5 Ways to Cut Costs During COVID-19

As stay at home orders slowly lift across the nation many businesses in the lodging industry are still looking for ways to cut costs to survive the economic effects of the coronavirus pandemic.

While there is no great, one size fits all solution to such an unprecedented problem, here are five ideas to overcome cash flow problems during this tumultuous economy.

1. Apply For Federal And/Or Local Financial Assistance:

As reservations dry up and things become tight, consider seeking financial assistance through SBA loans or relief packages supplied by federal or local governments. Although the initial $350 billion in funding from the CARES Act has been exhausted, additional funding is expected to be added in the coming weeks. Having an application ready to submit will save you time and help you get approved during the second round of applications.

Aside from the federal government, it is important to know that many states and local organizations have programs to provide financial assistance to small business owners. It is worth checking in with your local state governor's office, finance department, unemployment office, and labor department for any state government programs that may be applicable to small businesses and/or the lodging industry.

2. Examine Utilities And Services

As the impact of the virus continues to wreak havoc in the travel industry, it is important that you take stock of your essential business processes and fixed costs. Should things continue to get worse, it may be necessary to make difficult decisions to lower your financial obligations.

With many companies offering deals, now may be a great time to make upgrades and renovations to your property—but only if you can afford it. If funds at your business are tight, it may be wise to postpone any renovation and upgrade projects until we begin to emerge from this crisis and revenue becomes more stable.

If you are struggling, consider cutting back or revising services such as gardening or lawn care, and even utilities. Many large corporations and utility companies have been willing to offer small programs to assist customers during this time. Reach out to your suppliers to see if they are offering any deals or assistance such as payment deferment. Be transparent towards existing lenders, vendors, and service providers and involve them in your mitigating procedures.

3. Look For Free Or Discounted Resources

There are organizations and programs out there that are ready and willing to help small businesses during these stressful financial times. For example, the Lawyers for Good Government Foundation offers pro bono legal consultations for small business owners throughout the country. The organization helps small businesses under 100 employees answer any COVID-19 related legal questions, and will pair your business with a lawyer that have expertise in the lodging industry. You can fill out their contact information page and be alerted if and when they open a legal clinic in your area.

Other resources include programs such as SCORE, which include a network of thousands of retired business owners and expert volunteers. This includes volunteers with experience in the lodging industry. These volunteers can provide remote consultations for small business owners to meet and discuss business challenges during COVID-19.

4. Look For Ways to Keep Current Customers In The Long Term

As cancellations continue to mount, properties are forced to find innovative ways to try to keep customers long term. These can be simple ideas such as allowing the customer to re-book at a future date for the same rate (even holidays or weekends), or attaching a free perk to the reservation if they agree to re-book.

Where possible, and according to your business policy, try offering credit vouchers instead of refunds. ResNexus has created credit voucher templates that businesses can issue to their customers. These vouchers can help properties avoid having to hand back thousands of dollars in a short period of time for those that are cancelling their travel plans. Credit vouchers also allow customers the ability to stay anytime in the future and relieves the customer of any pressure to quickly choose a date to re-book.

5. Look To Stimulate New Demand

The lodging industry has been one of the hardest hit during this pandemic. Travel has all but dried up, and people are either unable or too afraid to venture out. This does not mean that you cannot try to find ways to stimulate demand. Get creative and think outside the box. Here are a few ideas to get you started:

• Marketing

Just because times are slow does not mean you should abandon marketing efforts for your business. Make sure your promotions and marketing techniques show a benefit to your customer, and how your business can legitimately help during this troubling time. Highlight your emphasis on cleanliness and safety. We have seen many successful marketing campaigns promoting "stay-cations", offering local customers a way to safely self-isolate while still allowing them the ability to leave their house.

• Seek Out Industries Still Traveling

While much of the general public is under stay at home guidelines and recommendations, there are businesses out there that are still traveling. Workers in essential industries such as construction, oil & gas, trucking, railroad, water treatment, and healthcare continue to work and travel to locations that need them most. We have seen many hotels and RV Parks house healthcare workers that have traveled to highly affected areas. Do not be afraid to reach out to companies in these essential industries to offer your rooms as a way to both assist them in their efforts, as well as provide additional income during this time.

• Offer Virtual Events

Many of the properties we work with host events of all types. From aerobics to painting to yoga, if your events have been cancelled due to COVID-19, consider ways to tailor your event to an online format to still keep in touch with your customers.

6. Decreasing Payroll

When all else fails, it may be necessary to cut costs by offering pay-cuts or furloughing/laying off employees. If you come to this decision, error on the side of overcommunication. Be as transparent as possible with your employees. They will appreciate you being up front and honest about the situation. If you decide to go this route, keep in mind that it may disqualify you for loan forgiveness on some types of federal assistance. SBA loans that are attached to the CARES Act (and presumably the next round of funding) can be forgiven only when employers maintain and/or quickly rehire employees.

If you do decide to decrease your staff, consider upgrading or becoming familiar with your available technology. Having a clean and relevant database, complete with access to reports can be invaluable going forward. A good property management system is like having an additional employee, but at a lower cost. ResNexus professional edition includes over 65 reports that you can use to make decisions regarding pace, pricing, and promoting your property as we begin to emerge on the other side of this crisis.

As no two businesses are the same, there are no one size fits all solutions for how to cut costs during this COVID-19 pandemic. This is a dynamic and fast moving environment. Stay focused and stay alert on your financial situation. But most of all, stay positive. No crisis lasts forever. The lodging industry in Asia has already begun to see a slight rebound as they begin to open up on the other side of this pandemic. There is hope.

Summary

Look For Federal And Local Assistance
Federal and local governments may have programs to provide financial assistance and/or tax breaks to small businesses. Seek these out.

Examine Utilities And Services
Consider putting costly upgrades or renovations on hold. Take stock of utilities such as lawn care services. Consider decreasing their frequency.

Find Free or Discounted Services
From pro bono legal advice to consultations with industry professionals, there are organizations and programs out there that are ready and willing to help small businesses during these stressful financial times.

Find Ways To Keep Customers Long Term
Where Possible, try offering credit vouchers instead of full refunds.

Stimulate New Demand
Explore new marketing campaigns or target essential industries still traveling. Think outside the box to find ways to attract new business.

Decreasing Payroll
When all else fails, it may be necessary to cut costs by offering pay-cuts or furloughing/laying off employees. Be aware that this may affect your status with any Federal or State assistance (such as the CARES Act).