During sustained periods of low economic growth and adverse trading conditions, owners and managers of hotels often regret they had not taken certain business decisions earlier. In these circumstances, their focus tends to be on immediate issues such as cash flow management, avoiding loan defaults and maintaining good relationships with creditors.
These elements are all important but there is a risk that in these challenging situations management may become ineffective, miss opportunities, resist introducing significant change and be too attached to existing operational structures.
The ability to view the business objectively and create a structured recovery plan is critical to maintaining overall confidence and support from key stakeholders.
Business areas that should be objectively assessed include:
Quality of Management
When examining this area of the business, there are several elements common to most management structures which should be considered.
Firstly, if the existing structure is owner operated, then it is advisable to seek an objective third part view on the current structure.
Secondly, it is advisable to assess the management engagement with the business.
Thirdly, assess the level of relevant experience of senior management – is it of a suitable level to guide the hotel through the adverse trading conditions and do the senior management team have an open mind and the flexibility to take on new ideas?
An objective assessment of the existing organisational structure is important to any business and you should consider exploring whether the existing structure is too top heavy and whether all the staff are working at the correct level and under-taking the correct roles.
You could explore the possible opportunities to consolidate positions whilst being wary of damaging the business.
It may also be beneficial to examine whether there are any strong existing staff who could take on additional responsibility. Finally, it is important to understand whether there is correct management of staff at all levels of your business.
Understanding whether the current strategy employed is maximising revenue and whether there are any areas of missed opportunity is an essential element of this exercise.
You should be ready and willing to challenge the existing assumptions and practises and ensure the business is accurately tracking the conversion of enquires and following up on all leads.
There are opportunities to involve your staff to increase revenue by encouraging up-selling and offering incentives for success.
The management/ownership team must be prepared to look objectively at the fees charge by the brand and the added value that is delivered by the brand.
Ask the question “Does my hotel generate enough additional income from the branding to justify the costs?”
It is also important to understand the global reach of the brand and whether this is in line with your objectives.
Optimising this business area is essential for maintaining and driving business through a downturn.
You must be confident that the current format of financial reporting provides useful information and that there is sufficient visibility on key performance indicators.
The analysis and statistics generated should be readily available at all times to you and the senior management team. You will find that by simplifying reporting, the time required is minimised and the usefulness of the information is maximised.
Sustainable cost saving initiatives
It is useful to consider a number of cost saving initiatives which are effective and sustainable. Suggestions include:
- Change the offering to improve profit conversion (e.g. remove magazines from bedrooms, reducing the specification of the breakfast buffet).
- Explore the possibility of consolidating staffing but ensure service and functionality is maintained.
- Employ energy saving strategies and involve the staff. Reward those who perform particularly well.
- Review wastage – marketing materials, stationary, food on buffet, etc
It is worth remembering that if the point of no return has passed and an Insolvency Practioner has been appointed it is just as important to introduce independent specialist hotel management to assist with the stabilisation and running of the business.
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