Monday, March 26, 2018

Hotel owners to ring in a successful ROI

As the annual budgeting process ends, hotel owners are finalizing the review of their properties' business plans. 

The question for owners, therefore, is how to evaluate the budget. 


Should they approve or reject the numbers and the plans? What should they consider when making a decision?

A meaningful budgeting process aligns the owner’s and operator’s visions for the hotel. It ensures the operator has explored potential avenues to optimise returns and asset value for the hotel and is given the right benchmark for the forthcoming year. It also ensures that the owner’s funds are spent wisely to maximise performance. 

yet owners must look beyond the numbers in successfully negotiating the annual business plan.

Below is a checklist to aid in your review:

What’s the view

What is the current and future market environment? Take a thorough and realistic assessment of recent and upcoming changes in supply and demand, and the potential impact on the local hotel market.

Watch the pitch

Operators with proactive and forward sales and marketing plans outperform those that adopt a reactive approach.The operator should present comprehensive strategies supported by activity plans and targets for each target segment and channel in rooms and other key operating departments. The plan should also include the total production targets by the operator’s channels and branded programs.

Bottoms up

Never underestimate the power of a party: food and beverage (F&B) outlets and banquet are significant profit contributors, but they can also be a drain if not optimized.To help you determine whether an outlet is making or losing money, take a look at the revenue and covers per meal period of every outlet in the hotel for each month of the year. Other key metrics such as revenue per available seat, profit per square metre, covers per employee and utilisation of the meeting space can also be employed.

Mouse in the cheese

Minor operating departments such as spa, telephone, laundry and boutique gallery are often overlooked as they are insignificant enough in times of plenty. Yet during periods of low occupancy, they can bring down profits. They are the mouse in the hotel’s cheese. Owners should consider whether some of the operational functions (e.g. laundry or housekeeping) or underutilised spaces (e.g. retail space, spa) should be outsourced or converted to lower expenses to generate more profit for the hotel.

Managing the pocketbook

Several key expenses that have substantial impact on the operating profits include production (F&B), credit card commissions (admin), payroll (all) and energy costs.Owners should benchmark key expenses and employ ratios such as per occupied room, per cover and per available room to compare with historic results and with other similar hotels (where available).

Productive staff

Owners should request that operators include an estimation of labour hours and headcount (permanent or casual) for all departments for benchmarking. All outsourced or casual labour assumptions should be clearly stated. Revenue per labour hour is a useful metric in many areas, such as rooms cleaned per eight-hour shift or covers per service period for housekeeping and restaurant teams. Given the tight labour market in most hotel markets today, statistics and strategies to improve employee productivity and retention should be presented. The operator should also clearly state in its budget the planned annual salary raise and discretionary bonus assumptions.

Beauty pays

Maintaining the property is integral to keeping its value. An effective preventative maintenance program will prolong the life of the asset and lengthen the cycle between refurbishments of any hotel. Accordingly, owners must seek inclusion of a preventative maintenance plan (including expenses) within the annual maintenance plan and monitor its effectiveness on monthly basis. This will also mitigate the risk for early requests for capital expenditure over and above the furniture, fixtures and equipment (FF&E) reserve.

The big spend

Renovate, refurbish, upgrade. When should they be done? To what extent? Will they really add value?The capital budget should fit within the overall long-term strategic plan and vision for the asset. It should be prepared in light of the existing business opportunities, the long-term goals as well as the estimated life cycle of the asset. Evaluation of inclusions in the FF&E budget should not only depend on meeting the operator’s brand standards. It should also specify whether or not an investment will generate efficiencies, incremental cash flows and meet the required ROI criteria.

Monday, December 11, 2017

Principles for HOTELIER LEADER'S

Continuous learning drives everyone to find a better way, every day. It's not an expense, it's an investment in continuous renewal.

In our careers as hoteliers, we have all learned there are clear differences between "leaders" and "managers." Leaders tend to be more inspirational and often have a vision of where they want to take their organization. The need for leaders is very clear - without their innovation and motivation, all industry and society itself would tend to be rather uninteresting and monotonous. One can look at industry giants from past generations such as Walt Disney, Lord Charles Forte, William Harrah, Conrad Hilton, Howard Johnson, Sol Kerzner, J W Marriott, Rai Bahadur M.S. Oberoi , Cesar Ritz , Ellsworth Statler, Juan Terry Trippe and Kemmons Wilson and recognize their leadership contributions in the evolution of the industry.
While these leaders set their vision in play, every one of them needed other people who could implement the vision through focus, effort and dedication. These people embraced the reality of that vision and primed it to be the success that it became. These people, usually titled " Managers" are the ones often responsible for handling, directing, organizing, monitoring and delivering results through other people. Each of the above global leaders in hospitality had a group of managers who assisted them in immense ways to launch the vision and thereby change the industry.

This is a five part series that will address areas of concern and interest for today's manager.
1. Understanding the Organization
2. Motivating the team
3. Using your management style effectively
4. Communicating with clarity and candor
5. Maintaining relationships throughout the organization

1. Recognize the "corporate culture" of your hotel or organization
Whether one works in the corporate headquarters of an international brand or as a department head in a 75 room hotel, one needs to recognize that there is a corporate culture in place. The size of the organization is not necessarily the determining factor of how that culture may have evolved. Some organizations tend to encourage competition among departments, while others tend to focus more on collaborative efforts. Some allow rumor and conflict as a means of senior management power, while others emphatically address this as a counterproductive approach.
New or long term managers should evaluate their organization and determine how to individually fit in and contribute to the success of the organization. The culture of your organization will likely either generate high staff turnover or it will encourage dedication and tenure of service.

2. Think like an owner
The hotel industry is one that goes through economic cycles like most others, but it frequently has peaks and valleys that may occur within that cycle. Successful managers will be valued when they use their knowledge and expertise to contribute to the organization's long and short term goals by thinking entrepreneurial.

3. Launch and believe in the Mission and Business Plans
Thinking like an owner for a manager often means taking the "vision" and creating practical business plans that the staff can "see" in the form of a "Mission Statement." Examples include marketing plans that are actually used, with monthly reviews of action plans and quarterly updates for the following 12 months. Staffing guides and payroll figures should be checked at last semi-annually to be certain that our hotels are competitive. Forecasting out for the next 6-9 months should become a regular weekly event to identify peaks or valleys. Revenue management tactics should be part of daily activity and, of course, budgets and income statements should be reviewed monthly..

4. Innovate regularly and fairly
"Innovate" can be a frightening word to both owners and managers. Leaders excel at attempting innovation, but managers are sometimes tentative at trying something new.
Successful managers innovate by solid communication throughout the organization about what they are trying to accomplish. If the occupancy is off, there will be a need to reduce payroll, but there are so many creative ways to address this other than automatic layoffs or assigning people based only on seniority. Innovative managers will explain the situation to all staff and try to get their input on ways to reverse the drop. In earlier LESSONS FROM THE FIELD columns, I addressed this specific topic. All of our staff have lives outside of work and may very well be able to suggest and deliver ways to increase business.

5. Understand the reality of the markets - including mergers
The 2000s and continuing through the past 8 years have seen a tremendous consolidation of many brands and management groups into larger organizations. Some are interested in the industry long term, while others may be more focused on growth in real estate values, franchising of under-represented markets or brands. Today's successful manager keeps current on trends, opportunities and market realities. Online research and learning is incredibly easy and affordable today.
The informed manager will be able to be successful in a merger or able to move to another position if the merger is not a logical fit for both parties. The key message here is "the informed manager" - just showing up every day will not lead to long term success.

6. Recognize the reality of politics
Few of use enjoy "office politics" but it is a reality. Many hotels today are owned and some managed by families, which can add an additional variable. On the other hand, many family businesses have outstanding track records in building loyalty and results.
Successful managers deal with politics by being prudent, communicative, tactful, and knowledgeable in their work. This means a balance between anticipating what the organization will need with what you and your area may need. There are only so many resources available and those who are viewed as contributing to the company consistently are likely to be able to avoid the worst of negative politics.

7. Embrace time management and priority setting
The world of today's hotel managers has evolved from activities to results. This means measuring the benefits of those activities, and making priorities from those measurements.
Neither occupancy or average rate alone represent success today, but ignoring the benefits of building one or the other can quickly affect cash flow and potentially staff. Revenue Management strategies means examining the trends, the forecasts and the marketing mix and acting prudently.

8. Be 100% committed to quality - every day
Many of the major brands today are reducing the number of corporate staff conducting pure, on site "inspections" . This does not mean they are lowering standards, but are using the benefits of technology. Services from AAA assessments, guest feedback at TRIP ADVISOR and other sites combined with email guest surveys are providing everyone with the potential of information overload.
Today's successful hotel managers use the first seven points in this article to make their staff aware of what is important. Commitment to quality has to be part of everyone's responsibility.

9. Learn something NEW every week
There are two restaurant "gurus' that I have admired for years. Both Bill Marvin, The Restaurant Doctor"
http://www.restaurantdoctor.com/ and Jim Sullivan , http://www.sullivision.com/
have in person and through their online services constantly remind all of us that we need to continue to learn and improve as managers. Check their sites out for a huge selection of materials and ideas.

10. Work with Budgets and the bottom line
One of the goals of literally all hotels and businesses is to make a profit. There are times when economic cycles make it easy to exceed budgets. In other times, the cycle makes meeting budget a struggle. Record gasoline prices, expensive airline tickets, and business cutbacks in travel are all making profitability a challenge.
On a personal note, I discovered that I learned more about how to effectively manage hotels and watch cash flow in times of economic uncertainty than in good times.

Saturday, February 11, 2017

5 Stars vs. 4 stars: What’s the difference?

Championship winning coaches have a habit of demanding excellence from everyone on their team.

They never tolerate mediocrity from anyone. Incredibly high standards are discussed everyday (yes, everyday). This article, however, is not about sports. Nor is it about AAA ratings, Mobil ratings, or Michelin Guide ratings. It is about what separates very good from exceptional.

I've had the privilege to work with 5-star hotels, restaurants, and spas. I have also worked with 4-star establishments. The difference between the two is like night and day. 4 star properties are reputable and very good. In most cases, the staff knows what they are supposed to do, and they have an idea about what great service is. In a 5 star establishment, excellence is demanded from everyone every day. Mistakes are always reviewed. Follow through is always done.

The best employees are always recognized. Everyone works like they have a personal stake in the property. To put it bluntly, good is never good enough...employees in 5 star properties strive to be perfect all the time. The leadership in 5-star properties always challenge their teams and themselves to get better. Being 5-stars is more about a mindset than it is about adhering to certain standards.

So what are the best ways to implement this 5-star mindset? First, recognize that 5-stars is not about an award or designation. It's about a mentality...a way of working...discipline...and most of all, a healthy disdain for anything mediocre. Whenever you find yourself thinking, "Well that's ok" or "It's not that bad" or "It'll be perfect next time", then you're drifting away from the 5-star mentality. Let me be clear, you don't have to work in a 5-star establishment to have a 5-star mentality. I've seen 3 and 4 star establishments with the 5-star mindset. I've seen grocery stores and airlines with the 5-star mindset as well. 5-stars is about excellence and striving to be world-class in whatever you are doing all the time.

I recently stayed at Accor Luxury brand the Sofitel So Bangkok in Thailand, Sofitel Macau ponte 16, Sofitel Legend  Metropole Hanoi and had a 5-star experience. One of the true testaments of a 5-star experience is how well the staff takes ownership and follows through. Shortly after checking in, I ordered room service. When the order came, the server was refined, yet very personable. She asked me where I would like the table to be set up, and I told her in front of the television. She then asked about my television station preference, turned the channel to the desired station, and placed the remote control right next to me. After uncovering my food and describing each dish, she asked if there was anything further she could do to assist. I had forgotten my lint roller at home, so I asked if the hotel might have one for me. She said that she'd be happy to take care of it, and I would have an update within a half-hour. Less than 15 minutes later, someone was knocking at my door. It was a laundry attendant with a silver tray and 3 lint rollers for me to use. By the way, the attendant also used my name and inquired about further assistance also.


Keep in mind that these were the laundry attendant and the room service server. Those are not the highest paid employees, but their actions created a 5-star experience. 


The true test of a 5-star establishment is not whether they can create a single memorable experience. It's whether they can create memorable experiences repeatedly every day. From a leadership perspective, one of the best ways to do this is to continuously solicit and share examples of memorable experiences. 

Every week, solicit examples from your team, or you can read letters submitted by past guests. Just make sure that you focus on the level of service you want to see repeated. Focusing on excellence will stimulate more excellence. Talking about excellence will stimulate more excellence. Rewarding excellence will stimulate more excellence.

One general manager with 5-star hotel experience put it perfectly... "It is the small, simple, special moments that we create through personal engagement with each guest that they will recall when they return home. To accomplish this type of sustainability we carefully and methodically select our employees, and then continuously train. It's not about the tactical as much as it is about speaking the language of the guest".

So as you begin 2017, become very clear about your vision for service excellence. Share some examples from various industries. Ask your team about the most memorable service they ever received. Most importantly, challenge everyone on your team to take ownership and follow through on guest requests all the time.


5-stars is not an award, it's a declaration to your team that good is not good enough; only excellence will do.