How much profit did your hotel make last night?

I’ve been in the hotel industry for over 40 years. I started as a Desk Clerk at the Syracuse Marriott. Even in that time long ago, each morning the General Manager wanted to know “What did we do last night”? The answer to that question was XXX Rooms Sold and $$.$$ ADR.

Decades later, these reports have changed very little. They are the numbers operators need to see and they are important. Are they the only things your managers need to to be aware of on a daily basis? What about Profit? Shouldn’t your managers have some idea where their GOP stands as they make month within the month decisions?

For 5 years we have been working on a new set of predictive analytics that can project GOP based on daily results at an accuracy of over 90% (and it gets better with each day you use it). If you knew on 10th day of the month that you were behind in Profit, would you make different decisions? If you wouldn’t, why not?

Don’t just be a victim of what happens at your hotel. Be predatory about your profit, and take control of your Net Income and Cap Return.

Change your focus, change your Profit. Email today learn more about these Enhanced Daily Reports. It’s easy, it’s painless, it’s automated.

October Tip of the Month-Payroll Burden

On average, participating GROW hotels run a Burden of 19% of Payroll. Hotels with a GOP higher than 40% run a Burden of 18% of Payroll.

Consistency makes Payroll Burden one of the easiest costs to plan for and monitor. This is because these expenses are based on known factors and a re driven by employee wages, number of employees, and benefits you offer.

Separating your Taxes, Benefits, and Supplemental Pay from Salaries & Wages is the key to making sure your costs are in line. You should update your financial reports to reflect these distinct areas so you are able to ensure costs are in line. Some Choice owners have already realized improve in their Worker’s Comp and other Burden Expenses as a result of comparisons.

Payroll Taxes

  • National/State Disability Insurance
  • National Medical Insurance
  • National/State Retirement Contribution
  • National/State Unemployment Insurance (aka: FICA, FUTA, SUTA, etc)

Employee Benefits

  • Automobile Allowance
  • Child Care
  • Contributory Savings Plan
  • Dental Insurance
  • Disability Insurance
  • Expat Benefits
  • Group Life Insurance
  • Housing and Educational
  • Meals
  • Nonunion Insurance
  • Nonunion Pension
  • Profit Sharing
  • Public Subsidized Transportation
  • Stock Benefits
  • Union Insurance/Pension, and Workers’ Compensation Insurance.

Supplemental Pay

  • Personal
  • Severance
  • Sick
  • Holiday
  • Vacation
  • Paid Time Off

September Tip of the Month-Utilities

Information on USALI’s 11th edition classification of Utilities.

The 11th Edition is very specific in its definition for the Utilities Department. The only line items that should be included here are:

  • Electricity
  • Gas
  • Oil
  • Water/Sewer
  • Steam
  • Chilled Water
  • Other Fuels (examples include propane, kerosene, diesel, geothermal, solar, wind)
  • Contract Services (firms that are engaged in energy audits, water reclamation, or other services that reduce energy consumption)

Things that don’t belong under Utilities (and where they belong):
cable (Rms), internet (Info & Tel), garbage (Maint), pest control (Maint).

Managing for Profit – Takes a Wide Focus

Hotel Profitability Improvement To Do List

Click Here to Download the full Hotel Profitability Improvement Checklist

Stacked Coins representing Hotel Profitability Improvement

Highly Profitable Hotels owe their success to managing all the facets of their business at a high rate.  They understand that driving profit means making the right decisions in all areas, and that those decisions will positive impact other facets of the business.  Many operators are great at managing one piece of the pie, like cost control, but still fail to produce high profits.  This failure is due to a lack of focus on other key areas of their hotels performance. 

This download is intended to give you some ideas of actions that owners, managers, and even hourly employees can take to create a complete Profit Focus. 

Market Dynamics

This part of Profit Improvement is about understanding what is going on in your marketplace. 

In order to grow revenue, we need to first know what opportunities exist.  The steps listed in this section are designed to help you create a process where you track the right information about your business, gather information about your competitors, and analyze demand generators.  You can then use this data to come with an action plan to help you maximize profits in any economy.

Competitive Position

A key focus of High Profit Operators is their approach to managing this issue.  All hotels look at the STAR Report, but highly profitable hotels use it as more than a report card. 

True Competitive Positioning involves taking the market data you have gathered and determining how you compare to your competitors in each segment.  

This is the foundation for deciding how much you can grow, what pieces of business to go after, what changes you need to make in your product, and how you will sell against each competitor.

Staffing and amenities

A key to creating sustainable growth in revenue, is determining what services and amenities travellers are looking for in a hotel. 

Adding the right services and amenities can help you acquire new business from competitors, or slow losses of existing business leaving you. 

Market Dynamics and Competitive Position data is how you determine what changes may be needed.  Understanding the types of travellers to your area, where they stay, and why they make that choice will help you add the right services and amenities to get the revenue you want.

Guest Experience

Up to this point we have dealt with figuring out what travelers to your area want in a hotel, what they are willing to pay, what you offer compared to the competition, and how you can best compete in the market.

Even once you determine what the right services and amenities are for your hotel, you need to make sure that you are providing them to you guests on a consistent basis. 

Guest Experience is the measure of how well you are delivering the desired product.   All hotels, no matter how well they are run, receive negative comments.  Hotels with high guest satisfaction scores generate a higher number of positive reviews to offset the negative ones.  This section of the download will help you understand how to manage expectations, deliver great service, and most importantly deal with negative comments.

Rate placement

Determining what rates to sell each night is definitely a component of Rate Placement and Hotel Profitability Improvement, but it there is much more to it than that. 

Highly profitable hotels have detailed plans to manage all of their rates.  They vary rates by booking channel and market segment, based on their overall goals. 

They set rates according to what they are trying to accomplish, not how many rooms they are trying to sell. 

Sales and marketing programs determine their volume strategy, and the rates they list are reflective of their overall revenue strategy. 

Regardless of whether they are upscale or midscale, they use negotiated volume sources to fill a base number of rooms, and then use mass distribution sources (OTA’s, Brand’s, etc.) to sell their remaining rooms.  Rate is not their only means of driving demand.

Room Sales

All hotels sell rooms.  High-profit hotels plan out their room sales, not just take a wait and see what happens attitude.  These hotels track when their busy and slow times historically occur. 

They track it by day of the week, time of year, and market segment.  If their base rooms come from business travelers; they turn off or heavily restrict discounts at times of the year when corporate travelers are most likely to be high.  They don’t wait until reservations volume actually get high, they anticipate the volume will be there and close discounts early.   They open those channels backup only when they know corporate travelers will not be coming.  This allows them to maximize rates when demand for highly rated business is peaking and minimize revenue loss.  

Service and Expense

Few hotels have significant overstaffing or overspending.  However,  it does often occur during peak revenue times, when there is enough revenue to cover up for a lack of solid scheduling and cost controls.  

Highly profitable hotels track and understand the variability of profit at different occupancy points.  They open and close discount channels not just as rooms sold go up and down, but also as they find themselves at points where the next several rooms sold do not add expense, allowing for more profit from even a discount rate.  Managers of these hotels also understand that good expense management comes not from cutting expenses, but from managing the relationship between revenue and expense.

Next Steps

Want to learn more about Hotel Profitability Improvement and similar topics? Check out the rest of our Blog and Learn More or Sign Up for GROW, our free Profitability Growth Tools!