For the past several years I have spoken at Choice’s Annual conference. The overriding theme of those sessions is “The Habits of Highly Profitable Hotels”. The concept that is there are common reports, measurements, and processes used by hotels that achieve high GOP’s. Don’t get me wrong, they start out with making sure they producing the proper revenue, but there is also a way they approach managing their business that drives their daily, weekly, and monthly task list.
With that in mind, I set out to find out how they approached some of the industry standard practices. The idea is pretty simple. The same we can show you a direct line between Labor Cost and GOP, with a very high correlation (labor cost will correctly indicate GOP around 74% of the time), we wanted to see how using certain reports, understanding certain metrics, and performing certain processes had a direct correlation to GOP. For instance, do we find that the frequency with which hotels perform Linen Inventory equates to higher GOP, at the very least, what practices can we say are truly common across high profit operations.
There is a reason these operators ae successful, and there is a reason they value certain processes. Our hope is that we can provide all of our clients’ guidance and reinforcement on the implementing “Profitable Practice. If you are user of the Virtual Operations Analyst, think of this as a “Conversation with ProfitScape residents, on what life is like in Pinnacle City.” (If you don’t what that is, Ask Jim is always on option. It’s over there on the left.)
So with that in mind, we started with our most successful clients and trusted advisors. These are people who include Brand Representatives, Owners, REIT Analyst, Multi-Property Managers, Property Managers, Consultants, my Mom, and some others. The criteria for the baseline group is; Limited Service Hotels had to be running GOP’s above 42%, and Full Service Operators needed to be above 32% GOP.
We found somethings were consistent across the full sample, some were in practice at the vast majority, and some were not as widely adopted. Interestingly enough, the percent of people using a tool was not directly proportionate to its perceived value. Let me try to clear that up. Some of the practices recommended for use by less than half of the group, but the people who recommended ranked it as very important to their financial success. Based on the final results, come of the survey group actually adopted the practice. This is what I love the most about profit driven operators, they are always looking for ways to get better, and never cling to the past just for the sake of believing they are right.
How on earth does this help you!
Where is all this going, where can you find out these “Habits”? Here on www.ciavoa.com, there is an Operations Process Assessment. You can get to it from the “Activities” menu, the “improve Your Operations Quotient” menu, or (well shoot) just click HERE.
This is a simple survey that will ask you about the same items as the survey group. For each item you will indicate: Do you have the process in place (do you do it) is a simple Yes or No. How important is it to you, where you will rank importance on a scale of 1 – 5, and How well do you think you are executing this, which is another scale of 1 – 5.
So let’s look at “Hotel has a PM program in place with checklist performed on all guest rooms 3 times per year”
If you don’t know what PM stands for click on Ask Jim on the left, or ask your Brand Representative. By the by, it means Preventive Maintenance. So if you have a Preventive Maintenance program like the one described, you would check the box for “Do you have this in place?” If you don’t do it, don’t check the box.
Now comes how important is it to you?
If this is something you believe is critical to operating your hotel put a 5. If you do it, but honestly you don’t know why”, then you would rank it as a 1. And so on, and so forth.
Finally, how good are you at the task, or how well do you understand it?
Again this is a 1 to 5 scale. If you have a maintenance person doing PM, but management doesn’t spot check the work, then you are probably at a rank of 3. If you have a PM process, but it does include a checklist of what should be done, you are probably a 2. If you don’t track the completed room numbers and the dates they were completed, then you are likely a 1.
Don’t worry about the ranking scale, answer to the best of your ability. Once you are done you can share your results with your Brand Representative and discuss whether adopting or improving your execution of the actions would pay you benefits. In addition, we will be able to present you with specific articles, links, and exercises to show you how the task in question will improve your profit, and how to properly implement and execute the task.
This could be articles like “How PM improves your REVPAR and reduces your Capital Expense”, a link to a written PM process, or a link to an expert who can help you.
Oh yeah, one last thing, for a low fee ($50.00) we will give several additional resources that will help you to implement the various tasks on the questionnaire. We will score you based on your answers, and show you how your overall score compares to others (and to the high profit survey group), as well as how your answers on individual item compare. As with all of our other comparisons, our goal is to give you the ability to compare your use of the items listed to: Your Brand, Hotels Your Size, Your Geographical Area, etc.
I know this isn’t as direct and exciting as Labor Cost at high profit hotels (<17% of revenue FYI), but this gives you some direct feedback on how high profit hotels operate, and some actions that you can implement. Properly implementing these processes, reports, and measurements WILL have a positive impact on your profit.