HOW TO BOOST A HOTEL′S BOTTOM LINE…

Undoubtedly  the company that hired you is expecting you to improve the results the company has had since the time you joined the company, and surely the people who have read my previous writings will say that the answer is “by increasing sales”--and they would be right.  But that is not the only way.

You’ll see that, unless you own or manage a bakery and you have people waiting in line to buy bread hot out of the ovens, your efforts to increase sales will not be become apparent until a full six months later.  Unlike Harry Potter, no one has a magic wand.

So, it is not enough to increase your sales if your costs and expenses remain the same, if your operational structure is unchanged, if your processes are not reviewed and optimized, or if your operating procedures are not re-engineered.

And, as I have mentioned in other writings, reducing costs by laying off staff members does not necessarily mean you are going to improve your bottom line.  So my recommendation would be to take a closer look at your operating, administrative, and commercial processes, searching for any opportunities you may find and eliminating those processes that are not really necessary or are not creating an economic benefit.

I should add that all companies are formed and operate in their own way, so it would be absurd to recommend the same actions for every company.  However, I would like to list a few points that could help you improve some things, and they may be applied according to your own point of view and the type of company you are managing.

ANALYSIS OF PRODUCTIVITY:

First, take into account that reducing your costs and expenses will have to be done gradually so as to not affect your operations.

Second, be aware that an increase in your operating profits could be for less than a digit, or one digit or more,and will increase gradually according to the operation or administration changes you make.

Below are some important points:

In the tourism industry, it is always possible that there will be a drop in hotel occupation, and consequently in general sales.  So right then we must begin searching for opportunities to apply actions that will allow us to reduce our costs and expenses.

In order to avoid surprises, something I would recommend would be to design forms that reflect your productivity ratios on a monthly basis, and to compare them against the previous month in order to spot whether there are differences.

Even though there are various areas you should be looking into, the following are some examples of where reviewing productivity ratios could be the most important:

Analysis of Departmental Productivity:

How many permanent and temporary employees do you have? What is the breakdown? Are they subject to hotel occupation percentages? Or to sales percentages?

How much are additional or related expenses represented in the company payroll?

In the case of sales, do you assign per employee quotas?

 Analysis of Food and Beverage Productivity Costs:

Do you have a purchasing report with your suppliers’ prices? And a month-to-month comparative report?

Have you identified which products have a higher cost and therefore, logically, most influence F&B costs?

Have you reviewed the makeup of your menu?  Do you have the right mix of high-, mid-, and low-cost products?

In the event of a decrease in sales or hotel occupation, do you adjust your operations accordingly?

If you handle an a la carte restaurant, are your products proportioned into single servings before beginning the day?

If you handle buffets, do you make sure that food production gradually tapers off before food service comes to an end?

Analysis of F & B Sales Productivity:

Do you have special promotions for holiday celebrations?

Do you have an internal and external advertising plan?

Do you promote your F & B areas in your business meetings?

Do you have cross-promotions between departments?

 Analysis of Productivity in Office Supply Expenses

Do you keep track of the cost or numbers of printing machine ink cartridges used?

Do you keep track of the cost of photostatic copies by department?

Do you use the intranet system (or at least Outlook) for your requisitions, requests, and forms in general?

Analysis of Housekeeping Productivity: 

If your sales drop during low season, do you assign rooms section by section?

Do you concentrate your linen storerooms into the required areas only?

Do you concentrate your floor storerooms or closets onto some floors only?

 Analysis of Hotel Sales Productivity:

Do you have a monthly sales report?  

If you attend a promotional event, is any kind of review done on your results?

If you attend an event, do you keep a record of the confirmed interviews and how many interviews were carried out?

Do you keep a record of how many attendees were at the event and how many stopped by your stand?

Do you measure your webpage production or that of the OTAS?

Do you measure customer response to your advertising?

What kind of follow up do you have with clients who produce the greatest percentage of your income?

Are your rates established by business segment?

Do you have rates according with your seasons(high,mid,low)block out periods,week vs weekend?

Are your ROH rates restricted?

Analysis of Administrative Productivity:

Cash Flow:

Is there a sufficient lapse of time between your payment and collection periods so as to not overburden your bank accounts?

Do you send your accounts to be collected on as quickly as necessary?

Do you make swaps or exchanges in order to avoid cash drain?

Do your auditing processes include conciliation of bank deposits against your accounting records?

Do you verify whether your company is making frequent or excessive cash purchases?

Did you take advantage of the discounts insurance companies offer for changing coverage?

Warehouses:

Do your purchasing requisitions tally with merchandise receiving?

Have you made sure staff is verifying that the requisitions filled by purchasing, warehouse, and other departments are the same as what is specified on the requisition form?

Have you reduced your inventories as needed?

Energy Sources:

Do you have a program for turning on and off your equipment, major and minor sources of energy use, etc.?

Are you using energy-saving lighting or light fixtures?

Do you have a program for turning on and off your public lighting using photocells?

If you subcontract with external service companies, are they subject to occupation percentages?  Are they really necessary?

Change signs and others to ones that use leds,these are two watts or less,compared to 40 watts for an incandescent signs.

Water heathers,lower temperature settings,fix hot water leaks,use heat recovery systems.

Ligthing:usually is the largest electricity user,and you have to put the first place to look for savings,use :timmers, dimmers,and turn off lights when not needed.

Several of the above suggestions could sound a little routine, and it is easy for us to assume we have everything under control.  Nevertheless, I urge you to at least review your payroll-related expenses.  Surely you will be surprised at the total percentage of your expenses alloted to payroll—and so it could be with the rest of your operating expenses, too.   

Finally:

There is no single, simple solution for increasing operating profits--there are always many conditions and situations that influence your bottom line.  You must analyze your operations, department by department, in order to find opportunities to improve your performance and earnings--and not just in your main areas. 

And if we are speaking in general terms, there are other points you will need to take into account, for example in sales:

PRICES AND RATES:

If you decide to increase your prices or rates, take into consideration that it is not very recommendable to do so if it is not the right time or if there is not much demand for your product or service.  A price or rate increase at the wrong time and without analysis can lead to a drop in sales that is much lower than the percentage increase you have decided to implement, especially if the increase is applied to the wrong market segment. In contrast, reducing your prices and rates could lead to an increase in your sales volume.  Nevertheless, your variable costs such as payroll, energy use, and other costs will significantly increase, causing a decrease in your profits, or even losses.

CAPTIVE MARKETS:

We must wake up and face facts: today there are no captive markets, nor are today’s customers loyal to our products or services. Nowadays, the competition is much more aggressive, and companies that are not prepared for the battle will be shoved out of the market. 

Hotels, restaurants, casinos, cruise ships, entertainment centers, condominiums and other businesses (from the most economical categories to the most upscale) constantly offer their services and advertise through the internet and other resources, and if you do not use the same or better strategies, you will not get your share of the market.

IN CONCLUSION:

Even though you cannot generate earnings overnight, you can start reducing or restructuring your costs and expenses more effectively so that your profit margins increase and provide you greater maneuverability.  I recommend that you focus on the areas that allow you to grow your cash flow at the same time that you reduce petty expenses and curb petty theft. 

Armando Martinez

Cancun, Mexico