Five Stages of Decline Before a Hotel Fails

If we catch the signs in one of the early stages, we won't have to go through the pain and loss of other stages

Changes and challenges are inevitable. We have seen the rise and fall of empires and companies throughout history. How they fail is not necessarily because challenges or changes were too great; sometimes it is because managers or people in charge in a given organization can't identify, recognize, circumvent or neutralize the problems, or adapt to external or internal pressures that threaten its long-term survival. (adapted from Weitzel & Jonsson, 1989, p. 94)

Especially now in the hotel industry, we are seeing businesses around us disintegrate as the global situation worsens. If we want to ensure that our own organization lives to see another day, it's important for us to make sure that our eyes are really open, not just 'see' the warning signs that something might be awry, but also act on those signs in a way that will improve things. Weizel and Johnson speak about five stages of organizational decline which I really think can be useful for us if we apply it to our hotels.

Stage 1: Blinded

If we can't see that we have a problem, we are blind. We may be facing problems of decreasing sales, losing clients or even our share of the market may be being diluted due to new players on the scene and the entry of new products. Sometimes we may just not notice what's really going on around us.

Sometimes this blindness may be due to a simple lack of awareness of change, or an inability to understand the significance of what we are actually seeing.

Perhaps there is some glitch happening in the systems that we are using; maybe it's the company's structure that is stopping us from getting the real information that we need. In this part of the world, many foreign managers and executives don't speak the local language, and so are dependent on the filtered message of a select few to communicate business critical information as to what's happening on the ground with the local teams. In this kind of situation, managers may be oblivious to what would otherwise be screaming in their faces.

Stage 2: Inactivity

Sometimes despite knowing that there are problems, we don't actively try to improve the situation. Rather, we hope that 'It will get better over time'. Or maybe we even have the 'It will get worse before it gets better' attitude

Inertia postpones responses, and continued inaction widens the gap between acceptable and actual performance. Quick action by managers, such as downsizing, can reverse the decline.

Stage 3: Faulty Action

This is the stage where we do actually take action, but it's not the right action. One of the most common reasons for this is because we reinforce outdated procedures and strategies. The solution isn't just to 'work harder'. You might need to really change the way that some things are done.

We see this happens a lot at a policy level, where management due to perhaps ego or self-preservation, have a strong commitment to their strategy and structures with little to no flexibility. The attitude that goes with this is 'This is how we do it here' or 'We have already invested in this and we will just have to do it and make it work'

It is human nature to prefer to 'do something' rather than nothing at all, which reminds me of the old practice of 'bloodletting' when someone became ill. It was the only thing they knew how to do at the time, so they did it, despite not really having any evidence whether or not it would work - it's just what people 'did'.

Stage 4: Crisis

The organization moves into the crisis stage when no changes are implemented.

The organization may reach a point where stakeholders withdraw support, the best managers leave, and suppliers hesitate to work with you out of fear of nonpayment.

In regard to hotel brands, we have seen that some brands are unable to attract talent, or they have a very high staff turnover rate, no new clients, and usually bad press all over the place. When this happens, people in the organization feel frustrated, angry, demotivated and going to work each day means managing a general gut feeling of anticipated chaos.

Only a new top-management team can turn around a company in the crisis stage. Major changes in strategy, structure, and culture can save the organization

Stage 5: Dissolution

This is the stage where the organization is haemorrhaging and is just producing too much loss. You lose market share, profitability, personnel, and capital. Creditors are not willing to throw money your way anymore and accessing new capital is near impossible. The damage is beyond recovery. The only real way out is to close down the company.

If it does come to this stage, the most important thing is to manage the dreaded 'HR' deeds in a humane fashion and try to limit other peoples' loss as much as possible.

We hope that understanding the stages of decline outlined in this article can be a helpful tool in your chest. If we catch the signs in one of the early stages, we won't have to go through the pain and loss of other stages.

Let us know of your own experiences of organizational decline and how you solved them. Your experience could help others who are facing the same situation.