Cost per occupied room spreadsheet

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Top 5 Challenges Hoteliers Face Today

Where does it hurt? I spent the first quarter of 2014 doing extensive research on the challenges and frustrations that hotel owners face on a daily basis. The goal was to dig deep, and if I found an area that is “painful” enough, develop a technology solution around it that would make life as a hotelier more enjoyable, productive and profitable. After speaking at length with more than 100 hoteliers and industry experts, I gathered invaluable feedback … and the results may surprise you. Since my questions were intentionally open-ended, the responses ranged from very general to very specific. I kept probing to ensure I was uncovering the deepest challenges, and I recorded each conversation so I could be fully present during each discussion. I then carefully transcribed each conversation and methodically transferred their responses into a detailed spreadsheet, grouping each of the pain areas identified into 15 categories with a rating of 1, 2 or 3 for each pain (1=low, 2=medium, 3=high). Here is an overview of my analysis.

Rank Pain Area % with

this pain (1-3)

Pain Level 1 Metrics/Statistics 66.67% 1.95 2 HR Staffing 21.21% 2.29 3 Franchisors 21.21% 2.14 4 Guest Reviews 21.21% 2.00 5 Labor Costs 18.18% 2.00 6 Lower Sales/Profits 15.15% 2.20 7 Guest Issues Tracking 12.12% 2.75 8 Legal 12.12% 2.00 9 HR Documentation 12.12% 1.50

10 Financing 9.09% 2.00 11 HR Training 9.09% 1.33 12 HR Law 6.06% 2.00 13 OTAs 3.03% 3.00 14 Budgets 3.03% 2.00 15 Marketing 3.03% 2.00

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

-20% 0% 20% 40% 60% 80% 100%

Metrics

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Of the pain points brought to light, here are the top 5: 1. Metrics - Over 66% of the hotel owners I spoke with (2 out of 3) shared that their single largest challenge is keeping up with their business statistics. The most successful hoteliers are not only concerned with their revenues, Occupancy, ADR and RevPAR, but they also calculate key metrics like GOPPAR (Gross Operating Profit Per Available Room), NREVPAR (Net Revenue Per Available Room), cost per occupied room, break- even point, and compare the performance of all properties in their portfolio. To do this, you need to gather and analyze data from each of your Property Management Systems and expenses from your accounting system. Most hoteliers find the cost of installation and monthly service fees for this type of enterprise solution prohibitive. I was shocked to learn that many resort to using complex spreadsheets, manual reports, and spend countless hours pulling all of this together. 2. Human Resources (combined) - The second largest area of challenge is around HR staffing, training and laws, with a combined total of more than 48% of the participants bringing this up. This includes finding, hiring, training and retaining good staff, as well as dealing with HR laws and guidelines for documenting incidents. I'm told that many franchisors do provide good training materials for some positions, but finding them in the sea of resources they provide can be overwhelming. One Independent hotel owner suggested using free videos from industry vendors to help with training. For example, Ecolab provides numerous training videos online for front and back of house, housekeeping, laundry, restrooms, and more. Because of the complexities of HR law, many are forced to pay high consulting fees, or worse, they do without and hope for the best. One alternative that some companies have chosen is leasing their employees. Employee leasing can help relieve some of the hassles and headaches of employee-related paperwork and compliances, payroll processing, and managing benefits. 3. Franchisors - I'm sure you're not surprised that Franchisors made the list with over 21% citing various challenges. The complaints ranged from increased fees, seemingly never ending lists of requirements and expectations, and of course, imbalanced agreements. People have written entire books on franchising, e.g. “Franchising: Is It Fair? How to Negotiate an Equitable Franchise Agreement,” but two key takeaways worth mentioning are:

1) The time to read, understand and negotiate a franchise agreement is BEFORE you sign anything, and 2) There is immense value in building and maintaining good relationships with your Franchisors.

Abiding by all of the set guidelines and staying in contact with the corporate offices will help you maintain a strong and successful relationship. 4. Guest Reviews - Over 21% mentioned online reputation - specifically guest reviews on TripAdvisor, as being a major pain. I ranked it #4 since the pain index was slightly lower than Franchisors. After doing some digging, I found a product called WaveReview that seems to be making some headway in this area. The founder, Geordie Wardman, wrote a great article on How To Manage Your Online Reputation which was published in the April 2014 edition of AAHOA Lodging Business magazine. The WaveReview approach is to help you proactively send a two-question survey to your guests, and if it's positive, the services makes is really easy for the guest to post a (positive) review on TripAdvisor. The more favorable

http://www.ecolab.com/solutions/front-and-back-of-house/cleaning-caddy/training-videos
http://www.amazon.com/gp/product/1576350541/ref=as_li_qf_sp_asin_il_tl?ie=UTF8&camp=1789&creative=9325&creativeASIN=1576350541&linkCode=as2&tag=lodging0e-20
http://aahoalodging.biz/trends-n-issues/How+to+Manage+Your+Online+Reputation/363
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reviews, the higher your rating – and studies have shown that directly results in higher profits. If the guest had a bad experience, the WaveReview’s survey logic will direct the guest's response to a key person you appoint to remedy the situation. This proactive approach is proven to help hoteliers boost favorable reviews and reduce negative ones. Visit them online at www.wavereview.com, and check out their blog, too. Good stuff. 5. Labor Costs - Last, but certainly not least, is controlling labor costs. Over 18% said that analyzing payroll is a regular business practice for them. According to a 2012 PKF Consulting Benchmarking Report, labor costs are the single largest variable expense for hotels and typically range from 30-35% when measured as a percent of total revenue over time. While tedious, comparing each housekeeper’s hours worked to the number of rooms they cleaned is a great way to identify your star employees, and those that need additional supervision. Some owners even calculate the average time spent cleaning stayover vs checkout rooms, and they know, for example, that the average is 18-22 minutes for stayovers and 22-26 for checkouts. If a housekeeper is spending too much time per room, they may be milking the clock; spending too little time, and they may be cutting corners that could lead to a negative guest experience. However, longer per-room cleaning times may also be an indicator that you don’t have sufficient linen supplies. Pars vary by item, but accepted guidelines call for a par of three – one in use, one in the laundry, and one on the shelf. A par of three also allows linen to rest and extend its life. Another way to control labor costs is to develop standard operating staffing guidelines based on needs. Calculate and schedule the support needed based on anticipated arrivals, stayovers, departures, etc., then compare to your payroll to ensure staff hours are being allocated effectively. Tweak, measure, repeat.

Do any of these pains hit home with you? After digesting the various pains so many of you face daily, the answer became obvious ... a cloud-based dashboard can help you manage 3 of the top 5 pains and make life as a hotelier more enjoyable, productive and profitable. In response, I developed a game-changing, cost-effective solution that does all of this and more - LodgingMetrics. Based on feedback from hoteliers like you, LodgingMetrics can save you more than $3,200 per property every month. Stop struggling to keep track of your business the HARD way ... know the health of your portfolio in only minutes per day. You're already tracking all of your statistics - why not plug them into a centralized system with powerful dashboards and reports designed to help you identify and solve problems, make informed decisions, drive profit, and align your company? Would you like to add $38,000 to the bottom line of each of your properties this year? If you're interested in seeing what LodgingMetrics can do for you, schedule a demo at www.LodgingMetrics.com/demo.

http://www.wavereview.com/
http://www.pkfc.com/en/pkfhome/FreeStuff/IndustryReports/January-2012-Hotel-Managers-Control-Labor.aspx
http://www.lodgingmetrics.com/demo
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As I dig more and more into these problems, I'll continue to share what other hoteliers are doing to overcome these pain points. If you have any input, experience or suggestions that others could benefit from, send me an email. I am also seeking input from Industry experts, researching trade publications, forums, LinkedIn groups, etc., and I'll be sure to share my findings with you in my next report.

Jonathan Albano, CHO jonathan@lodgingmetrics.com

linkedin.com/in/jonathanalbano

Jonathan Albano is Founder and CEO of the LodgingMetrics dashboard for hotels and host of the Lodging Leaders Podcast.

For more than 13 years, Jonathan defined Membership Services for AAHOA, one of the fastest-growing organizations in the hospitality industry, with more than 12,500 members owning more than 20,000 hotels that total $128 billion in property value.

After effectively executing 13 national conventions, hundreds of regional trade shows, and attending numerous industry events, Jonathan is recognized by many as a leading hospitality needs expert in bringing owners and vendors together for mutual gain. As Vice President of Membership, he led the Membership, Education & Professional Development, Public Relations & Communications, and Information Technology departments. Jonathan used his engineering background and passion for efficiencies to improve staff productivity and enhanced members' experience by implementing countless technology solutions, designing custom software, and overseeing the development of multiple websites and mobile applications.

mailto:jonathan@lodgingmetrics.com