Current economic trends, conflicts, and areas of progress are all things that companies must pay close attention to. Identifying these changes and responding to them effectively are things financial managers, and pretty much any responsible member of a financial team, must do in order to assure that their financial statements and budgets will not end up in the red. Both the lodging and restaurant sectors of the hospitality industry are affected by different economic trends; however, both must ensure that they respond adequately to stay competitive, and above all, to stay in business. In fact, most of these companies are as successful as they are do to their nimbleness in responding to current economic and maybe even social trends.
Recently, food cost inflation, whether do to bad weather patterns or a rise in the cost of food production, has become a real concern for restaurants. Furthermore, the greater challenge is finding a way to compensate for an increase in production costs while not increasing prices to the point where it negatively affects revenues. Despite this, third quarter earnings rose 8.6 % for McDonald’s Corp. This, Chief Executive Jim Skinner commented, is “hard- won”; although we are out of the recession, “Consumers everywhere continue to be cost conscious and hesitant to spend.” McDoanld’s was able to achieve this by offering increasingly diverse menu options and by implementing two price increases, “averaging 1% in March and 1.4% in May, to further offset food inflation.”
The lodging sector has numerous trends to keep up with. Anyone who reads a major newspaper or who has watched a TV news show or political debate recently, knows the hot topic right now is jobs. In 2009 the lodging sector cut numerous jobs and budgets. People are now wondering if 2011 will bring a repeat performance. A Wall Street analyst posed this question to Ed Walter, CEO of Host Hotels, who commented by saying, “If you start to see a meaningful falloff in occupancy, then you're going to see that you're going to go back and cut the hours that food and beverage outlets are open. You're going to end up with fewer housekeepers and you're going to end up with fewer managers than we have right now." Simply put, if hotel room demand decreases so will the number of jobs in the lodging sector. The up and coming holiday season will give us an answer to this concerning question.
On the other hand, one thing to be sure of in today’s world is people’s obsession with technology. Of 2,756 voters surveyed for a Hotel Check-In poll, 84% said they bring at least two mobile devices with them when they travel- a whopping 48% said they carry their iPad or other brand tablet computer. David Garrison, CEO of hotel broadband provider iBahn, says the "iPad revolution" is generating a dramatic boom in demand for video. As a result, hotels will have to increase their access to Wi-Fi and alter their pricing, perhaps increasing the price as demand goes up or take the risk of offering free Wi-Fi, in an attempt to create an advantage over competitors. Installing new Wi-Fi systems might be a big investment, but with so many consumers demanding it, it might offer a big return on investment. Something general to point out is that consumer spending trends affects every business. What businesses in the hospitality industry must realize is that dining out and staying at a hotel, which usually means going on vacation/trip, are luxuries. When consumer’s incomes decrease so will the demand for these services. As a result, companies, like McDonald's and Host Hotels, must be conscious of events and trends that affect consumer spending habits.
