When Will This All Turn Around?

The pundits are all over the place, but it seems that there is some sort of optimistic consensus that the economy will start to look better by sometime next year. Kiplinger's has an index for such a prediction: http://kiplinger.com/businessresource/recovery. And while I think this is a great traditional (and thus conservative) tool for monitoring lagging indicators, I'd argue for a newer approach. Otherwise, we are completely discounting the fact that we may find a truly transformative path toward economic recovery.

I'm more interested in reevaluating our methodology in looking for leading indicators than measuring our lagging ones, in order to better reflect changing values. There was a great article on fool.com about the historical performance of large cap stocks (http://www.fool.com/retirement/general/2009/06/23/its-already-worse-than-the-depression.aspx). On the one hand, the article's observation begs the question of a bottom in the market--even though I predict another year of poor lagging results--but it also raises the possibility of a new kind of growth.

What if we the entrepreneurial class decide to overturn traditional economics by bringing forth an era of immense economic growth coupled with deleveraging. Not only do I believe that we need this for the long term, I also think it's possible with a short-term focus on old school yankee ingenuity. And I think that Gen X is uniquely capable to take on such an ambitious goal. What choice do we really have? More on this later.... including a tie-in to why this should especially concern those of us in the western U.S.

The Truth About Changing Hotel Revenue Models

Here's a great story from Michael Schindler, themed "Things I’d Prefer Not to Hear Anymore." In it, he discusses the whining that is all too prolific in our industry right now. Following is a reprint of my comment on his blog:

I feel the same way as Michael about our industry's currently sorry state. To his final point in this story about being a cheerleader, I would take his comments a little further to the acerbic side by saying "shut up and work through the tough times." Our industry is reeling right now from an era of all talk and cheap money. This meant that no one had to do much in the last few years aside from managing their time to process all the business transactions. Now, deals are tough to come by--as they should be in an efficient market (where efficiency is tied to parity on upward and downward forces in the economy). We should each focus on succeeding rather than pegging the date that the market makes it okay to do so again. That means working with what we've got.

Also, I often wonder why hotels aren't getting more creative in their reaction to the once again dynamic nature of our business. I have made a couple of recent trips to Las Vegas, where I frequently gamble at MGM properties in my spare time (low dollar amounts, I promise). While I regularly receive deals for $49 or $69 room nights, which are far below "acceptable rates," I know that these are offered at huge discounts to their simultaneously advertised rates. Thus, the hotel is using a classic marketing strategy to segment pricing based on overall customer value. Some people are indeed paying $200 per night, while I'm only paying $50; also, I'm making up for my room discount by dining out, attending shows, and gambling. A good marketing analyst is likely tracking these numbers to ensure that their strategy is working.

While this financial model is different from the limited service world where I operate, it's really not too different in its approach to the market. Hotel operators need to leverage their relationships with revenue sources and influencers to look for opportunities for quality promotions. Here in sunny Arizona, for instance, I would consider tapping into the cheap rates at golf courses and other currently struggling businesses to promote stay-and-play packages. Given all of the automated marketing and property management tools available, it doesn't take too much effort to try. And if you fail in one area (or marginally succeed), then simply move on to another idea. Remeber, if you fail to capitalize on such opportunities, I bet that the bigger players (Hotwire, Priceline, etc.) will happily do this with or without you.

In a nutshell....

I think this pretty well describes the world we've been in for the last year or so. Great stuff. The sad part is that when everyone goes through the motions, deals tend to get done. Now things are changing so that you have to put up the money in order to demonstrate the justification for everyone doing the work.