Market Reports

Weathering the Economic Storm

- How hospitality companies can thrive in challenging times

If you listen to executives from consumer-related companies in the US, they will tell a story of terrible hardship for consumers, of sales that are stagnant or worse, of costs rising faster than they can increase prices, and of consumers retrenching on most types of discretionary spending. And yet the overall economic numbers will suggest a modest downturn in economic activity but not necessarily a true, full-blown recession.

Why the difference? The answer is exports. The strength of US exports, which is related to the weakness of the dollar, has partially offset the considerable weakness of the consumer sector. On the other hand, if the credit crunch worsens substantially, the entire economy may feel the hardship now felt by consumer related industries. Time will tell.

For hospitality companies, of course, the storm that has hit US consumers is what matters. Moreover, many aspects of this storm are likely to linger even after the economy recovers from its current doldrums. These include elevated food and fuel prices, troubled credit market conditions, and excessive consumer debt levels. That means that hospitality companies not only have to shield themselves from an economic downturn, they also must undertake measures to adjust to a changed business environment.

In this publication, we examine the outlook for the US consumer of hospitality services and offer our views on what hospitality companies should consider to prosper during troubling times.

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