Tragedy, Travel and Tourism
Diversification and patience are the keys to weathering today's turbulent hospitality market.
Without a doubt, the Sept. 11 tragedy has rocked the travel and tourism industry. In addition to massive airline layoffs, restaurants and hotels that depend on tourism dollars have suffered. According to the National Restaurant Association about 103,000 restaurant jobs were shed in September following the attacks, the largest drop in history. It stands to reason then, that for those that supply products to the hospitality industry, business is not quite the same.
"The process of selling to this industry has definitely been altered since the Sept. 11 tragedy," said Graham McClean, president of Global Docugraphix, a $100 million-plus distributorship in Lincolnshire, Ill. "People are delaying ordering, reducing quantities or not ordering at all. There is no question that attention has been diverted."
Corporate Vice President Tony Kegowicz, Graphics Services Division of North American Corporation, a Glenview, Illinois-based distributorship, agreed. The company, said Kegowicz, has serviced hotels, resorts and cruise lines for about 15 years.
"What we saw in the wake of Sept. 11 was a temporary halt on budgets," said Kegowicz, adding that he believes the ultimate financial impact of the events on his business will be minor. "Most markets paused to reflect on what was happening. And while other markets seemed to have returned to normal more quickly than the hospitality areas, now we see it starting to recognize the need to generate more traffic through promotional avenues such as direct mail."
Global Docugraphix's work in the hospitality market, however, is concentrated mainly on travel agencies—a sector that McClean described as hard hit, although he predicts that the downturn will be short term.
"Certainly in Houston, where we have a concentration of this business, there will be a negative effect," said McClean, "but I'm confident that it will come back."
And travel industry statistics support this belief. According to the Travel Industry Association of America (TIA), while travel in the fourth quarter of 2001 is ex-pected to drop significantly and remain soft in the first half of 2002, it is expected to return to pre-Sept. 11 levels later in the year. Association President William Norman noted, however, that these "are still very fragile times for the industry."
Along these lines, Kegowicz offered that while hotel booking rates were beginning to return to normal a few weeks after the attack, the Anthrax scares caused people to pull back again—resulting in, as he described, "a continued uncertainty that there will be softness in the industry."
For distributors serving it, then, diversification will be an important ally. For example, McClean does not fear a severe economic impact because of the travel industry's downturn in part because of the broad base of markets Global covers.
"It would be a strong statement to say that the hospitality downturn will be material in our results," said McClean. "We are in many markets and a dip in one causes a ripple effect. For example, we do a lot of work in the mortgage arena, and with interest rates at a lower level, that area of our business will increase. By selling into a number of areas, there's always a balance."
Kegowicz echoed this sentiment. "Because we're growing rapidly through penetration of other markets we won't feel the effects as much as distributors more dependent on hospitality."
The More Things Change
While the reason for the downturn the hospitality market is experiencing is unprecedented, the downturn itself isn't. More so than many other markets, travel and tourism is dependent upon the economy and discretionary income, and experiences highs and lows regularly.
And in low times, a distributor offering bundled and value-added services that reduce customer costs can gain a competitive advantage.
Global, for example, offers the ability to order over the Web, making it easier to order products such as stationery and business cards—products commonly sold by distributors to hospitality clients.
Its Web-ordering program, said McClean, is particularly advantageous for its tourism clients with more than one location. In addition to facilitating the ordering of stock items, "We can set up a customized but templated program for each location," he said.
A value-added offering that works in many different market segments, McClean noted that its not so much the fact that it's used heavily, but that it's offered. "At the end of the day, most of our clients are still using the traditional ways to order. But we see it as building an electronic fence around them to protect them from the competition. We provide value by keeping customers abreast of the latest developments and encouraging them to use these new tools in addition to our traditional methods."
North American and its Graphics Services Division, says Kegowicz, reaches value-added status by providing a variety of products and bundling them all together for a more efficient supply chain management—a service that helps reduce overall costs.
So, armed with this capability, a down time may be one of a distributor's best times to approach the market.
Explained Kegowicz, "If you can pick up market share when the economy is soft, you'll really stand to gain when the economy strengthens—as your accounts' business grows with the economy you'll benefit as well."
By Misty Byers
- People:
- Graham McClean
- Kegowicz
- Places:
- Lincolnshire, Ill.