Last time vs. this time: A look at downturn signals
 
Last time vs. this time: A look at downturn signals
31 OCTOBER 2019 7:14 AM

Oh what a difference a few years makes, especially when you think about the broad industry changes from the last downturn to the next one.

I’ve been covering the hotel industry for 13 years, which means the one meaningful downturn I’ve been around for was the Big Kahuna—2007 and the Great Recession that followed. That one sure was a doozy, but in hindsight, isn’t it fascinating to think that in 13 years, there’s only been one meaningful downturn?

So much has changed in 13 years, and I’m reminded of that every day when I pull out my stories in the Hotel News Now newsroom. I feel positively ancient saying things like, “Oh, back when I started covering the industry, we published two 100-page print issues a month! Print!” Or, “Back when I started, Airbnb was only renting out couches, which nobody did because the Craigslist Killer was also a thing!” Or my favorite: “Back when I started, I took actual taxis that I had to hail in the middle of the street!”

It will be interesting to see how this upcoming cycle shift compares to that one. Mind you, I don’t want to be that person who talks a downturn into happening by saying it too much and too loudly. Instead, I’ll let people like David Loeb and Jan Freitag point out the signs they see heading in that direction.

There are a couple more universal signs of a typical hotel cycle shift that I look for that are less economy-related and more macro. But as I put this list together, I was struck by the different factors having an impact on them today than were there at the last downturn.

Flight to brands

  • Last time: The last time around, the downturn made a lot of independents skittish, and many opted to join brands as a security blanket. Brands could offer distribution and marketing support to keep rooms as full as possible.
  • This time: I don’t think we’ll see this flight as pronounced as we did the last time. Independents in general are a lot more mature, many have the security of institutional owners behind them and they have solid distribution plans (because lest we forget, Expedia has matured a lot, too, since the last downturn).

Relaxed brand standards

  • Last time: Brands may not like to admit it, but after the last downturn, it took a few companies a while to dig themselves out of a relaxed brand standards-sized hole. Remember that a lot of the big hotel brand companies still owned a lot of assets back then, and needed to keep their cash flow from franchise fees as high as possible. As a result, they loosened the reins on standards a little. (No, not everybody, and I mean this in general terms.) As brands dug out in 2010 and 2011, you heard them talk a lot about “brand clarity,” and needing to raise the bar. That was a tough job—a lot of hotels were in receivership, PIPs were delayed and it took a good couple years before many brands could get their standards back.
  • This time: Oh how the major brand companies have changed. Most are asset-light, most have spent the last 10 years diversifying their brand mix and incorporating segments they didn’t have before. What I think we’ll see in the next downturn is possibly more trade-downs than relaxing of brand standards. The big brand families have—dare I call them this—some catch-all brands that can keep the newbies or lower performers in the family and still writing checks to mom and dad.

Soft-brand wars

  • Last time: Wait, what were soft brands? I joke, but there’s a kernel of truth: Hotel soft brands first came on the scene in 2008, right as the recession hit its stride. Choice Hotels International and Marriott International led the pack, with goals to target high-end independents and essentially compete against OTAs and the marketing alliances that also had their eyes on strong independents. At the time it was a genius move that changed the conversation and opened up new avenues for guests, independents and hotel companies.
  • This time: Talk about a sea change. Today there are more than 15 soft brands from the major global hotel companies that target segments from midscale on up—economy if you consider Best Western Hotels & Resorts’ soft-brand cousin, the SureStay brand. I think that where we saw the flight to brands last time, we’ll see the battle for soft brands this time, as hotel companies try to lasso in as many unaffiliated independents as possible via the soft-brand route.

This list could go on—I haven’t even touched the emergence and influence of alternative accommodations, for example. Let me know your thoughts on these indicators I mention above, as well as what else we should be looking at. Comment below, email me at sricca@hotelnewsnow.com or find me on Twitter @HNN_Steph.

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1 Comment

  • Robert Rauch October 31, 2019 11:26 AM Reply

    Well said, Stephanie. There was no Twitter, no iphone, no Android, Facebook was just replacing My Space and the world has changed since you began covering the industry! The truth is, the econoomy has shifted as well. We were without safeguards in 2008. Today, the most likely scenario is not a recession, rather it is a soft landing. We are truly in a global economy.

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