fourth quarter to fourth quarter basis.

And, with the end of the recession in sight, another magical thing is starting to happen: Consumers are starting to feel more positive, too. According to The Conference Board the Consumer Confidence Index, which had improved considerably in April, saw another monstrous gain this month. The report, released yesterday, now stands at 54.9 (1985=100), up from 40.8 in April. The Present Situation Index increased to 28.9 from 25.5 last month. The Expectations Index rose to 72.3 from 51.0 in April.

"After two months of significant improvements, the Consumer Confidence Index is now at its highest level in eight months (September 2008, 61.4). Continued gains in the Present Situation Index indicate that current conditions have moderately improved, and growth in the second quarter is likely to be less negative than in the first. Looking ahead, consumers are considerably less pessimistic than they were earlier this year, and expectations are that business conditions, the labor market and incomes will improve in the coming months. While confidence is still weak by historical standards, as far as consumers are concerned, the worst is now behind us," says Lynn Franco, Director of The Conference Board Consumer Research Center.

Consumers are spending more, too, which could lead to a boon for travel, especially during the summer travel season. According to the Gallup Monitor of Consumer Spending, Americans reported spending an average of $73 per day in stores, restaurants, gas stations and online last week. This is up 20 percent from the $61 of the prior week, and up 30 percent from the $56 average of a month ago.

So what does all this mean for the hotel industry anyway? Basically, it means you have a better shot at capturing the attention and business of potential travelers. But to do that you have to stay focused on offering guests a strong value proposition for staying at your hotel. Though guests have been proving to be price sensitive, they are more value conscious and are willing to spend if they feel they’re getting a good deal.

Make sure to appeal to their pocketbooks by creating reasons for them to stay with you. Highlight your complimentary offers such as free breakfast and free Wi-Fi. Give families an excuse to stay at your hotel for the weekend to use your pool and eat in your restaurants. Prove to them that making memories doesn’t have to break the bank. Give them an excuse to get away. Deep down they feel they deserve it; you only have to nudge them a little bit.

To do that, however, depends on making a strong emotional connection to the guests with your stay offer. Ask yourself what the quintessential elements of your hotel are that make guests feel good about themselves while spending time with you. Then craft packages appealing to those emotions. If you focus on dollars and cents, you’ll simply be one of a million choices. But if you can meet the emotional needs of your potential customers, you’ll be the one-in-a-million choice they select.