There are significant concerns regarding profitability and a potential downturn caused by today’s economic headwinds. Many hoteliers may react to current headlines with knee-jerk reactions to cut budgets. Hotel Management interviewed Cendyn’s President Michael Bennett to get his take on why adopting a different approach will be key to success.
Q: For those who only know you as the president of Cendyn, could you share a bit about your background and history in the hospitality industry?
I'd be happy to. Before Cendyn, where I’ve been for nearly a decade, I spent most of my career in hospitality, primarily with White Lodging hotel property management company in the U.S. and later KSL Capital, working on both U.S.-branded assets and various independent projects in Europe.
Q: The big topic of conversation right now is the economic headwinds. Given the current macroeconomic status, how should hotels be preparing?
I believe I will answer that in a couple of different ways. I will start with a question that I am currently hearing, particularly from owners and hotel groups: “Is there a comparable event or situation we should consider when navigating potential negative business impacts?” I don’t believe we should look at the pandemic since it was a one-time event. Past crises show that the brands that stayed in the market came out first and fastest.
Skift research reported that the economic crisis in the United States in 2008-09 is probably the most comparable scenario. During that time, Marriott’s continuous media investment helped it exit the downturn with stronger pipeline growth than its peers that paused spending. While in the post-9/11 period, hotels that kept a visible brand presence after 9/11 regained RevPAR roughly 12‑18 months sooner than heavy cutters; OTAs’ share jumped when hotels went dark and never fully receded. As we consider potential outcomes, these are likely our two most appropriate comparisons.
Let’s hope we don’t reach that point; I’m not saying we’re there—we’re not even close. For instance, a recent article from the New York Times indicated that, thus far, travel to the U.S. is holding up. Except Canada, where politics and personal travel decisions appear unmistakable. Many Canadians are choosing to travel domestically instead of going to the United States. According to data from the Airlines Reporting Corporation, domestic bookings for the summer are up 6 percent this year. “It’s a shift in where people are going, more than a shift in them not traveling,” according to Steve Solomon, chief commercial officer at the Airlines Reporting Corporation.
Today, we are receiving many inquiries from customers across the board—both from our services agency side and our software side—asking, “What do we do? How do we plan?”
Reflecting on the 2008/09 crisis, we had two choices while I was on the hotelier side. You could cut your marketing budget and control your costs, a strategy many will likely choose today, and there is nothing wrong with that approach. However, I preferred the strategy we implemented, which proved extremely successful. It involved doubling down when others were cutting costs. Since those cutting their marketing budget didn’t have a strong presence in the market, specific marketing strategies and marketing dollars created an opportunity to steal market share.
Not everyone will focus on rate cutting, so hopefully, we won’t see a drastic decline in average daily rate—although some decrease is expected. Regardless, focusing on occupancy is essential, regardless of the type of hotel or location.
This strategy involves lower funnel efforts that tend to convert well. Surprisingly, new digital media channels and OTAs have popped up, but I don't believe they have changed significantly over the past ten years. Hoteliers will continue to seek more direct bookings to save on commissions, ultimately aiming to expand market share even in a challenging market.Cutting visibility now is like turning off your hotel’s exterior lights during a storm—guests still need a beacon.
You have to spend on this strategy for it to work; for those who don’t, it will take much longer to dig out. I’m not saying we did that in every hotel. But in most cases, where we didn’t, the recovery took much longer. You’re essentially rebuilding, so it’s a bit concerning that I am hearing hotels candidly around the globe saying, “Hey, I think I should cut my marketing dollars.”
As a 30-year marketing veteran, I know people will always come after marketing first. It’s an easy dollar to cut. However, in this case, it is probably not the most responsible path forward. In fact, we advise hoteliers to hold at least 60-70 percent of their 2024 brand‑equity budget; redeploy it, don’t remove it.
Q: How did you decide which hotels to double down on and which to avoid? Was there a strategy? Did something alert you to which ones would be more successful?
It depends on the hotel and market. If you are in a market with a lot of group business and the group is holding, you’re likely less reliant on transient business. If groups are canceling and that business is dissipating, you may look to fill it with transients, especially in larger hotels. But at the end of the day, our overarching strategy was that you can’t afford to mismanage your marketing dollars; you have to spend them wisely.
With pure transient or luxury-type products, you need to determine what’s happening in the market and what the inbound looks like. For instance, we are already seeing significant cuts from major US airlines in Q3; we’ll see if this trend continues into Q4. But right now, United, Delta, and Southwest have stated they are implementing significant cuts to flights, depending on market variables. Therefore, you should consider all factors: What’s my mix? What’s the inbound? What are the airlines doing? Then, put it all together to come up with a strategy.
We established, in most cases, a four-legged stool mentality, focusing on marketing, revenue management, group sales, and partners. I can’t say this enough: it is essential for marketing to collaborate with revenue management. Although this relationship may not always be the friendliest, it remains one of the most crucial.
Q: In your opinion, how does a management company, for instance, have this conversation with ownership, who might be a bit nervous?
I think they will be nervous and quick to cut. They’re trying to protect margins because margins have gotten really good post-pandemic. Owners want to keep them, rightfully so. Whoever speaks with the owners or the asset managers on behalf of a property must come armed. I think that’s where they have to rely on partners.
In our case, we want any hotel we partner with to be enabled and equipped with the right information so they can make informed decisions rather than acting impulsively, such as the “We’re worried, so we’re going to cut” mentality. It’s about bringing those teams together in that four-legged stool approach.
Q: We all know bad news sells. How often would you recommend hoteliers check in to real data instead of simply relying on the headlines?
We wake up every morning not knowing what the headlines will say or how the decisions will impact the current environment. Nonetheless, we look at data on a rolling 14-day basis. There has to be enough data to show the dial moving, and it’s easier if you have access to broader data. I believe examining your properties’ marketing spend and presence (and compset) every couple of weeks is appropriate in the current environment.
Q: Any parting thoughts?
First, take the time to understand the data and what it really means. Second, work with your partners, both internal and external. Third, don’t overreact too quickly, and finally, employ slow and methodical decision-making tactics. Flexibility beats frugality: save where you can measure, spend where you can compound.
For every business, even our own, market and macroeconomic factors impact us and the decisions we make. But it will be key to be slow and methodical. This is not the pandemic where one day we’re all open and the next day the world shuts down, so let’s hope that the broader macro environment evens out and is not as negative in terms of impact as we might anticipate it would be.