The Hotel Financial Coach - 19 September 2017
We are all familiar with the American Sunday ritual of turning left several hundred times, cold beer, BBQ and t-shirts. I have long been a big fan and there is a great story and parallel to financial leadership I want to tell you about. It relates to one of my favorite drivers, Mark Martin.It has just been announced that he will be inducted into the short list NASCAR Hall of Fame recipients in 2017. Funny thing: He has never won the super bowl of the sport, The Daytona 500, and he has never won a season championship either. So, why the Hall of Fame?"To be gritty is to keep putting one foot in front of the other. To be gritty is to hold fast to an interesting and purposeful goal. To be gritty is to invest, day after week after year, in challenging practice. To be gritty is to fall down seven times, and rise eight." ~ Angela Duckworth from her book Grit.Mark's NASCAR career started in 1981 when he participated in only five races, won two poles (qualified fastest and started first) and had one top 5 finish. Pretty good for a rookie in an incredibly competitive sport. The next season he started 30 times had two top 5 finishes. His third season he started 16 times and had one top 5 finish, fourth season: five starts and no top 5's or poles, fifth season: only one start and no results. Things were not looking so good. Five years of going backwards on a young career would be enough to pull the plug, but not for Mark. If there is or will ever be a driver with GRIT it is Mark.For 33 seasons (years) he battled it out. 882 races. 255,000 laps. 40 wins. 271 top 5 finishes. 453 top 10 finishes. 56 poles. Yet no championship and no Daytona 500 win. He finished in second place for the season championship five times. How does someone keep going? Well, he looked at it this way.How can I get a little better with one small accomplishment at a time?That's Mark's motto. He would think all night long before a race: what about the shocks, what about the carbs, the tires, every part of that car. That is a great way to look at anything you are trying to accomplish. What is the next thing--the next little thing--I need to do? Do not be waiting for the BIG thing--look for all the little things--they matter and they produce the big thing. The same is true with your financial leadership, do not look for the magic solution; look to make lots and lots of continuous adjustments."I'm not good at looking in the rearview mirror, I like the windshield." ~ Mark Martin"How would it change my life?" he was asked in a recent interview if he had won the 500 or a championship.He replied, "I'm not bitter, I'm proud of my accomplishments and my career. I worked hard and that's what mattered, I didn't ever stop being a winner."This is it. What has happened in our past is history, it is not an indication of what is ahead. We do ourselves no favor by regurgitating our first 5 seasons.What are you looking at? The rear-view mirror or your windshield. So what if the events of your past are not victories. Don't go there.Keep moving forward and you will find your hall of fame. If you would like a copy of any of the following send me an email at firstname.lastname@example.orgHotel Financial Policy Manual - Inventory of "Sections"Hotel Financial Coach "Services Sheet"F&B Productivity SpreadsheetRooms Productivity Spreadsheet Financial Leadership Recipe F TAR WFlow Thru Cheat SheetVisit my website today for a copy of my guidebookThe Seven Secrets to Create a Financially Engaged Leadership Team in Your Hotelwww.hotelfinancialcoach.com
The Hotel Financial Coach - 12 September 2017
Global is a big word and now that we have your attention I want to define global in a hotel setting. Global refers to all sources of revenue and their corresponding profit picture. A global perspective on revenue management yields the highest possible profit because we understand and apply a BIGGER view to our business.I think the title and buzz word that has our industry locked on "revenue management" is entirely the wrong way to look at it. It is not revenue we are after, it is profit. Revenue is where we start but it is always profit that we end up with. Understanding what happens to the room revenue and resulting profit from different segments is the starting point to a much more effective outcome.We essentially have three types of customers in hotels: leisure, contracted individual and groups. Let's have a look at the profitability profile of each major segment of the rooms business.DO NOT PUT ALL YOUR EGGS IN ONE BASKET. Warren BuffettUnderstanding this lesson and applying it to your hotels "global revenue management" strategy in turn helps you understand your hotel's DNA. Knowing the DNA and how we can affect it is the highest and best use of the profit maximization strategy.Leisure, on the surface, is the most desirable customer in most people's eyes. They normally pay the highest rate and we like to think they spend lots in F&B, parking and the spa. But not so fast on this one. What we need to examine is the cost to get the leisure customer. First, they book through an OTA (online-travel-agent) or the company website and both are very expensive sources of distribution. Typically, 15-20 percent of the rate comes back to the operation as a commission or reservation expense. Second, most leisure customers will use the hotel's facilities, but they also are busy seeing local attractions, including restaurants and bars. Long gone are the days when leisure guests stay put.Third, it is hit and miss with leisure guests and how they treat their room. If it is a multi-occupancy family stay, the housekeeping department better have lots of supplies and staff for service. This segment as a whole is the hardest to service. We do not know when they will arrive but it is often early. We do not know when they will leave but frequently it is a late checkout and they always pay with a credit card that attracts a nice two-plus points of total spend. The last aspect of leisure we need to be aware of is they are predominantly weekend or seasonal customers. I say the leisure guest is at best tied for second place in my preferred customer profit profile.Next up is the contracted individual or, as some hotels describe it, corporate individual traveler. In many hotels, the contracted traveler serves as a base for the rooms business. Hotels pop up all over the place and in many instances, they want to plant themselves close to other businesses and offices. This location effect attracts business travelers to the hotel. Business travelers are a desirable element for hotels to nurture as they have several positive attributes. Generally, they use the hotel throughout the year, less holidays. They typically arrive late, after 6 p.m., and leave early, before 9 a.m.Housekeepers love the corporate guest because usually it is just one customer and he or she uses the room very lightly. The use of the room cannot be overlooked. With renovations needed as early as 5-6 years in some properties, a good mix of corporate business can push the renovation out a year or more.On the distribution side, there are costs but almost always fewer than leisure because there is ability to negotiate the distribution. Corporate customers are normally hotel breakfast customers and quite often you will see them in the hotel bar having a beverage after the business day is over.Another very positive aspect of the corporate customer is he or she has the potential to bring other corporate customers, as well as small to bigger meetings, to your hotel. So, nurture your relationship with these repeat customers. Let's just say the corporate customers are easy. Overall the preferred customer rating I would assign the corporate individual traveler is tied for second. In this case, like baseball, the tie goes to the runner and the runner is the corporate individual traveler.The big cohune in most hotels is groupsAt first glance at your rates, you might conclude that the group average rate is low. Do not stop looking there. When you look at the sheer economics, groups often win the top prize.First, take the distribution costs. If the hotel is well run the group is booked through a rooming list or another low-cost reservation method. No OTAs or central reservations need be used. In effect, this adds 15-20 percent to the group rate. The group may come with a commission from a third party, but many do not, especially if you have your own sales team.Second, consider the group movement. The group arrives, moves in-house and they leave together. This is very desirable from a labor and efficiency perspective. On third base is F&B. Groups meet, eat and drink together at the same time. This effect is the most powerful profit combination. A good group with breakfast, coffee breaks, cocktail receptions and dinner are the perfect profit combination. In demand situations, hotels can place groups perfectly in their need periods. In addition to the room and F&B revenue, groups almost always need AV, display space, drayage and best of all meeting room rental.Third, the cherry on top of the group cake is they almost always pay their invoice with a check. Groups business is the number one desired customer in my book.How does a hotel measure these different sources of business and decide which way to go? The easy answer is you need all of them to be uber successful. Like Warren said, "Do not put all of your eggs in one basket." Having a diversified customer segmentation means you can better manage when one or more segments faces headwinds. If you were running a hotel in the last financial crisis, you know what I mean by customer segment diversification.Knowing what each piece of business is likely to spend and where is key. Most hotels have tools to analyze the spending and the profit to come from that revenue. Global hotel revenue managers are looking at the profitability of each piece of business, weighing the operational challenges with the economic benefits.Hotels are a pure example of the supply and demand principle.If you would like a copy of any of the following send me an email at email@example.comPolicy Inventory OutlineF&B Productivity Spreadsheet Rooms Productivity SpreadsheetFinancial Leadership Recipe F TAR WFlow Thru Cheat SheetVisit my website today for a copy of my guidebookThe Seven Secrets to Create a Financially Engaged Leadership Team in Your Hotelwww.hotelfinancialcoach.com
Hospitality Financial Leadership - How to Set Up and Report Food & Beverage in Your Hotel Financials
The Hotel Financial Coach - 5 September 2017
That is a long title and it is fitting because F&B reporting in your financials is the longest part of your hotel financial reporting process. Every other department except for benefits is a single shot. In F&B you need allocations and a roll up of all outlets into a total F&B profit statement. This is the single biggest area where I see hotels get their statements wrong. In this article, I am going to lay out how to set up your statements and general ledger to provide you strong financial reporting for your food and beverage department.Food and beverage is differentThis is the first thing to grasp. In complete contrast is the rooms department where there is a single revenue and cost structure neatly wrapped up and standing alone. With F&B there are multiple revenue and cost centers.On the revenue side, there are banquets, room service, and other outlets. Each is its own revenue center and a separate department within the general ledger. Inside the revenue centers:FoodLiquorBeerWineMinerals...are types of revenue at a minimum.Revenue from outlets should be recorded by meal period--at a minimum breakfast, lunch, and dinner. Brunch is lunch and depending on the nature of the outlet, you may want to see cover charges, gratuities, and miscellaneous revenue categories. In all the different food and beverage segments capture the number of customers and report the average customers spend. Today it is average customer revenue: total food and beverage sales divided by the number of customers. Within banquets, you will want to see group and local sales separated (see my post titled - Separating Group and Local Sales in Banquets). Additionally, in banquets capture revenue for receptions, coffee breaks, room rental, labor charges, freight/transportation, utilities, gratuities and miscellaneous.After payroll in each outlet, you will want to see the cost of sales next. Cost of sales for food, liquor, beer, wine, and minerals are all separately recorded with the dollars of cost and a percentage. Here is where so many hotels get off the road and into the ditch. Many hotels try to capture the actual cost of sales by outlet. This a noble idea but not at all practical. Allocation is the way to record and distribute the cost of sales. The most efficient way to produce food from a cost of sales and labor point of view is to have a main kitchen, banquet floor kitchen and satellite kitchens for the outlets. The main kitchen prepares the bulk of the base of food: soups, pastry, sauces, butcher, etc. The satellite outlet kitchens finish and assemble the food for their outlet at the time of service. Banquets are a little different as they often prepare the bulk of their protein and vegetables and assemble them en masse.Having one food cost is efficient because the food in the hotel moves around more than the people. I recall a study that we did in one hotel I worked in. It was to study personal individual yogurt container portions. We bought a lot of these. We concluded they were being refrigerated and used in more than 2 dozen different locations. We had one vendor for the yogurt and one invoice. To try and capture this by outlet is sheer madness. The same principle that applies to the yogurt is the same with all dairy, bread, soup base, butchered meat, salad dressings, pastries, etc. If you do not believe me, just stand in your main kitchen by the service elevator and watch the food move.Beverage is different when it comes to recording the cost of salesYou want to see the individual cost of sales by type: liquor vs. beer, etc. Doing this by outlet is much more practical than food, however, I also know from personal experience that it is largely a waste of time and effort. Why?Two reasons: First, the booze moves around your hotel. Transfers between outlets are frequent because the par stocks are a single bottle for most liquors and expensive spirits unless you want a bucket of money sitting in inventory. From my personal experience of trying to track transfers in a large hotel, this is a waste of time. Set up your par stocks, sticker your bottles, do bottle for bottle requisitioning on your spirits, insist on transfer forms and forget about tracking them. Blind controls. P.S. Do not tell anyone what you do with all that paperwork.Second is the secret most people do not get. Your beverage cost does not depend on requisitions, transfers, and potentials. It comes down to the total opening inventory, plus all the purchases for the month, less the closing inventory. NOTHING else you do is in any way part of the calculation. With beverage set all the controls that make sense, but know in the end it comes down to the cost of goods calculation. The basic calculation is also used for your food cost. Everything else is smoke and mirrors.In a large hotel that is doing millions of dollars in F&B sales, allocating the cost of sales based consistently on revenue is the way to go. Having one reliable overall cost of sales is key. Chasing your tail with outlet costs is a waste of valuable resources because, in the end, it is all for not. To capture and allocate the cost of sales have a journal entry that captures your outlet sales by type and total for the entire hotel. Once the cost of goods calculation is done at month end the gross cost by category gets allocated based on revenues by outlet. Everyone knows banquets have a lower cost and fine dining is much higher. To that, I say the efficiency of one cost and allocation far outweighs the alternative. If you want to understand the costs in the outlet, then do the analysis based on the food that enters the cost center by capturing all the food that comes to the outlet via the outlet's kitchen door.Next is payrollI wrote a separate piece on setting up F&B labor using management and hourly positions and having outlet direct payroll as well as allocated departments for the kitchen, stewarding and F&B management. See my post titled - Measuring Labor Productivity - Part II. It explains in detail how to set this up including the use of hours of work.With payroll, it is the same scenario we want to avoid in the hotel like the food chase described above. If you try to assign cooks, cleaners and F&B department management to an outlet, you are either way over staffed or splitting hairs again. The pastry kitchen, gard manager, and butcher are examples of this--every large hotel has these departments in their kitchens. They produce a large part of the base food for the hotel and this includes handling the "brought in products." The most efficient way to produce all of this is in the main kitchen. There might be outlet chefs but in large part food preparation, payroll is all lumped together. Capture all food preparation payroll for the month in an allocated department on your GL and then portion it off based on food revenue mix. The same applies for cleaners and F&B department management.In contrast to the allocation described above, there is direct payroll in each outlet. Direct positions are defined as people contact positions:WaitersBussersHostsOutlet managers, etc.Separate the outlet labor into two buckets: management and hourly.The last area to set up is expenses. The best way to do this is to have the ability to direct expense and have a process in place to allocate expenses. You want to be able to allocate expenses in F&B because much of your efforts are pointed at driving efficiencies. Can you imagine if every outlet had its own china, glassware, and silverware? Can you imagine if each one purchased its own cleaning supplies and paper goods? On the other side, there is a unique single attribute you can capture for outlets. This is where the direct mechanism comes into play. You want to directly expense items like outlet specific entertainment, uniforms, specialty china, etc. Having a choice with each purchase to either expense it directly or allocate it is the way to go. You accomplish this by having expenses accounts set up in your GL by outlet as well as an allocation department that gets zeroed out at month end with a nice allocation based on total outlet revenue to each F&B revenue center. Note there is no transfer to the kitchen or stewarding as they are not a revenue center. Matching principle in action.The final part to lay out is how statements will look. This is where things get exciting. First the order of things. You want a top-level food and beverage consolidated report. Inside your financial reporting system, you will need to design a report that pulls together all the revenues and costs for all F&B departments into one report. Here at glance, you can see the food and beverage profit performance as well as the makeup of the result. You will be able to see the total sales for the entire hotel in each area outlined above. The total cost of food and beverage including the percentages. Payroll for both direct and allocated including hours of work and EFTE's and total productivity. All payroll related benefits in total. Payroll as a percentage of revenues. Total food and beverage expenses by category and viola - food and beverage profit. All this on one page. In addition, you can draw out:Average wage rates by management and hourly, direct and allocatedAverage pricing by meal period per customerTotal expenses by customerF&B revenue per room occupiedF&B revenue per sq. footF&B revenue per hour of workFood and beverage cost per customerIf you include the customers as well as the hours of work, plus a couple of other statistics you can produce an incredibly effective F&B total financial picture for your hotel.The second thing you will see reporting on is each individual outlet performance. Your GL is set up with a department for each outlet and the beauty of this is you only need to design on chart with the appropriate accounts for revenues, cost of goods, payroll, benefits, expense and statistics. Once it is complete for one outlet you simply copy the same chart to the other outlets that have a different department number or dimension. Now each outlet reveals its actual revenues, direct labor, allocated labor, allocated benefits, expenses and outlet profit. The sum of these outlets ties back to the F&B consolidated statement and your top line profit and loss report. Each outlet will also reveal its sales and average pricing by meal period. Labor productivity for direct and allocated. Cost per customer for expenses.The final piece is a cross-view report on your biggest expense in food and beverage: labor. By designing the labor with direct and allocated as well as management and hourly, you can generate a very effective report. This report details the dollars, hours, EFTEs and productivity by outlet, by hourly positions, and management positions.There you have it. This is how you design and report F&B in a hotel in an efficient and practical way.If you would like a copy of any of the following send me an email at firstname.lastname@example.orgPolicy Inventory OutlineF&B Productivity SpreadsheetRooms Productivity Spreadsheet Financial Leadership Recipe F TAR WFlow Thru Cheat SheetVisit my website today for a copy of my guidebookThe Seven Secrets to Create a Financially Engaged Leadership Team in Your HotelCall or write today and arrange for a complimentary discussion on howyou can create a financially engaged leadership team in your hotel.Contact David at (415) 696-9593. Email: email@example.com www.hotelfinancialcoach.com
The Hotel Financial Coach - 29 August 2017
One incredibly challenging aspect of hospitality is the ever-changing technology. In a modern full-service 500-plus room hotel you have more than 50 different systems and apps to manage, integrate and upgrade. Most people do not see the massive amount of technology being used in hospitality and this article is about leadership in the face of that ever-changing landscape.I remember when we upgraded from Micros 4700 posting machines in the front office of my hotel to an IBM System 36. Back in the late 1980s, the PC was just coming into widespread use in hotels but networks and programs were almost nonexistent. The System 36 was the size of a bathtub.In those days, we did not have email; we had Merlin. Merlin was an email type of system but only for people within our company. I still remember my Merlin code, LUN0007. We had just installed a back-office GL and AP system that was PC-based and not on a network. All the GL files and data were on the one PC in the accountant's office and the AP data was on another PC. At month-end, we needed to take the AP data on a disc from one machine to the other. Accounts receivable was an out service. We input data and when we were done the data disc came out of the machine, the courier picked it up and a day later we reviewed the paperwork to see if our fingers made all the right moves.Payroll was the "one write" system where you used a peg board and carbon paper paychecks. We hand wrote each check and simultaneously recorded the details - en masse - via the carbon paper. When we finished we totaled each column of pay and deductions to balance the payroll sheet. Completing approximately 30 of these sheets equaled the hotel bi-weekly payroll. Adding them all up was a pay period journal entry. Talk about complicated and tedious.I also remember every time we upgraded systems just how stressful it was for most people. I vividly remember our accountant Walter keeping a complete manual general ledger while the "system" ran parallel books. He was not asked to keep the manual books but he did so because he did not trust the PC. He is also the same guy who welcomed hockey legend Jean Beliveau in his office for a friendly visit on a regular basis. He was an incredible individual with great knowledge and a wonderful sense of humor.I remember asking him why he kept the paper ledgers and he smiled, took a big puff of his cigarette and said, "One day it will all stop working and I'll still have the score." I have often thought about his comment in that moment. He was near retirement and the thought of change was so frightening he was willing to double his work to try and compensate. Not only did he double his work but, by not trusting the technology, he did not see that it would allow him to do other things.That is always the driver or the road block. It is the driver if we believe our lives and our personal well being are going to improve. It is the road block if we are afraid of our own redundancy and self-worth. He really believed the GL and the PC were against him. Why could it not have waited another three years until he was retired before it had to be installed?Where is the lesson in all of this?I believe Walter suffered in this situation because of a lack of leadership. His leadership, yes, but much greater leadership was missing. It is always what is missing when it comes to change, with technology and the way we embrace the human aspect of change management. What did Walter need in that scenario to successfully navigate the PC's GL system and go from paper to automation?People need to think that change is at least partly their idea. Who asked Walter what he thought and what he would like to do, or what he needed? Quite literally the box arrived, a few days later a technician, and the following week the PC was alive and blinking on a desk in his office. Nobody asked Walter for his thoughts. The decision was made to automate the GL and he was going to change how he worked. It was that simple. But wait a minute; he had over four decades of knowledge and skills.Why didn't anyone stop to make sure he was part of the technology change? He could have liked the idea if it was his idea to start with. How can we get people to like the things we need to change? Answer: Get them to think it is their idea to start with.How do you do that? You can accomplish this most of the time by putting more effort up front before the box arrives. What would Walter have had to experience to get him excited about the new system? What would it have cost and where is the ROI on that?A few years later I experienced a similar event in a completely different way. We were replacing System 36 and moving to a PC-based network (LAN) system with new modules for the GL, AP, AR and income. To get us ready for the change we were sent to Florida for a week of training and I must tell you I was scared before I spent that week in Tampa. I was scared because I did not know what this new system was all about. I could navigate the old system and - as mechanical as it was - I knew each piece and how it all came together.By the end of the week in Tampa I could:See there was something emerging that I could work with.See that some thought had been put into this.Ask lots of questions and do much of the setup of the new system.Be part of the process.Bingo! for change management and technology upgrades.Get your people involved from the get-go."People don't resist change. They resist being changed!" -- Peter SengeIn hotels with so many systems and upgrades to be managed, the act of getting your staff involved is not only necessary it is the silver lining. Many hands make light work, my mother would say.That is the battle cry when embracing technology change in hospitality.If you would like a copy of any of the following, send me an email at firstname.lastname@example.orgPolicy Inventory OutlineF&B Productivity SpreadsheetRooms Productivity SpreadsheetFinancial Leadership Recipe F TAR WFlow Thru Cheat SheetVisit my website today for a copy of my guidebook - The Seven Secrets to Create a Financially Engaged Leadership Team in Your Hotel www.hotelfinancialcoach.com
The Hotel Financial Coach - 22 August 2017
Having a policy manual that covers all the important aspects of your business that relate directly to the financial function is a mission-critical building block for your hotel company. Not too many people would argue with that statement.Why then do most small hotel companies still not have a financial policy manual for its hotels and what do they need to do to create one? In this article, I will lay out why this project is on the backburner, how to construct a policy and a process for getting this project completed in short order.There are two main reasons why the creation and completion of this policy manual are so elusive:One, there is just no time. We are too busy buying hotels, repositioning them and running around from meeting to meeting to sit down and get serious about putting this manual together. Tomorrow is the word. But ultimately, we know tomorrow never comes. Things are changing so fast we do not have time to stop our world long enough to capture what should be the correct governance for our financial function. We know it is an important project but it never really gets to a boiling point, not to the point where we must act.The main reason there is no time is that we do not make the time for it and - let's face it - the COO and CEO are not exactly killing you daily because it is not done. It is kind of like your underwear drawer, out of sight and largely out of mind.Two, there are just too many cooks. That is right, too many opinions and not enough certainty about all the various aspects of the operational minutia of your business. You know what it is like when we get 10 people together to discuss how we should do something. We get the 10 people in a room and we have 12 different ways to do the same thing. Everyone has an "opinion.""It's not about making the right choice. It's about making a choice and making it right." -- J.R. RimThis is where your leadership needs to pivot. You know all the noise and ideas are great but what you need is to leave the conversation at the right point and have concrete direction. With policies, it is important to be brief and concise. Stay away from the procedural aspect of the exercise. If the discussion is on the policy for the bank reconciliation, you do not want to slip into "how to do a bank rec." You do want to state the purpose of the policy and the policy itself.Something like this:PURPOSE - To properly handle, control and process the monthly bank reconciliations.POLICY - All bank accounts are to be reconciled by the 25th calendar day of the following month.The standard reconciliation from an Excel spreadsheet is to be used.A paper copy of the reconciliation is to be produced each month.Review and approval in writing are to be completed by the 25th of each month by the controller.All supporting documentation is to be included with the reconciliation and/or the location referenced for bank statements, outstanding deposits, outstanding checks and all adjusting entries.The reconciliation must be complete and all relevant documents that support the reconciliation must be attached or easily found via reference, i.e., bank statements.The reconciliation is not to be completed by any employee that has bank account signing authority.The reconciliation is not to be completed by anyone who prepares the bank deposit.All outstanding checks are to be reversed once they are 180 days old.All bank statements are to be mailed to the attention of the controller.Here is a simple and straightforward way to get your policy manual project done and won. The motto for this project is "many hands make lite work." Give your project a fun name, like "Mission Possible." Get creative with this. Make it fun.First thing, put together an inventory of policies that need to be incorporated in your manual. Just like you did in college, you are going to start with an outline of major topics to cover:CashInventoryPayment Card Industry ComplianceEtc., Etc., Etc.In all, you want to have 25-40 different sections. Email me and I will send you a copy of my policy inventory outline and you can use it to get started.Once you have the outline, add the names of the policies you want to write and include in the manual. Here is where you can get democratic and get the buy-in up front from others. Strike a policy committee from within your company's structure. Include the relevant individuals you want and make sure you have good representation from the hotels and your corporate office. Eight to 12 people (not including you) is ideal.Once you have the group put together, organize your first call. Prior to the first call, send the list of policy sections to each member. In the email tell the members that you will assign each participant two-three sections of the policy manual and ask them to think ahead which sections they would like to head up. Also, ask them to think about other important sections that might not have made your list. Request these additional section suggestions be emailed back to you before the first call.Convene the first call and just prior to that call send out the latest enhanced inventory of policy sections. Include in the latest inventory of sections a player draft. In this draft selection, you have organized the players by your own last season points rank. The most junior or newest members get to pick their first section just like the major leagues do in sports. Complete the rotation until all the sections have been assigned. This should take about 15-20 minutes top. During this call, you can also review the purpose of the project and lay out a plan for the completion of the project.Once all the sections have been chosen by the players, let them know the next step is for them to populate their sections with policy titles. The call the next week will be to have each team member submit their policy titles by section. One section at a time with no discussion or debate at this point. The goal is to get a first draft list of policy sections and policy titles. The second call should take no longer than 20 minutes. Have each member send you their policy names by section through email after the call.In preparation for the third call, it is your job to get the list of policies consolidated. Here is where you take the lead and review, edit, discard and add policy titles. You communicate back to the individual owner of each section your approved list of policy names for their sections. This requires communication to each member ensuring they agree. They also get to hear from you firsthand on the policy project--especially the method for policy creation. Lay out the "purpose" and the "policy" template, framework and follow-up with each member and send them a policy sample like the one above for "bank reconciliation."This is the most critical step so far.It is an essential step because you want to be very clear with each member on the structure for policy creation. Brief, concise, and not a lengthy procedure. Ensure each member has an opportunity to express their concerns and suggestions. Be open to new ideas and individual concerns. Have approximately 150 policies. If you have too many, consolidate some. It is essential that each team member owns their list of policies.The third call is to share the edited list of policy sections and titles and the sample template. Prior to the call send the final policy sections and policy title list to each member and include their names with each corresponding section. At this point, you are turning over the creation of the policies to your team. You have organized the team, the list, and the standard template. Using the math above with an average of 10 members who have 15 policies each to write you set up a schedule for 15 calls. I suggest you do not allow this to extend beyond 5 months or 22 weeks. With holidays, reporting schedules and other business it is important to lay out a calendar that makes sense. The format of these calls is each member presents one policy to the group by reading it. The members can add their verbal comments, suggestions, and ideas but the debate is limited to five minutes per policy.You call the order of presenters and you are the timekeeper and gatekeeper. This call can be completed in one hour. The call is recorded and all members get the link after the call. Each week each member edits their policy and sends it to you for your final review and approval. If members cannot be on a call they have the responsibility of completing their policy and ensuring that another member will read it into the record. That member is still responsible to edit their policy and send it to you. Just stick to the timetable and week by week you will assemble a great policy manual that your team complied. Ownership and pride in the result in less than 6 months. As the quarterback of this project, you need to make sure each member has their ball and that they stay on track week after week.From this point, you have the makings of a powerful tool.With this power tool policy manual, you can now create an Internal Control Review process. More on creating that in a future article.If you would like a copy of any of the following send me an email at email@example.comPolicy Inventory OutlineF&B Productivity SpreadsheetRooms Productivity SpreadsheetFinancial Leadership Recipe F TAR WFlow Thru Cheat SheetVisit my website today for a copy of my guidebook:The Seven Secrets to Create a Financially Engaged Leadership Team in Your Hotelwww.hotelfinancialcoach.com
The Hotel Financial Coach - 8 August 2017
In food and beverage, you want to get obsessed about a similar measurement like you do in the rooms division. In F&B it is "hours per cover served."Right out of the gate you need to understand the definition of a cover and it has recently changed. A cover is now properly labeled as a "customer" and it is now calculated by dividing the total sales in all food and beverage items by the total number of customers. Before it was only food sales and you divided the number of people who consumed a food item by the total food sales. Now it is the total of warm bodies divided by total F&B sales. See Uniform System of Accounts for the Lodging Industry Eleventh Revised Edition(Hospitality Accounting/Financial Management) for more on this change.With productivity, the measurement is "hours per customer." That is what you want to get obsessed about. Unlike the cover in the rooms division, a "customer" is or can be more challenging to record consistently and correctly than a room sold. Be diligent with the food and beverage service staff to ensure they record their "customers" correctly in your point of sale system. Reviewing point of sale guest checks will tell you very quickly if this is being done properly and consistently. One other tip is to closely review the daily revenue report and look for average covers by meal period that do not make sense.Productivity in food and beverage is also best measured by dividing hours worked by customers served. Operations managers have no control over wages or pricing, but they do have control over schedules and this is where they should focus. The percentages and per cover/customer costs are important but the trump card is "hours per customer served." What you need to see is this measurement in all budgets, forecasts, daily reports and schedules. What is the F&B total productivity and how does it breakdown by outlet? You need stacks in each outlet that can stand on their own and you also want to see the consolidated results.In F&B there is a bigger challenge than rooms with productivity creation. In F&B because of the multiple departmental structures and the allocation of management, food preparation and stewarding, things must be set up a little differently. Again, you are going to need your payroll dictionary and different classifications based on job title.The first delineation is the people in operations who work on the floor vs. behind the scenes. All service staff for an outlet, both management and hourly, are considered "direct." The hourly and management for food preparation, stewarding and F&B administration are considered "allocated." To design stacks in F&B, use the following structure.Direct and allocated both need hourly and management positions:Any Outlet Hourly DirectAll Wait Staff, Host, Bussers, Bartender, Bar Waiter, Cocktail Servers, Sommelier, Supervisors, Bar Backs, Captains, All Floor Guest Facing Non-Management PositionsAny Outlet Hourly AllocatedCooks, Dishwashers, Helpers, Apprentices, Supervisors, Pantry, Attendants, Porters, Cleaners, Chef D'Partie, Butcher, Garden Manager, Secretary, Administrative Assistant, Office ClerkAny Outlet Management DirectOutlet Managers, Outlet Assistant Managers, Maitre D, BeverageManager, Assistant ManagerAny Outlet Management AllocatedExecutive Chef, Sous Chef, Pastry Chef, Outlet Chef, Banquet Chef, All Chef Positions - Executive and Jr.In banquets, there will be several additional hourly and management positions; however, the same hourly and management "allocated" positions will apply. Banquets Hourly DirectAll Wait Staff, Porters, House Person, Bus Persons, Bar Person, Bartender, Banquet Supervisor, Banquet Captain, Banquet Bar Supervisor, Office Coordinator, Payroll Coordinator, Revenue Clerk, Host, Hostess, Cashier, Banquet Secretary, Catering Coordinator, Administrative Assistant Banquets Management DirectDirector of Banquets, Assistant Director of Banquets, Banquet Manager, Assistant Banquet Managers, Conference Services Managers, Assistant Conference Services Managers, Catering Managers, Assistant Catering ManagersThe results of these groupings and classifications are well worth the effort. On the chart below see an example of single outlet productivity; banquets would also look the same:In food and beverage, you cannot get away from the allocation game. In your hotel, the most efficient way to manage your food cost and food labor is to have one main kitchen that prepares cold food, sauces, soups, pastries, banquets, and butchers the meat, etc. Then outlet kitchens prepare the final product, usually the protein through a combination of resources from the main kitchen's efforts and their own.The same idea is applied to stewarding and administration in the F&B division. Hotels that try to capture all the costs for food and labor directly for each outlet are ultimately not successful. They either spend too much time creating the separation and resulting duplication of efforts that the main kitchen scenario provides, or they pretend that they can capture the actual costs. Either way allocations of labor and cost of goods are inevitable.In the end the allocation method is ultimately the most efficient way to manage the labor in food and beverage. What you need is an effective way to measure and manage in food and beverage. The "direct and allocated/management and hourly" is the way to go.Inside the F&B consolidate statement you can see the individual outlet results, as well as the total for the allocated areas.What you want to see in your daily operation is productivity. Have a daily labor analysis produced so you can track and monitor the productivity. Include these summaries in the financial statements each month. From that analysis, you can see where the hotel is winning with productivity and where the hotel is not.In the scenario above for the month of May, I see the following:Banquets had a great month and are ahead of budget and last year, both hourly and management productivity is better with lower volumes of customers, well done.Room service had a poor result for May, lower volumes and more hours worked. This requires attention. What are we going to do about this ongoing challenge we have? How else can we provide our guests F&B services?The all-day restaurant also had a challenging month with the volume of customers flat to last year and below budget. I need to ensure my floor managers are adjusting the schedule where possible, sending people home early where possible. I need to emphasize again that every hour counts.The results in fine dining were mixed with an improvement over last year but below budget.Sundays are the problem and we need to look again at our need to be open on Sunday.Food prep is creeping up and it appears that little adjusting is being done. The new chef is more concerned with keeping his cooks happy with their hours than he is managing his productivity. I need to remind her again that labor productivity targets are part of her core responsibilities.The information segregation and the framework outlined above give you a lens to see what is happening in your operation. It is up to you to use it and to manage the team and move in the direction of incremental improvement. To get a copy of my F&B Productivity spreadsheet send me an email firstname.lastname@example.orgTo get a copy of my Rooms Productivity spreadsheet send me an email email@example.comTo get a copy of my financial leadership recipe F TAR W send me an email firstname.lastname@example.orgTo get a copy of my Flow Thru cheat sheet send me an email email@example.comVisit my website today for a copy of my guidebook: The Seven Secrets to Create a Financially Engaged Leadership Team in Your Hotel www.hotelfinancialcoach.comCall or write today and arrange for a complimentary discussion on how you can create a financially engaged leadership team in your hotel.
The Hotel Financial Coach - 1 August 2017
Budget season is fast approaching and I am writing this article to highlight some areas to look at when you are reviewing a hotel financial budget. Maybe you want to make sure you have all your ducks in a row before you submit your 2018 numbers to the corporate office or perhaps you are the one doing the review. This article will give you some ideas of what you need for your review, what to look for and where to find it.The only thing we know for sure about the budget is, it's wrong. ~ AnonymousBudgeting is first and foremost a business plan with numbers. It is the culmination of all the wants, wishes, aspirations and ideas laid out in nauseating detail for the coming year. Budgeting is also a game played by managers, executives and owners at all levels. Under promise and over deliver is the hotel's game because their incentives are linked to the budget. Missing the GOP (Gross Operating Profit) target for the year in the hotel is a big deal. Miss it two years in a row and--depending on what is in your management agreement--your brand might be out in the street.Having a good budget, one that is a stretch but not too much of a stretch, is what you want to have and in order to get it you need to know what to look for.If you do not have a map any road will take you where you want to go. ~ AnonymousThe first thing you want to have for review when looking at the budget is a P&L style report that lays out the following from left to right: next year's budget, the current year's latest re-forecast, the current budget and last year's actual. In addition, you will want detailed level data on the prior three-five years. What have the trends been on occupancy, rate, revpar, average F&B customer spend, expenses per department, productivity, average wage rates and year-over-year flow-thru in rooms, F&B, non-operating department and GOP? Your system should be able to produce this as long as you have the actual history under your belt. Take the time to prepare this report in advance of your review schedule and it will make life much, much easier.Something that looks like this example:xxxNext, you want to examine the YTD actual performance relative to the current budget and last year. This is where you will find the most common bait and switch routine coming from many of your constituents. Let's say you are reviewing budgets in mid-September. You will need the YTD August P&L with a detailed comparison to YTD last year and YTD budget. In this imagined scenario, the hotel is doing well in relation to last year with revenues up YTD August by $1 million and GOP is up $600K. The same kind of comparison shows up relative to the current year's budget. That is the bait.Now here comes the switchWhen you look at the year-end rolling forecast for the current full year and compare that to a full year, last year and the full budget, you will often find the prosperity you have seen YTD stop or, even worse, it will reverse. This is the sandbagger's biggest opportunity to tell his or her tales of woe. In defense of poor performance in the last four months of the year, you will hear amazing stories about one-time windfalls last year, events and business that were a once-in-a-lifetime deal, rebates and credits galore last year. In defense of the slippage to the current year's budget at year end, you will hear whining about expense timing, cleaning projects and lite accruals. These are the sandbaggers' stories and you have been warned.One sure-fire way to throw some water on the budgeting sandbaggers and their YTD performance vs. the Y-End numbers is to have last year's scenario laid out. What was their story at budget time last year relative to that year's performance and how did they finish the year? Sandbagging the budget is an annual event and it can be well worth the effort. If a sandbagger can downplay the last quarter's performance by $200K in GOP, next year's budget target is at least $200K less. A great way to deter the sandbagger is a final review of the budget mid-January. Most hotels can swing this with their brand and ownership should insist on it.Another tool you want at the ready is your group rooms report. What is the pace? In many hotels groups form the base of business. Understanding the group rooms picture is critical to the budgeting process. Where are you YTD with our pickup for next year, where were you last year at the same time? What is the year end crossover group rooms on the book's target for this hotel and how far do you have to go to get there? How does this compare to last year? What are the definite and tentative numbers each month? What are the associated rooms rates for each month? What about the banquet spend with minimums required? Where are the opportunities to yield and where are the need periods? What is the forecast for citywide events? You will want to have this group rooms report checked against the reservation/sales system. Sandbagging the group rooms is not uncommon. One way to test this is to look at last year's performance in the final quarter with the production of group rooms on the books. Hotels are notorious for busting the dam on group contracts going firm in the final quarter. Do not be sold on the story that next year's group performance is down. Dig into the details.Corporate room nights serve to provide base as well in many hotels. A corporate rooms production analysis is what you need to see. Who are the top 20 contracts? What was their production last year and YTD this year? What are the rates and what is the strategy for next year? Who are the top performers? Who is not producing their committed room nights? Who has last room availability? Who do you need to be aggressive on the rate with?Having a firm strategy on your corporate rooms business is a key component in many hotels. Adjusting this base up where possible in a market that is going up is what you want to look for. If your market is tight or retracting, preserving this base is very important.An incredibly valuable piece of information you want at the ready is the report that details all the corporate and regional brand related expenses that are included in the budget. The programs must be laid out along with a comparison to last year's actual spend and the current Y-End forecast by individual program. If you are reviewing a branded, managed hotel this report is critical. Brands sell management services. Brands endeavor to mandate programs and they want owners to pay. What is baked into your operating budget that the brand will end up charging you back for? Do these programs make sense? How much was in last year's budget by program and how much is the forecast spend for the current year? What programs are optional and which optional ones are included in the budget? Which programs are mandatory, how much are they and why?Understanding what is layered into your budget that comes from your brand is mission critical if you are an owner. If you manage the hotel you will want to have a firm handle on this as well. In many scenarios money is budgeted and never spent on corporate programs. Hotels love to include budget items per the brand's direction and sometimes when the rubber hits the road the hotel will not spend that money. It is a great way to inflate the budget and use the reason that it is a corporate program.In any hotel budget, the biggest cost is labor. To review any hotel labor budget, you need to be able to measure productivity. Is next year's budgeted productivity better that this year's performance? You better hope so. Why would anyone present a budget for their hotel and project lower labor productivity? How many rooms will we sell next year and how many hours of labor in the rooms department? How many customers will you serve in F&B and how many hours of labor will it take to serve each one? How many EFTEs do you have in each non-operating department and how does this compare to the current year and last year? Hotels are in the habit of adding bodies. If all you are looking at in your budget is dollars of payroll without the corresponding hourly statistics, EFTEs and productivity measurements, you are flying by the seat of your pants. Even if these stats are not included in your budget and actual financial statements, they are easily found and a supporting analysis of the budgeted labor with productivity is a must. If you need to review and ultimately approve a budget, you need to understand the productivity.On the other side of productivity, look at the average wage rates. Do they line up with reality? What is the plan for wage movement next year? Union contracts, local wage laws. It is all there. You just need to know what to ask for and where to find it.REVPAR index is another key document. What is the properties index YTD and last year? What is the relationship between rate and occupancy, groups and leisure? How does this relate to the 2018 growth projections for the hotel and the hotel's current REVPAR index position? Are we talking share or are we giving share? Are we gaining or losing share from occupancy or rate, groups or leisure? You should see a direct correlation between the hotel's strategy and the REVPAR index predictions for your market. The second report you will want to see and have a detailed look at is the supply and demand index for your market. What is the picture for the total market and how does the hotels position correspond: historically in the past three-five years, this year, next year and beyond? This report should also include new inventory for planned new hotels in the market place. You will want to see a picture that shows your hotel making gains in its marketplace. If not, then what are you doing to fix this?The staffing guide is another must-have document. What are the fixed and variable positions in the hotel? You will want to see this report laid out for the entire operation, both operating and non-operating departments. Look at a department like the front office and see the staffing formula laid out each day of the year. Look at an example: At the desk, you operate 7-24 and the first step is start with the fixed positions you require daily. Then add the incremental staff and hours needed to handle the arrivals, departures and occupancy at the different levels, separate group and leisure rooms. In this example, you have a 300-room hotel. You need two overnight staff regardless of occupancy and three AM and four PM staffs. That is your fixed front office staffing. After 100 arrivals, you need to add a fourth PM. After 165 arrivals, you need a fifth PM. With your AM staffs, you only need a fourth after 100 departures. With your overnights, you only need a third when weekend occupancy is above 200 rooms for additional security. A detailed staffing guide should be developed and the daily activity in your hotel serves to populate the drivers and, "Voila!" you have a powerful tool!Expenses need to be zero based. The biggest sin I see is hotels presenting a budget with low-balled revenues and poor flow thru. Depending on your market and its current performance and its historical performance you should see a picture emerge for next year well before you prepare the budget. An old GM of mine was fond of doing the budget in 5 minutes. He would know the historical annual revenue gains for the past three years, he understood the current market conditions and that no one knows what will happen tomorrow.He would say something like this, "In the last three years we have grown the top on average 7 percent each year and our flow to GOP over the same period has been 56 percent. So, let's not waste any time here. Next year I want to see 6.5 percent revenue gain and a 50 percent flow to GOP and let's let corporate and the owners tell us where we can find more."Simple, really: Produce a reasonable positive picture based on good performance and good overall management. Why would you produce a dog and try and sell it? So many hotels make this mistake on their first-round budget. Corporate and regional teams usually find these and get them in shape before they are presented to owners.More than anything your budget speaks to your ability to manage. How you manage the sales team, catering and banquets, the entire operation and ultimately deliver the GOP. If you do a budget and it lacks growth and/or flow, this simply points out where you need to get to work.Do not present your problems, present your solutions.To get a copy of my Rooms Productivity spreadsheet send me an email firstname.lastname@example.orgTo get a copy of my financial leadership recipe F TAR W send me an email email@example.comTo get a copy of my Flow Thru cheat sheet send me an email firstname.lastname@example.orgVisit my website today for a copy of my guidebook: The Seven Secrets to Create a Financially Engaged Leadership Team in Your Hotel (www.hotelfinancialcoach.com)
The Hotel Financial Coach - 26 July 2017
Stupid sounds like a harsh word. Webster's dictionary defines stupid as, "Given to unintelligent decisions or acts," along with a few other more colorful options.Outsourcing your hotel accounting is an unintelligent move, that is my opinion and I am going to make my case right here. When I refer to outsourcing, I am talking about a third party provider, not a centralized function.Any good decision comes down to more pros than cons I often work with clients on decisions and we often make two lists. Good things that can come from a decision and how we can amplify them, then the bad things that could and would happen and how we can minimize them. Here goes my list on outsourcing your hotel accounting. Rather than two lists I will alternate between pro and con.One good thing that comes from outsourcing is being trendy. Many brands are doing it and it is the trendy thing to do. I spoke with a CFO recently and he explained that the board had decided on outsourcing."Why would they do that?" I asked. He smiled a little and said, "We need to keep up with our competition, other brands are outsourcing so we are going to as well."Inside his smile I detected a slight amount of political discouragement. My take on this exchange: It is a political thing and the CFO was going to pick his battles. This was not going to be one of them. Why should he care? His company does not own the hotels; they simply manage them for someone else. He knows ultimately if there is a service problem it falls on the hotel's lap, not the management company's problem really.In business, especially one that has multiple stakeholders, the pressure to keep up with the Jones's is stiff. Companies feel compelled to move, to innovate, and sometimes these changes are not in their best interest.There is a quote that speaks very nicely to this, "If you enter a market and don't know what to do, watch what everyone else is doing, and then do the opposite. The majority is almost always wrong. " ~ Earl NightingaleA negative aspect of outsourcing is the reduced level of service. Good service in a hotel is everything, not only for external guests, but also for internal guests. In a full-service hotel, the accounting department provides a long list of services: receivables, payables, payroll, revenue control, cash management, systems oversight, audit, food and beverage controls, purchasing, receiving, general accounting and budget/forecasting to name but a few. When a hotel outsources they typically outsource payables, some parts of purchasing, general accounting, sometimes accounts receivable and almost always the daily audit and revenue functions.Where do you lose the service? Hotels are a high-volume transaction retail business. Every day a hotel sells hundreds or thousands of rooms to many different customer segments. In addition, it services thousands of food and beverage customers. At the heart of all of this is understanding the sales and segments, pricing and the corresponding settlements. The service a good accounting department provides is to keep it all together, find the errors, correct them and, most importantly, work with the operating departments to get it right.These functions in a hotel are like filters, collecting all the errors and working with operations to get them back on track. A good AP clerk is worth their weight in gold. A revenue auditor is equally as valuable. What these functions ultimately provide is a service well worth having. If it is outsourced, it is hidden over there - the volume turned way down. This in-your-face service provided by a whining accounting clerk is an extremely valuable business process that ensures a smoother and more profitable outcome.I said I was going to alternate between the pros and cons. The second pro is cost savings. Typically, when outsourcing, a few colleagues with lots of tenure are gathered up and, depending on the jurisdiction, and whether union or not, they are bought out. Usually the hotel will lose the assistant controller or accountant as well. From this point on their functions are performed in large by the outsourced vendor for a monthly fee. From the numbers I have seen, the costs savings in the short run are completely upside down - in other words - no savings. To get the outsourcing going there is usually an upfront one-time fee. In the longer-term picture, the savings are forecast yet they are extremely slim. We all know what happens with cost creep. Before we know it, we have added something that looks almost exactly like what we used to have. Water will always find the lowest point.I spoke with a very experienced controller recently that had her AP outsourced as part of their project. She said there were several very negative aspects. Department heads and managers hate the additional paperwork they are given, namely scanning documents. The hotel loses track of so many invoices so they start logging the scans and cross referencing these with the outsourced company. Cost creep. Vendors are up in arms. Payments are not timely and several vendors had demanded payment or no delivery. A hotel without vendor credit is not pretty.She also expressed concerns about USE tax being improperly assessed. There was also confusion on her part with the paper. The hotel still must maintain the paper for the state and municipal audits and with the outsourced company it is a paperless system. What will happen when the auditors show up and ask for documents? The last thing she said was the most damning. The hotel had been late paying its retail taxes and had been assessed a fine.Brain DrainAnother very negative result of outsourcing the accounting function is brain drain and the resulting challenge it creates in succession planning. If much of the internal accounting process is carved out and sent it to a third party, the hotel loses the development people/positron aspects that propel careers in hospitality finance and accounting. If there are no entry level positions, no revenue auditor and no middle management, then how does a hotel grow controllers and directors of finance? I have asked this question many times and I still do not have an answer. This will bite our industry hard.If hotel accounting departments are going to take an ax to the development pipeline, they are not going to have financial leaders that understand the hotel business and all its insane nuances. I have seen several attempts to bring in financial leaders from other industries to lead hotel accounting functions and the rate of failure is extremely high. They simply do not get the culture, the work ethic and the spirit of the hotel business.Hotels are grinders. It is not a 9-5 white collar accounting gig. It is a full on heavy metal jacket, boogie until you puke, get back up again and start all over love affair with the biz. If not properly trained, super conditioned, a bit little crazy and slightly brainwashed with the Kool Aid, an accountant is not going to make it. He or she will not make it through those crazy month ends, a four-month budget season, never-ending meetings, surprise audits from friends at corporate, the GM who needs a financial babysitter, the revolving door of department managers and assistants to straighten out, not to mention the relatively small size of the paycheck. Hospitality already has a huge challenge finding, developing and retaining financial professionals and now the already wobbly legs have been taken right out from underneath it. What are people thinking?An old GM of mine had a saying that he would fire at us from time to time:"I can tell you people have a lot of common sense, because you're not using any!"I think this would apply here.On the positive side, another idea about outsourcing accounting is the creation of a different kind of finance and accounting leader; one that is not focused on the "accounting" but one that is a business manager, thought leader and people developer. Having a leader with a strong knowledge of the financial mechanics that goes on under the deck of the ship, helping to steer the other non-financial managers toward greater levels of their own business understanding and success, is a good idea. This in theory is exactly what I think hotels should be doing - developing the business skills of the non-financial managers. The challenge with this idea in the outsourcing scenario follows:Modern day hotel accounting is a huge bunch of systems, numbers, transactions and entries. Every time an employee sells something, schedules someone, buys something, cooks something, turns on the lights, takes a payment, collects sales tax, gives credit, checks in a room, receives goods, uses something, takes vacation, serves someone, cleans a room, checks out a room, takes a reservation, makes coffee, pours a drink, fixes a sink - I could fill the page. These "things" I just listed result in transactions that need to be captured, kept, managed, budgeted, forecast, measured and ultimately reported on. That is the mega city-sized mess that lies under the deck of the ship, tucked away from sight. If that mess is not managed extremely well, then your financial manager is dead on arrival. He or she will have less time to be the leader you want.It is a given that the re-coding and management of all the processes and systems used in the hotel need to be right. The data that comes from these processes is what must be captured, measured and reported. The reporting of this information drives the business and decision-making process. The fact is these systems and processes are always in need of constant and diligent attention. There is always someone new to train.There is a never-ending lineup of systems to upgrade to replace the old ones - hotels are always playing catch up. The staff and positions that no longer exist really handicap efforts to keep it all organized and working properly. In hospitality, the hotel prospers on service propelled by good information and communication. This means training and the training, and most importantly the follow up, needs to be provided by people. Colleagues in the operating departments need constant oversight and this boils down to finding out what is wrong with the data and communicating back to these areas. When there is no one to attend the next front office communication meeting to explain the proper way to do a rebate, no one to follow up on the invoices that do not match the purchase orders, and no one to chase down the waiter who did not balance his remittance properly, the hotel is really sunk.I know what you are thinking. You have outsourced all the mundane stuff so now the financial leader and his or her downsized team can handle all the training and follow up communication. No. They Can't.They cannot do this because they now spend just as much time in meetings, more time corresponding with a revolving door of associates of the third party, and usually this means it is already tomorrow where they are. Not to mention a large portion of the remaining staff now spend most of their time on the mindless task of scanning documents.Documents that someone used to read, check and make sure they were right before they were paid or entered in the books.I said I would list the pros and cons. In this case the pros are very light and the cons are a big deal but only if you have your attention on the details. It is easy to overlook the mess if you are not below deck.If you are thinking of outsourcing your accounting, think again. It is not a good decision. It will cost you dearly and your investment will suffer. If you have already outsourced and you have seen or heard some of what I have written about, then you need to believe it. Change the course today.It is never too late to say uncle! What are you waiting for?To get a copy of my Rooms Productivity spreadsheet send me an email email@example.comTo get a copy of my financial leadership recipe F TAR W send me an email firstname.lastname@example.orgTo get a copy of my Flow Thru cheat sheet send me an email email@example.comVisit my website today for a copy of my guidebook: The Seven Secrets to Create a Financially Engaged Leadership Team in Your Hotel
The Hotel Financial Coach - 17 July 2017
"If you want to be more than a flash in the pan, you must be prepared to focus on the long term. We will learn that though we think big, we must act and live small to accomplish what we seek. Because we will be action and education focused, and forgo validation and status in their pursuit, our ambition will not be grandiose but iterative--one foot in front of the other, learning and growing and putting in the time." Ryan Holidays - Ego is the EnemyIn the financial leaders' world, ego will not serve them well. Ego will put distance between them and their audience. Ego would have a leader being the star of the show and there would only be one act in the play.A secret weapon: Knowing how to get non-financial leaders to produce amazing results through their creativity and leadership support to manufacture this product on a continuous stream.If one succumbs to ego they take themselves out of the game as if they were once a star but now they are too important to engage and really find out what the other leaders need. Being ego driven means the financial leader is hiding out. He or she wears the ego like a thin suit of armor to deflect any legitimate acknowledgement that maybe they do not have all the answers after all. Ego serves to tell them they are too important to go to that level of engagement. This is a big mistake because they miss seeing what is really going on and miss the opportunity to change it. "Can't fix what we can't see."Einstein said, "More the knowledge lesser the ego, lesser the knowledge more the ego."This quote really sums things up quite well. Egotistical people really lack the knowledge because they have shut down. They are closed for business. They cannot learn and grow if they are shut down. The game is an incremental day in day out, conversation after conversation, idea after idea, support after support, financial leadership is a relationship-building deposit-based enterprise. Leaders out-give constituents. That is what makes them tick successfully. Ego has no place in this environment.I once worked with a financial leader who made it a point and even verbalized the fact that he only spoke with members of the executive team. He was too important to speak to anyone else. According to him the idea of communicating with anyone else was a waste of time and beneath him.Well, the truth was he was hiding out. He was not comfortable communicating with anyone who might challenge his way of seeing the world of his business. What a waste to leave out so many inputs that are there to help shape and grow a vibrant, continually evolving and growing business landscape!The other interesting aspect of this example is the chief executive allowed and even condoned this behavior. Information is the currency of leadership. If leaders want more currency, they need to embrace leadership practices that allow for its accumulation.Ego and hiding out will not produce more currency.What are egotistical people afraid of? They are afraid of the very real possibility that they do not have all the answers, some of the answers, or even the answer. Rather than giving up their fake self-image they hold onto it and believe in it. Ego is not who they really are and inside they know this is the case. Yet it is too scary to let go, or seemingly to scary. However, ego is only a habit. This is the good news. Let go and have that next conversation and acknowledge that maybe "I don't know everything and I'm willing to learn."If you want a copy of my Rooms Productivity spreadsheet send me an email firstname.lastname@example.orgTo get a copy of my financial leadership recipe F TAR W send me an email email@example.comTo get a copy of my Flow Thru cheat sheet send me an email firstname.lastname@example.orgVisit my website today for a copy of my guidebookThe Seven Secrets to Create a Financially Engaged Leadership Team in Your Hotelwww.hotelfinancialcoach.com
The Hotel Financial Coach - 6 July 2017
In hospitality, the measurement and management of productivity is hit and miss and miss again. Time and time again hotels are using ineffective measures to try and capture labor productivity measurements.It is important from the beginning to establish the goals for measuring productivity in your operations. This article will focus on rooms and Part 2 will be F&B.The goal in measuring productivity in the rooms division is to see, monitor and ultimately improve on the number of hours of work it takes to service a room. The expression to use is "hours per room occupied."Hours worked divided by the number of rooms sold. This labor productivity statistic is the most important tool available to manage your biggest expense in the rooms division.If you were making cars, you would want to know and continually improve on how many hours and minutes of labor it takes to make a car. Regarding rooms, labor comes down to how many hours it takes to service one room. You want to see this at the total rooms level as well as how it stacks up.The "rooms stack" is best laid out with the following sub totals: front office, housekeeping, room attendants, reservations and bell/door. These categories must be separate to see where there are productivity wins and challenges. To be able to see labor categories separately, use proper departments and job codes to fall into the different stacks. In addition to the separation of the stacks, you need to know the difference between hourly and management positions in each stack.To do this effectively and consistently there must be a payroll dictionary. Establishing a consistent way to segregate labor is not difficult. Start by defining the difference between management and hourly positions. For consistency, ignore salaried vs. hourly and union vs. nonunion. These are ignored because they differ greatly from location to location. Instead focus on job title. The word manager is critical. If the word manager or higher appears in the title, they fall into the management category. If supervisor or a lower title appears in the job title, they fall into the hourly category. Here is an example for "front office." It is important to recognize that management or hourly terminology is only a way to organize data and is not an indication of any regard.Front Office Stack"Front Office Hourly" - Front Office Clerks, Reception Clerks, Front Office Cashiers, Front Office Supervisor, Reception Supervisors, Night Audit Clerks, Secretary, Admin Assistant"Front Office Management" - Front Office Manager, Reception Manager, Assistant Manager, Front Office Director, Rooms Division Director, Night Manager & Assistant Night Mgr.Repeat the same exercise and organize rooms department and positions into the different stacks and by the "hourly and management" classifications.Once the classifications are established, track the hours worked in each stack. In turn, divide the hours worked in each stack by the total number of rooms sold for the entire hotel: for 1 day, 1 month or 1 year. Anytime you can capture the number of units of labor (hours of labor) it takes to sell the rooms and divide this by the number of units sold, you have rock solid data.The "hours per room occupied" measurement can be used everywhere. Starting with the annual budget. You will want to know the "hours per room occupied for the year" goal. If the total hours for the rooms division in the budget is 45,978 and the total number of rooms occupied in the budget is 37,525 then the hours per rooms occupied is (45,978 / 31,525 = 1.4585). This number 1.4585 is gold!In everything you do with rooms labor, you now know the measure of success. Meet or beat the productivity goal of 1.4585 hours per room occupied and you win. If you can use this target in your daily schedule, weekly schedule and monthly forecast you can continually adjust the course to track to your target. It is a simple and effective way to track to the goal.As the operations manager, you cannot have any effect over pricing or wages; they are out of your control. Any measurement that looks at labor as a percentage of sales in noteworthy but you cannot control it. As the operations manager, what you have control over is the schedule and hitting the productivity target if sales volume is down or up. The hours per room occupied is your speedometer and you can tell what stacks are up to speed or not and see if it is an hourly or management issue.The chart below looks at a monthly and year-to-date report for the rooms division:Note that all classifications do not have management positions. In the example above, room attendants and bell/door do not have any management positions.When you measure and track productivity this way you give leaders and managers on the ground a simple and effective tool. There will be days when you lose big on productivity goals. Days like Mondays in a leisure hotel. Challenging productivity days are heavy arrival or departure days, multiple occupancy, and low occupancy. On the other side of the coin, you will have days where productivity is naturally high: stay overs, long stay guests, business travelers, groups with heavy programs, and single occupancy guests.What operations managers need to see is the hours per room occupied goal. Knowing there will be losses and wins in the days and weeks is natural. Hitting or beating the monthly productivity target is the magic result for them to see and get excited about. Hours per room occupied is the only productivity measure they need to focus on. Get each manager in the rooms division to do their monthly forecast, weekly schedule and daily log all referencing their productivity target and the actual result. Like tacking on a sailing ship, you are constantly moving from a loss to a win and a win to a loss all the time keeping an eye on the desired final destination. Use hours per room occupied in addition to the number of arrivals and departures and room credits on your schedules.If you are interested in how you can set this productivity measurement in your financial statements, email me and request my article on "Do Your Hotel Financial Statements Pass the Test?" or visit my website, blog page. Having these measurements in your finical statements is critical.To get a copy of my financial leadership recipe F TAR W send me an email email@example.comTo get a copy of my Flow Thru cheat sheet send me an email firstname.lastname@example.orgVisit my website today for a copy of my guidebook: The Seven Secrets to Create a Financially Engaged Leadership Team in Your Hotel - www.hotelfinancialcoach.com
The Hotel Financial Coach - 27 June 2017
If your hotel has a reasonable amount of meeting space (+10,000 ft) and your banquet business is a significant contributor in your Food and Beverage Department (+20% of F&B revenue), you are going to want to separate local banquet business from group banquet business on all of your financial statements, forecasts, budgets and daily reporting.At this moment you may be asking, "Why would I want to do that? That sounds like a lot of work." There are some very good reasons to make this practice a standard in your hotel. I see many hotel financial statements and most are missing the boat because they do not separate group and local banquet revenues. Separating this reporting and setting it up properly provides powerful information you can use in your hotel to make better decisions and ultimately be more profitable. When you take the process apart and look at each piece, it is not complicated. It just requires someone who wants to do it. That begs a question: "Why would I want to set up separate revenue reporting for groups and locals inside my banquet department?"The first reason is to track the revenue and follow the profitability.You want to know how much banquet revenue is generated by groups in-house who occupy your bedrooms vs the revenues generated by local customers who use your hotel's meeting rooms and banquet facilities, but don't occupy rooms.We normally refer to the business coming from in-house groups as Conference Service. We call the business that comes from customers who do not occupy rooms as Catering and we also call them Group and Local.If a significant portion of your F&B revenue comes from banquets, there is a very good chance that you have two competing elements inside this revenue stream. You want to know how much revenue comes from each separate element. In rare circumstances (like a remote resort without significant local business), this separation may not be necessary. All other hotels that have a good mix of business would benefit from reporting this data separately.You want to know the revenue separation for all types of sales in the banquet department. The following areas need separate reporting: food, beverage, room rental, audio visual, gratuities and miscellaneous.Groups vs. LocalYou need to understand the spending characteristics of these two different customers so you can choose your customers wisely. If you are running a full-service banquet and meeting facility and, on top of it, you have a few hundred bedrooms to sell, you want to use the meeting and banquet facilities to drive room nights. When you do not have opportunities to fill your hotel with groups, you want to be able to sell your space to local customers who want to hold meetings and events without staying at your hotel.Understanding the spending and profit potential that each different element produces will help you develop your strategy for selling to groups vs local business. What does the average customer spend in local catering vs in-house groups? What are your minimum food and beverage sales per room occupied for your in-house groups? What is the minimum amount spent on food and beverage to release the main ballroom or other anchor rooms in your hotel? An essential element to properly manage your hotel is understanding these characteristics and the corresponding seasonality. Separating the revenues is the only way to go.When you review your financials, your budgets and forecasts you need to understand the makeup of the entire revenue picture in your hotel. Groups vs transient and corporate room revenue and local vs. in-house banquet business create a different picture each month, week and day in your hotel.Understanding what it will take to drive the maximum revenues and profits starts with understanding the piece of business that is going to bring you the greatest contribution of both and what time of year. In most hotels with significant meeting space, it is group business; when these group opportunities are minimal, like summer, holidays and weekends, you want to sell your space to local catering customers. Therefore, you need separate financial revenue reporting within the banquet department to measure your effectiveness. If you lump it all together as many hotels do, you are missing a huge opportunity to better understand and manage your business.The second reason is to organize your team: sales, conference services and catering so you can sell and service the business most effectively. This is where the water quite often gets murky.Depending on how you organize your efforts in catering and conference services, you probably have people dedicated to one or the other or, in some cases, both group and local elements. In your sales department for rooms, you have sales managers with segments to sell into, quotas to meet, and bonuses to earn. These sales quotas must contain food and beverage spending minimums. This is a critical hook that many hotels waiver on with groups in certain "need periods."In conference services, you want to know how much revenue each seller and each group is generating. You want to have Intel so you can see the overall spending of each in-house group. You want to know how much revenue is produced by each catering manager. These leading indicators help you maximize your revenues and profits. If you do not know how much revenue each seller in the various areas is producing, how will you know how effective they are and what is possible.Are you leaving money on the table by not having enough sellers in each area? Are the efforts of each seller today producing enough revenue to justify their positions? Are your F&B spending parameters effective and do they adjust seasonally to reflect your change in business mix? Do your catering minimums and room rental policies reflect the most up-to-date data? Most hotels cannot tell you these important statistics. The main reason is that they do not separate group and local business reporting.On top of all of this is the 6,000-pound rhinoceros in any hotel that has significant group business mixed with local banquet demand. How and who controls the meeting space in your hotel? What tools do they have to help them decide when to release banquet space for local business and when to hold onto it to sell to groups?Are you organized to make the best decisions for the hotel?In most hotels, this is a hotly contested subject. Most hotels have some guidelines but when you dig into the policy for meeting space vs room nights, vs room revenue, vs banquet revenues, vs group spending, vs local spending ,vs the profitability for each element, you are not going to find much in the way of evidence to win your case. You will find a lot of opinions but not a lot of facts to back them up.Having these spending and room night guidelines, by season, by day of the week, and by segment with an effective review process is the picture you want to build. By building this structure in your banquet department you will start to develop your revenue management muscles. The combined rooms and banquets, groups and local revenue management intelligence in your hotel is the result.You need to create the system to separate these two revenue streams in your banquet department to see what is really going on; and it is not difficult. It begins with how you organize your selling and servicing of groups, their corresponding banquet event orders "BEO's" and separate codes for group vs local. Next, it is a point of sale system "POS" that has separate revenue buckets for the group and local sales. These are easily set up. You need floor staff who are trained to "post" the banquet sales to the corresponding codes from the BEO's. You need to review and ensure that all revenues are posted correctly.Next, you need to set up daily reporting for the group and local sales on your daily flash reports. Your monthly financial statements and general ledger need to be programmed to have separate codes and reporting for the group and local sales inside the banquet department. Monthly forecasts and annual budgets that include analysis and reporting are also necessary.Summing it all up.Track and report your banquet group and local business separately. Do this on all your financial reports, daily, monthly and annually. Budget and forecast these revenue streams separately. Track and manage these revenue streams by the seller. These disciplines will lead you to full-blown revenue management processes that integrate rooms with banquets.Understand your business better with the right data and you will make better selling decisions and increase your overall hotel profitability.It is not complicated. What are you waiting for? To get a copy of my financial leadership recipe F TAR W send me an email:email@example.com.To get a copy of my Flow Thru cheat sheet send me an email:firstname.lastname@example.org.Visit my website today for a copy of my guidebook: The Seven Secrets to Create a Financially Engaged Leadership Team in Your Hotel. www.hotelfinancialcoach.com
The Hotel Financial Coach - 21 June 2017
"Systems are everything to a business. Don't change the people. Change the system." - Steve ChandlerWhen people understand and use the business system well we get a superior result. When people don't understand the business system and can't follow the business system we get a poor result. What's the business system in your hotel?By definition, a system produces something. In the hotel business, we have lots of systems we create, manage and follow. In operations, we have many great examples of systems we use to effectively manage. One good example is the system housekeeping uses to turn the house. We wake up every day with hundreds of dirty occupied rooms and we move through our system to check out and clean these rooms and ultimately sell them again a few hours later. It's not rocket science but there is a system to follow; to manage and to ensure its ongoing health is paramount to our prosperity. Room inventory is established, sections are assigned, staff is deployed, the cleaning is done, one by one the rooms come back, maybe we inspect them and we're ready for the next guest. Every day that we work the system, we learn what worked and we adjust and innovate where it didn't work."I cannot say whether things will get better if we change; what I can say is they must change if they are to get better." - Georg C. LichtenbergWith the financial piece in our hotel, we don't naturally see the process as a system we can develop and evolve. The reason we don't readily see this is because the system is hidden and it's not used by most leaders. Most hotels don't produce a monthly forecast and they don't get their managers to participate in the financial system. The system in most hotels is that the controller or director of finance produces the forecast and reviews it with the GM and then it is sent to corporate.In some cases, the departmental numbers are shared with the operations managers with the hope that they will aspire to hit these targets. Very rarely do we find hotels that have forecasts and budgets that have been created by the line managers. This line manager creation is the level you should be aspiring to in your hotel. Imagine your department managers know how much revenue is expected this month. At the same time, they know the corresponding expenses planned for the same period in detail from a zero base. With their payroll, they know their staffing formula and its fixed and variable components. Lastly, imagine your managers tracking their revenues in the month for the month and then, in turn, they adjust their expenses and payroll to control their flow through.When we don't have a system to follow this is impossible and it results in the tail wagging the dog. When we face a challenging month, revenue wise, we are largely unable to react. We are unable to react because no one knows what's in the middle of his or her statements. You might be reading this and shaking your head. Why is this the case? Why is it so hard to get my hotels and their department managers to know their numbers?The answer is: they don't have a system to follow. There is not a good system for financial communication in the hotel. We roll the dice every month. We roll the dice hoping the revenues materialize and when they do we expect a certain profit picture to emerge. When it does, this is great. When it does not happen, we are surprised. What happened to the revenues and why are the costs so high? Didn't anyone see this coming and didn't anyone react? The answer 19 times out of 20 is, that's right, no one knows what the HE double hockey sticks LL is going on financially in their hotel. Department managers don't know if they are making their revenues or not, and they have no plan for the day when the phone stops ringing.All of this is because the hotel does not have a financial leadership system. The executives have not created the system in the hotel. You can't buy this system. It must be created and maintained by the; GM, the director of finance, the executives and by each departmental manager. There is no other way. The attention to this system is an ongoing daily function that needs to be the obsession of the entire team lead by the GM. It's as essential to the hotel's health as being obsessed with great guest service and outstanding employee engagement. Without this financial obsession, the patient, the hotel is on its own, left up to chance. Chance is the development of events in the absence of any design.Create a financial leadership system in your hotel. It starts with the monthly forecast. Every leader who produces revenue, consumes expenses and schedules labor participates in the forecast creation. The forecast is produced by the department managers and consolidated by the director of finance. Inevitably changes will be needed to the details of the forecast to reach the overriding financial goals of the hotel. When this happens, we cannot just make changes and add a little revenue here and pinch a little expense and payroll over there. Leaders must make these changes to their forecasts to ensure any buy in. In the absence of this buy in your leaders are literally thumbing their middle finger at you. Don't make this critical error. Ensure all leaders start the month knowing what their numbers are and ensuring that they created their own numbers. Do not make the fatal mistake that so many make and skip this step.The second part of the system is that we give the numbers a voice, the right voice and we ensure everyone hears it every day. I can't tell you how many times I go to a hotel and ask the managers how room revenue is coming along this month or how banquet revenues are. They look at me like I just asked them how their ballet lesson was. Financially engaged leaders need to know their numbers and to help with this we make the numbers just as important as guest service and colleague engagement in all our daily communications. Leaders need to know every day what the sales were yesterday and month to date for rooms and food and beverage. They need to know the pickup in both areas and the bridge to make the forecasted revenues for the month. We make sure every communication meeting and lineup includes the financial update. Knowing where our business stands from a revenue point each day is critical for our entire leadership team.Tracking the revenue build in the month for the month is essential as it allows the leaders who have planned their expenses and payroll to adjust their spend according to how the revenue picture is emerging. Adjusting payroll and expenses is the quintessential action we want our leaders to be able to accomplish. To pivot when we're down 10% on the top line to forecast is the move we train for. If we don't teach our managers to adjust their spend to the projected revenues in the month for the month we miss the ability to manage the flow through. It is completely inadequate to leave it up to someone else to sound the alarm bell. It's inexcusable to have a look mid-month and see how things are "coming along." We need to hear the numbers daily, the pickup, the bridge and the latest projections so we can adjust our spend in the month we are in. In the month for the month is our battle cry!The fourth part is the review of the month-end financials by the same leaders and managers who produced the forecast, tracked their progress and made their adjustments. They review the freshly printed P&L and general ledger detail to ensure that their lines have the values they managed and not some other numbers. This ensures that we complete the circle and each manager and leader has the tools and processes to own their own piece of our financial process. This ownership is the key to the ongoing monthly financial exercise we take on.The last part of the financial leadership system in the hotel is that each manager and leader who participates in the system writes their own commentary, detailing the planning and execution of their part of the forecast and the month's business. Note what worked and what didn't. Learn every month and know that the job will never be done or mastered.Managing the operating financial piece in your hotel is not difficult. What makes it challenging is there are many people and departments involved and time marches on. To combat that, we need a simple effective system for financial leadership. We need a hospitality financial leadership communication system.What are you waiting for?To get a copy of my financial leadership recipe "F TAR W" send me an email at email@example.comTo get a copy of my Flow Thru cheat sheet send me an email firstname.lastname@example.orgVisit my website today for a complimentary copy of my guidebook"The Seven Secrets to Create a Financially Engaged Leadership Team in Your Hotel" www.hotelfinancialcoach.com
The Hotel Financial Coach - 12 June 2017
Your DOF is a great accountant. They do a solid job running the accounting department and they are very efficient. Your monthly financials are timely and overall the accuracy is high. The internal audit reports are very strong and they manage the accounting staff and departmental communications well. What's the problem then? What you really want and what your business really needs is a DOF that's a "financial leader". The kind of DOF that's going to teach and lead the non-financial managers in your hotel. You want the DOF to be as effective with the forecasts and commentaries as they are with the day to day accounting. You want your DOF to be the financial quarterback that calls the plays that move the money ball down the field. Not the recordkeeper who hides out in their office avoiding the world and your business. You want a financial leader that's going to tackle the issue your business faces and the trailblazer that gets results.So, what's missing? This article explores the other side of the DOF's role. It's the side that is not a natural place for most accounting types to be in. It's the side that required the accountant to be a leader that serves his/her constituents."If serving is above you then leadership is beyond you" AnonymousI learned what it means to serve 10 years ago while I was the DOF of a large hotel in Toronto. I had been there for only a few months in my new role and things were not going well. I could not get the non-financial leaders in the hotel to meet any of my deadlines. Forecast, month end accruals, monthly commentary, budget time. You name it and they missed it. It was like pulling teeth to get the information I needed to do my job. In the hotel business you cannot sit in your office and dream up what's going to happen next month in the; kitchen, in sales, at the front desk. The hotel business does not work very well when you try and run it this way. As a result, I was putting out forecasts that were off by hundreds of thousands of dollars. Month end statements were a disaster that contained invoices from prior periods and accruals that were wrong. My month end commentaries made little sense. Does this sound familiar? In short, I was sure this gig was not going to last. I was either going to get fired, quit or have a nervous breakdown. The owner's asset manager and corporate would ask me, David what's going on? My response was, "we're working on it". All the while knowing that it's not working.I had tried all the moves I knew to get the other managers to do their part. Monthly schedules, department head meeting reminders, emails, I even brought this up at the executive committee meetings all too little avail. Coincidently at the same time we had a new GM join us. We sat down shortly after they started and we discussed how things were going in finance and accounting. I explained my challenges with getting timely information and cooperation form the other managers. My GM had an idea. They said, "let's create a hotel finance workshop, we can call it hotel finances for dummies". To which I replied, "I'm not a teacher and look at my desk, I'm already here 10-12 hours a day". We discussed this idea a couple of more times in the next week and then they said to me, "David, it's the right thing to do and I'm making it part of your bonus criteria" Now it's going to cost me if I don't do it.I really didn't want to do this workshop. I was pretty sure it would suck and so would I. I mean getting up in front of a room full of leaders to talk about accounting all day was not my idea of fun. It would mean I was out there, exposed and all alone and the thought of that scared the crap out of me. Human resources "inva-told" 35 leaders, the worst offenders to attend the day long workshop. I somewhatbegrudgingly set about to create the content for the workshop, putting ideas and concepts together to hopefully show the participants what all the noise was about with the financials.The day arrived and class started on time and the room was full. The day went off OK and I didn't die. Overall, I thought it was pretty good. There were a few shaky moments. A couple of the exercises could have been clearer. Some of my content could have been explained better. But in all I thought the participation and interest from the leaders was good. I wrapped things up with a short 10 question survey and thanked everyone. The next thing that happened totally blew my mind. Two leaders came to see me to hand in their surveys and they both thanked me for putting on the workshop. They said; finally, someone explains the P&L, why don't we get this training from day one, I never knew what you did with my numbers. Before I knew it, there was a pretty good-sized line-up of managers waiting to talk to me, to share their experience from the day. WOW!In the following weeks, we scheduled another workshop and it was full without any conscription. In the short run in my hotel something very wonderful happened. I was now receiving most of the manager's forecasts, accruals, commentaries on time and the quality was vastly improved. I literally had leaders coming to see me with ideas on how to save on expenses and labor and ideas on generating new revenues. All of this was because of the workshops. Inside this I learned a powerful lesson. And that lesson is Service. If you want someone to serve you, you need to serve them first. Serve them first meant I was education and sharing with the leader's important information. The workshop showed the leaders that the P&L is not hard to understand. I showed them what we did with their information. They could clearly see that they were an important part of the financial machine. A new found understanding that they make a difference in our business.So where was the pivot for me? The pivot was on one hand the creation and delivery of the workshop. The second and most important part of that was the change in my approach. Prior to the workshop I send out schedules, memo's, directives, deadlines, department head meeting sermons, executive committee meeting winnings. These seemingly innocent acts were nothing more than me, The Director of Finance, demonstrating my "expectations" to the non-financial leaders. There was no serving going on. Just my misguided and ugly expectation. People hate expectations being placed on them. By serving them with the workshop I was able to turn this financial ship around. Leaders need a way to feel safe and welcomed in the financial arena. What can your DOF do to create their own safe place? What can your DOF do to serve your non-financial leaders. It's the secret sauce to create hospitality financial leadership in your hotel.If your DOF likes the comfort of their office and email to conduct business and uses MO that to engagement with your non-financial leaders with their forecasts, budgets and commentaries. If the state of these living documents is not where you want them to be, you now have the answer as to why this is the case. If you want to create the financial engagement with the leaders in your hotel "someone" needs to serve them first. Leaders naturally don't want anything to do with their numbers. They have a predisposed fear around the financials. Someone needs to show them that it's not so hard and that there is a system to follow. Show them that you or someone is there to train, lead and support them and they will engage financially. Once your managers see; that they can do this, that your there to provide the system, and it's safe to step into the financial arena they will want to do this. They will want to do this because being part of the financial "in crowd" is cool. They also know that these financial skills arethe ticket to greater career prosperity. Without financial leadership skills, their hotel career trajectory is severely limited.Time and time again, I ask budding non-financial leaders what they want from their career in our one-one coaching sessions. Hands down its to be a leader that has a financial aquiem. Chef's, F&B managers, spa managers, housekeepers, front office managers, etc., They all say the same thing. "I know my job, with the guests, the colleagues, the operation, but what I really want are the skills, the abilities, and the comfort with the numbers". They all want to be the leader that excels with their departmental and hotel financials. They know it's the way forward in their career.What you need to do is provide the environment in your business where this can happen. The key to doing this is having a DOF that wants to be that financial leader. Time and time again in my coaching sessions I ask the DOF's, "what's missing in your world? A high rate of response to that question is, "I want to have a greater leadership role in my hotel" but inevitably that's not happening. When I hear this it's like magic to my ears because I know I can help this person create the financial leadership if they are willing to create their own version of service. I also hear a lot of financial leaders tell me they are just fine the way they are. To which I reply, great!So, who will be that financial leader in your hotel? It won't happen by itself. It needs someone to step up! Do your part and help them help you.To get a copy of my financial leadership recipe F TAR W. Send me an email email@example.com
The Hotel Financial Coach - 6 June 2017
When heads of state come to visit your hotel they usually make a bit of a show. The Russians are no exception, they even bring their own warship, the KGB and a wad of cash!I had the pleasure of witnessing the Russian President Dmitriy Medvedev arrival in San Francisco in June of 2010. He flew in the presidential plane, meanwhile his missile cruiser Varyag sailed into San Francisco Bay to accompany his visit. Heads of state often have a ship accompany them on their state visits.The first and previous last time a Russian warship entered San Francisco Bay it was almost 150 years earlier during the American Civil War. The Russians sent two warships to America during the civil war to show the Union their support at a time when the English and France were thought to be supports of the Southern Confederacy.The Russian Presidents team took over two whole floors of the main building of the hotel. Almost 100 rooms in total for his staff and hangers on. Upon his arrival, the President was greeted in the lobby of the hotel by former secretary of state, George Schultz and the then current California Governor, Arnold Schwarzenegger. The Russian President arrived with a rather long line of military and support staff including a couple of beautiful younger ladies. It was quite a show and I was quite surprised that it all took place in the very public lobby. Usually, these meet and greets are behind closed doors. The typical modus operandi is the head of state arrives at the hotel and he or she is usually greeted by the General Manager and then quickly escorted to their private reception where the politicians and public figures greet them. The show that day was very public and there was no press, just unassuming hotel guests that were now witnessed to the international meet and greet.The Russians stayed 3 nights and racked up a pretty good bill, just north of $600,000. Most of the bill was for food and beverage with some incredibly lavish items. When groups come to your hotel they quite often ask for credit. In the hotel business, this is a common practice that is one of the hallmarks of our industry. Direct billing, we like to call it and we still do this and it's a direct result of our business being so old and competitive. All hotels would love to stop granting credit but we can't because we would lose a competitive feature. In order to ascertain your group or companies credit worthiness, we use certain credit reporting agencies and also our own sister hotels credit history. Having a group like this in-house can be high risk as it is political in nature and anything can happen. Having no deposit, no credit references and no credit card on file would normally be a potential disaster waiting to happen. When its government, especially a government with the label power of the Russian President you just hold your breath.Word came after day 2 that the account would be paid upon departure, in cash. This is incredibly unusual for an account of this size. In my entire 30+ plus year career I only had one other group pay their group account in cash at it was $250,000. The Russians had requested a simple receipt for their payment in the form of a hotel folio with the total amount indicated and an embossed stamp that said, PAID. We actually had such a one-handed stamp that looked like a pair of pliers with what would appear to be two large coins on each end. they were not interested in the reams of paper that would normally accompany the master account. All they wanted was this one piece of embossed paper!On the day of departure, our chief of security informed me that the money would be delivered to the executive office at 3:30 pm. Subsequent to learning this I arranged to have our bank on notice that we would be making a large cash deposit that afternoon and they were ready to receive it. Banks today do not have much cash on hand and the manager was quite intrigued by our call asking if it would be OK to deposit $600,000 in cash. My communication with the Russians was through our hotel's chief of security. He, in turn, would speak with the American secret service officer in charge of the visit who would, in turn, speak with the head Russian presidential security service, their version of the secret service.Three PM came and went and no money and no word from the Russians. At this point, the President was gone, off on the next leg of his journey to Washington and with him went the delegation of hangers on that stayed in the hotel. I am beginning to feel the burn. Five PM came and went and still no Russians and no money. I knew it, you can smell these a mile away, especially once the customer fails on their commitment, in this instance 3 pm. Nothing but silence permeated from the Russians through our security department and in turn through the secret service. At 6:30 my office phone rang and it was our chief of hotel security. He informed me that word had come that the money would be delivered at 7:30 pm and that he had requested the meeting take place in the executive office. He said the money would be coming from the ship and the KGB would be the one's delivering it. Holly crap! What to do now?At 7:30 at night having 600k in cash in my hotel is not a good thing. The bank is closed and I must keep this money overnight in the hotel. My imagination quickly gets to work and I can see the Russian underworld at 2 am strong arming my night staff, jumping the desk and quickly getting the cash. We have limited facilities to keep a small amount of cash, it's called the safe and its way to obvious a place to leave the cash. The safe is in the general cashier's area behind the desk and it's a small modern safe. Easily taken by a couple of determined thieves. The hotel has a huge safe that's over 100 years old that we use for safety deposit boxes, the main door to the safe is 6" thick and the safe is 7 feet tall and 4 feet wide, the problem is the safe is locked out, combination and working life long gone. One of the safety deposit boxes could work but popping these boxes is child's play for a gang of determined thieves that know the hotel just got a large payment.That's it, that's the game they are playing, it's all clear now! Pay in cash, pay late in the day so we cannot get the money to the bank, set it up with their Russian Mafia friends and get all the money! It's so simple and easy. The hotel is such a soft target we don't stand a chance. Putting the night staff in jeopardy is a bad idea. What to do? It's 7:30 and my credit manager and I are waiting in the executive office.7:45 and still no visitors and suddenly the door to the office opens and it's our chief of security with two heavy set gentlemen in suits and a little old lady who was dressed in a vintage pencil skirt and suit jacket, Audrey Hepburn style. She is the one with money. She comes unescorted from the reception area in the office to the inner office and closes the door. She sits down and opens her purse. The purse is the shape of a small doctor's bag and its vintage Louis Vuitton. She opens the bag and with one hand pulls out $600k, still wrapped in plastic you can see the open end of the package that once held a million. She plunked the $600k on the desk and asked, "how much more". I replied, "39,000". She pulled another smaller wad out and started counting $1,000 bills. She counted to herself and then passed the small stack to me. I passed them to my credit manager and I, in turn, said to the Russian lady, "do you mind if I have a look at the package?" "No, I don't mind, it's yours now..." With that, I examined the package closer and it had 6 stacks of factory bound $1000 dollar bills. I held this package which was barely the size of a box of salt. An incredible site to see.My credit manager confirmed the count of 39 and I, in turn, handed her the folio which was presented in a hotel letter envelope. She opened it and look at it quickly and said, "Thank you, this is all we need." With that she stood up, nodded her head, I thanked her and she turned and left the office. There were some quick words in Russian to her escorts and then they were gone.We're left in the office with the money and I have a very strange feeling that this is just too easy, too simple. Who shows up at 7:45 pm at night to pay a hotel bill for the Russian President in cash to the tune of $639,000 dollars, all with $1000 bills and it's all done by a little old lady who is a KGB agent.Now I need to decide what I do with money. I contemplated taking it home but that would be risky and anything could happen on the way home and back, not to mention that's not something I want in my home. I thought again about the safe, the safety deposit boxes. If we're are going to be hit tonight its way to obvious, they will get the money, it's like you're robbing a house, you're going to look in the top drawer of every dresser. With our business complete I put the money in my bicycle side bag and we left the executive office. The immediate feeling, I had walking down the corridor to our offices was, we could be a target any moment. This is crazy. Once in my office my credit manager was not long getting ready to leave, she asked me what was going to do with the money. I am going to drop in in the night wallet, I said. OK, see you tomorrow. She left and I'm now alone with more than a half a million dollars in brand new, unmarked cash.I unpacked the plastic and moved the stacks of $100,000 through my hands. I thought about Mexico or a South American country where I could hide out and live life on the lamb. Na! That's crazy, I would be too paranoid. I thought for a moment and then I turned my office chair around and stared at my waste paper container. I reached out and picked it up, it was half full of paper, a couple of coffee cups. I turned it upside down and dumped its contents onto the floor. I placed the cash, all of it, all 639 - $1000 bills in the bottom of the trash can. I then picked up the paper and cups and placed it back in its spot beside my side desk. Having changed into my riding clothes it's now time to go home. Forty blocks across town in the night air feels good. It's down, down down Nob Hill, across the tenderloin and the western addition and then up to Diviz and through NOPA and home. I sleep well. Up at 5:30 am, out the door on my bike at 7:30 and I'm back to work........ Just another normal day in the hotel business
The Hotel Financial Coach - 30 May 2017
Creating a great commentary for your owners and corporate is a monthly mainstay in almost every hotel. It can also be a large dose of drudgery. This article is about how you can create an effective system in your hotel to generate a strong and meaningful commentary based on information from all areas of your business. Creating this kind of information system in your hotel is a powerful tool. This commentary power tool can help you drive superior financial results if you approach it with the right spirit and a system to follow.Who invented this commentary and why? The need for a commentary exists because of the principle of full disclosure. Full disclosure is a basic principle in the business and accounting world. What the principle says is that the readers of the financial statements need to know all relevant information that did or may impact their investment or stake in the business. Readers of only the financial statements cannot ascertain many important facts from looking at just the numbers. They need a "footnote" or special report to round out the financial results and to explain many of the reported results and future forecasts. If a possible future event is going to have an impact on the business it needs to be disclosed. Some examples would be: pending litigation, environmental issues, labor relations, governmental regulations, management changes, competitive changes, business trends, business on the books, etc., the list is long. The footnotes give the readers of the financials the information they need to ultimately make the most informed decision about their investment and its future. We translate the full disclosure principle in hospitality and voila we have our monthly property performance commentary, or executive commentary and sometimes it's called an owners commentary.Hotels are complex departmentalized beasts that are all connected and also very separated. What's happening in sales has zero to do with the kitchen but the chef and his or her food have everything to do with image and the sales and marketing efforts. Good commentaries in hotels tell the various stakeholders what's going on and what's planned for the coming month, quarter and year. Much of the revenues for a hotel are booked in the month for the month. On the flip side of this, it's the group base and its performance that drives the financial results. This coupled with catering pace needs to be closely monitored and explained carefully and consistently in the commentaries. The expenditures and labor costs can often have big impacts on the financial results and explaining the reasons why they perform the way they do is critical. Many times, the commentary is used to explain what happened. The forecast was for a certain level of income and profit and it did not materialize. Revenues were soft and costs need to be explained. That's where the drudgery comes from. We need to turn this around and realize a commentary is a tool. If we use the tool properly we can see what happened and take the appropriate actions so we don't make the same mistakes again.So how do we get every part of our business to tell their story each month in a way that provides meaningful information and proactive business thinking leading to constant improvement?The answer is a three-prong approach. The first part is every line needs an owner. My mother always said, "Many hands make light work." I translate that into our business and out comes a powerful concept. We literally take the P&L apart and we assign an owner to every single line of revenue, the cost of goods, payroll, and expense. The second part is we make agreements with every corresponding manager that they will Forecast, Track, Adjust, Review and Write monthly about their lines. A financial communication system for them to follow called F TAR W. This clarity is magic in your business when you combine this accountability with consistent training, executive support and the right business management encouragement. The third part is designing and communicating the monthly financial circle. The circle and key dates are on a monthly schedule that the whole hotel falls into. This keeps everyone on track.I have a separate blog on the detailed F TAR W process. If you missed it send me an email and I will see that you get a copy.When managers sit down and plan their numbers in the form of the monthly forecast we teach them to zero base the numbers. This gives them the clarity they need to see, to comprehend and execute their part of the business. Knowing exactly how much revenues are forecasted and what expenses are in my lines is mission critical. Without this zero-based detailed plan, they are lost. Having details on how many fixed and variable positions I have in my department provides me the structure I need to manage my labor. Expense forecasts need to be comprehensive with detailed lists of what is needed, with itemized lists and costs for each corresponding GL account. We don't just take a cost percentage or a cost per room occupied or cover and run with it. That does not work. We need details. With the details, we can see what our options are when we have a business situation that dictates that we need savings this month in order to help meet our profit targets. We couple this with a culture that makes the numbers as important as the guests and the colleagues. This means we discuss numbers daily at our communication meetings in all departments and this gives the leaders the focus and attention that's necessary to manage their numbers. We work with our managers to ensure that they take the time that is necessary to properly work the numbers. We create the culture around the business piece and the leaders now have a system to follow and they love it. We know the numbers are just another aspect of our business that requires our constant and continuous attention. Having a team of leaders who all manage their own piece is the key to success with your hotels' operational financial health.Good commentaries tell a story about what happened in our hotel and why. What did we learn from the results and how are we using this new-found information moving forward to obtain a better result? That's the muscle we exercise every month in our hotel. We're not going to simply regurgitate the numbers and explain ratio variances. This would add zero value. If food cost is up, we explain why? If protein costs are the culprit we tell our readers what we're going to do to remedy the situation. If the room rate performed better in our group segment, we explain what happened to make the forecast too low or the actual result better. What was our lesson and how will we take that knowledge forward in our hotel? If labor was over forecast, we explain what happened and how we are managing differently as a result. If expenses were off because our planning was flawed we tell it like it is and most importantly, always, what did we learn. This discovery process in our business is the key to improving results. Knowing that this process is the way forward in our business is good news. We also know that this job will never be done. There will always be new challenges to manage and yes, the same old problems come back every once and while. That's the hotel business!Commentaries flow from each part of our business as line owners follow their financial communication system. The last part of F TAR W is Write. Write about your lines. Don't let someone else tell your story. What did I forecast, what materialized, what changes did I make based on business levels and what did I learn? What happened and why and, most importantly, what are we doing about it moving forward. What management decisions and changes will be brought about because of the previous performance. Every month the window opens and closes in our business and each month we get a new opportunity to perform. The mistake most hotels make is that they leave the money tasks to a few executives. This is not effective because the action happens on the ground in every area of my business. I want to align my business practices around the individuals that make the schedules and order the supplies. This alignment gives me the ability to affect the result directly.An effective monthly commentary gives the stakeholders a clear picture of what happened in the business and why. It also tells the readers what we will "manage" differently based on the results we achieved. There needn't be any drudgery if you have a system to follow and you build a management team that produces. Ultimately, you're in control of the result and you can own this process by investing in financial leadership training and development with your leaders. This development will not happen by itself. It requires your attention, just like guest service and colleague engagement.Serve your leaders by creating financial leadership in your business and watch your profits soar. Serve your team and watch their engagement grow.Visit my website today for a copy of my guidebookThe Seven Secrets to Create a Financially Engaged Leadership Team in Your Hotelwww.hotelfinancialcoach.com
The Hotel Financial Coach - 29 May 2017
In our culture, it sadly does have that connotation, and what we need to realize is that expectations are weak, cowardly and completely ineffective when dealing with other people--especially when we want to get real work done and build strong relationships. Yet we cast these expectations everywhere and let others have these diseased spells over us and its largely because we don't know there is an alternative.If I have a complaint in my world, it quickly becomes an expectation that someone needs to fix, and I tend to obsess over the injustice, and in doing so, I create my expectations. What we need to see is that this is completely ineffective for getting things to change. Complaints are very easy to ignore and diminish; however, requests on the other hand, are not easy to ignore. Once we have made a request, we're heading in the right direction because on the other side of a request we now have the ability to make an agreement.Let's take a hotel example. Currently I am having a very hard time getting the other managers to prepare their monthly forecast in its detail and to get it to me by the 30th of the month. I typically send a schedule and reminders. I speak at the department head meeting about the deadline, but I still don't get a high success rate on their submissions.It's always a struggle to get other's to do what I "expect." Without the forecast, I'm left with two very unattractive options: do it myself, or go without it. Both options mean I am being shortchanged because you're not living up to my expectation and I have two alternatives. I can complain about it which, by the way, I have been doing for years without any results, or I can make a "request" of you. This is the pivot point. If I am willing to see that my current status is an expectation and it is weak, I can bring myself to ask you, to make a request of you. It might go something like this:"Peter, can you help me? I want to include your numbers, not mine, as part of the detailed forecast and I'm requesting that you complete your part and get it to me by noon on the 30th. Can you do that?"Now it's not easy for Peter to say, "Sure no problem." He now sees what you're asking for in a different light and he might say. "I could but that means I'm going to have to rearrange my week and my assistant is on holiday and our second office computer is dead."This is what you want to hear. This is the foundation of an agreement as you have now both asked for something. It's no longer the case of you having a single expectation, now we have multiple issues in the air, yours and his, and this is the way to go. Turn the complaint into a request, and turn the request into an agreement."OK, so I will send our systems person to your office today to switch out your second computer, and I'm not sure what I can do to help you rearrange your week," to which Peter replies, "No worries. With the computer replaced, I can manage and I will get you my forecast by the 30th."What just happened here? 1. I changed my language up front from a tired self-centered expectation into a request. 2. Peter asked for my help to complete and meet my request. 3. I committed to acting to help him with the computer. 4. He in turn was positive in his response to meet my request.The above exchange is the foundation of an agreement and upon examination, we can see it passes the test to be an agreement because it has four parts, two for me and two for Peter.The test is "get and give." If an agreement is really an agreement it must have these parts; a get and give for each of us. In this example, Peter gets his computer fixed and he gives me information on time. I give him the resources to fix his computer and I get his report on time. Before the request and the agreement, it was just me and my ask. I wasn't giving anything, and I had an expectation of Peter and no agreement. Now, I can be pretty sure some of you who are reading this are saying to yourself, "I'm the boss and people need to do as I say," "I don't have time to make agreements with everyone."Maybe that's partly true, but know this: Your people are quietly thumbing their nose at you and your expectations. What you need to do if you want commitment, is to drop your expectations and start making agreements. Take the time to make these agreements and find out what you can do to help the people you work with. This will change your world. It all starts with you and the ask; without it you will not have an agreement. Find out how you can help the people you work with and they will be more than happy to reciprocate. If it's all about you and what you want, then all I have to say to you is, "good luck."
The Hotel Financial Coach - 28 May 2017
He would say this to our director of sales quite often, not only to ridicule their efforts but to remind them that the business is there it's really about maximizing the opportunity and knowing that this telephone ringing condition will not last, it never does. So, what are we doing, and what's the plan to siege the day?This is the tale of any and every hotel. "The rising tide lifts all the boats." This quote was made famous by JFK and it is said that he got it from the chamber of commerce in a small New England town, probably a resort town. The relationship from this idea to your financial leadership is one of opportunity. We all know that when we have a good month, season or year we know it's because the business was there. It all starts with that. Without the business being there and coming in like spades we are sunk. The reality in that statement is true but we also need to see that we can have a much bigger impact when we have a high tide.We seldom examine the excellent results for ways to improve. Why would we bother to do that? We just had a record year, double digit RevPAR increase and profits are off the charts. All indications point to the fact that we are doing an excellent job. But we also know deep in our sole that the volume hides a multitude of sins. The opportunity in all of this is to step back and look to see what these sins are and how we can correct them when business is good. We seldom or never do this exercise when it's actually the best time to do it. Imagine doing a staffing review in the middle of the best year we have ever had? That's right, doing the staffing review on a full tide will yield much more treasure. In addition to finding more opportunities you will see that finding the money to do this is much easier when times are good. Why wait for headwinds in your business and your pesky asset manager telling you its time? The same is also true for an expense review. Looking at your spending when you're spending the most will uncover the biggest opportunities. There is a reverse psychology that appears when you do things that all others miss. People are much more willing to adjust and change when times are good. Try and do this when your business is in the tank and you will meet resistance and bad moral. The same needs to be said for looking at ways to increase revenues, do this when business is strong and you will have more creativity and certainty. Being the leader that always looks for the opportunities to grow especially when all others look away is the greatest use of your talent.There is quote by Earl Nightingale, it goes like this, "enter a market and observe what everyone is doing and do the opposite" To sum this up, look at what everyone else is doing in business and especially when business is strong and find the opposite, do that, siege the opportunity. Creating the kind of culture inside your business and inside the hearts and minds of your team will have a spillover effect. Any monkey can follow the crowd, it's the clever chimp that knows there are more opportunities when the house is full.
The Hotel Financial Coach - 23 May 2017
If you're in the camp that says we don't share, I ask you to think about what holds you back from sharing. Is there really a policy in your company that states the sharing of financial information is prohibited? I'm pretty sure those are few and far between. The way it usually goes down is something this. That's just what we do, we have always done it this way or the last guy or gal didn't either. I am willing to bet that most of your reading this could make the decision to share the financials with your department managers if you had a plan as to what would be accomplished if you did share. That's an exciting prospect. Changing the way, you manage and introducing a new process to generate a different result.The financial statements serve two purposes in your business. One, they are the vehicle we use to keep score. It's that simple, a way to keep score for the game we call the hotel business. How is your business prospering or not is revealed by the numbers in your statements? A quick look by someone who knows how to read the statement will reveal your truth. I know many hoteliers don't share because they are embarrassed by the lack of prosperity they are experiencing and the very thought of sharing this with their managers is too much to take. In our culture money has immense power. If we subscribe to this notion the power, we`re giving the money in our business is negative. It holds us down and keeps us from really wrapping our arms around our business and getting the results we know are possible. "But what will people think of me", "surely, they will think I'm incompetent", these are some of the fears we have. I often hear it's the owner that does not want the financials distributed. I also here its policy not to share and the reason is we want the managers and department leaders to look after the guests and their colleagues. No matter what the excuse or reason I always say the same thing in response to my inquiry about sharing the results. I say, "do you think you could achieve a better financial result if your leaders and managers knew what was happening financially?" Inevitably I get a deer in the headlights response of yes, but......The second purpose for the financial statements in your business is to help you to create plans and actions to improve the results moving forward. Really that's the BIGGEST and HIGHEST purpose of the financial statements for your business. Tell me how I'm doing, what's the score and drum roll here......It is What can I do to improve the results! Your financials point the way to possible improvements. If we don't know what's wrong with our patient, then prescribing a cure is beyond anyone's ability. A close review of your financial statements will reveal exactly what is wrong with your business. When we look at ways to improve our business we naturally want the maximum buy-in from our managers and leaders to help pull it off. Well, let's think for a moment and ask yourself how could I get my managers to really own the action going forward. How can I get the team as engaged as possible financially? The biggest part of the answer is to share the financial results with your leaders and involve them in the formulation of the profit improvement plans. This really is not a new thought or a leading edge new age strategy. This idea to get your managers to buy into the ideas for improvement by involving them in creating the ideas by sharing the financials is as old as the hills. Here is the kicker. If you won't share or believe you can't share the financials the buy-in and accountability you desire will NEVER HAPPEN. That's right, no matter what else you do if the managers and leaders of your hotel don't have financial statement information they will not step up. Why may you be asking is this the case? It's simple, you cannot expect someone to create a result that is better than the current result if he or she don't know what that result is or what the new one should look like. They are in the dark without any way of navigating and they have no destination to navigate too.Your leaders want to make a difference in what they do in the lives, at work, and at home. All of us have a basic human need to make a difference. Your managers what to have a greater impact on your business results. They also what to know the score, the scoop. They want their seat at the captain's table. They want to be on the inside track. They also want you to treat them like adults. For you to share the financial results and ask for their participation is an incredibly powerful gesture. It also needs to be presented properly with just the right amount of humility and vulnerability. Yes, vulnerability. When you share your results your opening up a part of you that they know is sensitive and personal. Money in our society has such incredible power and by showing your financial results you create equity with your leaders. Manage this process carefully and you can turn your financial world around. Educate your leaders on the financials. Show them how it works and what it all means and watch them get excited. Financial leadership skills are incredibly valuable assets for your managers to create. With these skills, they are highly marketable in our industry. These skills cannot be picked up at school, or from a textbook. The only place you can learn how to manage the P&L and your department is on the job. The only person in your business that has the capacity and capability to create these financial leadership skills with your managers is you. Do you remember what it was like when you were younger and someone took you under his or her wing, guided and mentored you? This is the same opportunity you have to create that priceless relationship with them. Do this for your leaders and they will move mountains for you and your business. And don't worry about your managers taking these new skills and running to the competition. By the very fact that you have served them and created greater prosperity for your managers means their commitment to you is at its highest level.Serve your leaders by sharing the financials. Serve your manager by training them on how the financials work. Serve your team by asking them to participate financially and ultimately to create their own forecasts and budgets. Serve by creating financial leadership in your business and watch your profits soar. Serve your team and watch their engagement grow.Visit my website today for a copy of my guidebookThe Seven Secrets to Create a Financially Engaged Leadership Team in Your Hotelwww.hotelfinancialcoach.com
The Hotel Financial Coach - 16 May 2017
To maximize your effectiveness with your leadership team around the money you would be well advised to accept the fact that it's an endless exercise. We must see that the idea of mastering the numbers is elusive. This imperfect reality is comforting and seeing the challenge we have as just another endless mountain to climb is very healthy.It's critical to always remember when we do a budget or forecast for our hotel or our department that the only thing we know for certain is it's wrong. Yes, wrong, it will never be right. Why then do we go through such an exercise if we know it's wrong? The answer is obvious; we want a system that produces information about where our business is going so we can manage accordingly. We confuse this with the misguided idea that my numbers need to be right.The fact that we will never master the numbers in our business is oddly enough in great company. Introducing the money's two sisters; we have guest service and colleague engagement. These three pillars operate in the same fashion. We confuse money and its absolute qualities with the real task at hand, creating a business plan in which we can communicate and achieve a superior financial result. Having and executing the business plan in all departments is the key. Knowing that the various parts of the plan have been created by the leaders inside each department means we know the resources we have to execute our mission relative to our projected sales. With the plan in hand, they can take their shot. That's exactly what we want them to do. Know the target, take the shot. Hit or miss, just take the shot.Guest service is a constant, never ending battle in our hotels. We accept the fact that it will never be mastered. There will always be challenges; training, standards, new colleagues, technology glitches, communication issues, guest expectations, business volumes, staffing challenges, value for money. I could fill the page with the endless demands that are part of creating and delivering guest service. The important aspect of these confronting circumstances is that we accept this reality. Knowing the job will never be mastered keeps us in the hunt, on our game. Hospitality and service are not an absolute, it's not a science. There is an endless list of ingredients and conditions that produce a different result every time. That's our business and we accept the challenge and meet it head on and perform. Knowing there will be new challenges tomorrow keeps us excited to see what shows up. It's comparable to playing a team sport where we get a chance to win every day. Even if we win our performance is full of areas we could have executed better. Somehow, we come back the next day and play again knowing were going to face yet another set of challenging circumstances with service. This captures the very essence of our business and it helps explain the addiction we all have to the hotel business and service.Colleague engagement is the never-ending practice of building a team to take on the challenges of our business. Creating and maintaining an engaged team in your hotel is the building block that allows the service the highest probability of being consistently delivered. We know that the creation and maintenance of engagement will never be complete. We will be forever charged with the task of creating and maintain engagement with our colleagues and leaders. The important thing to always remember and accept is the job will never be done. There will always be; turnover, lack of turnover, staffing level challenges, business volumes, resource issues, communication issues, last minute changes. I could once again fill this page and so could you with all the engagement challenges we have. What's most important is we accept the fact that the engagement job is never done. We don't give up and we fight every day to improve the landscape and win. That's a tough pill to swallow especially if you still have some rose color in your glasses. Knowing what our business is all about is knowing the game will never be mastered. For some of our leaders, this is the obstacle that stops their career. Who would want to work in an environment that resembles ground hog day? The same old served up day after day, the same challenges. Moving the needle in the right direction is the reward, building the team and their engagement is the reward.So how do these two sisters relate to the money, how do they correspond to the financial leadership inside your hotel?The money is "exactly" the same. The money piece will never be mastered in your hotel. As I stated earlier, the only thing we know about our forecasts and budgets is the fact that they're wrong from the getgo. Somehow, we have it all wrong in our thinking around the numbers. We naively believe we are entitled to get it right. Like it's grade 10 math with an absolute answer for each problem. With grade 10 math it's either right or wrong, we get a check mark or an x. That is where we confuse math with business planning. This confusion stops many of you in your tracks when it comes to playing; the money, the monthly forecast and annual budget game in your hotel. The whole idea behind creating financial leadership in your hotel is not to get the answer right. It's to produce; more operational questions, better financial communication with you leaders, higher engagement with their numbers and ultimately a strategy to more effectively manage your business. Like service and engagement, we are going to drop the ball from time to time. When we do we need to realize it's part of the deal and it's an opportunity to learn what went wrong. The error leads to a better result next time. If we can see this, we now have the numbers working for us. They now give us clues about our business we could not see before. That's the real purpose for the numbers, they point us in a direction. If we don't write a plan and then execute we have no comparative. Without the comparison, we are lost. "Without a map, any road will take you where you want to go". Far too often we use the result in our business to make someone wrong. Rather, we should be looking at the financial communication system and strengthening it."I've missed more than 9000 shots in my career. I've lost almost 300 games. 26 times, I've been trusted to take the game-winning shot and missed. I've failed over and over and over again in my life. And that is why I succeed. Talent wins games, but teamwork and intelligence win championships. I can accept failure, everyone fails at something. But I can't accept not trying." - Michael JordanThis quote by basketball's greatest player ever sums it up quite well. In your hotel, you have a chance to take a shot with every leader every month. Buy "not trying" in your hotel means you have no monthly departmental business plans. Each department is on the sidelines and they are not taking a shot, their shot. They are not taking a shot at getting better. They are missing their opportunity to fail and learn. Get them to complete their forecast, track their results, adjust their spending, review their monthly financial results, write their commentary. F TAR W. Practice and learn, that's what you do and above all else, you create an environment where it's safe for your leaders to take their shot and ultimately miss it. And then you encourage them to take another shot, learn and know that failing is the way to win. The financial game in your hotel will never, ever, ever, ever.......repeat "ever"300 times, be done, won or mastered. Accepting this reality with the financials and working with all departmental leaders to create teamwork and intelligence with the numbers is the ultimate way to succeed. You have the ability to create a financially engaged leadership team in your hotel. Just get everyone on the court and take a shot. Learn and take another shot. Just don't stop.I am going to wrap this one up with a great quote from Henry Ford. "Whether you think you can, or you think you can't--you're right."Financial leadership in your hotel is something that you can create and it's also true that it won't happen if you don't think you can. The right mindset is a powerful thing.Visit my website today for a copy of my guidebook: The Seven Secrets to Create a Financially Engaged Leadership Team in Your Hotel
The Hotel Financial Coach - 1 May 2017
In the hotel business, we have three equal pillars. The guest, the colleague and the money. We need to realize that the 3rd pillar, the money, the owner, the P&L, the paperwork, whatever you want to call it, it needs a proper voice. The right voice, a voice that speaks to the leadership and the highest purpose that a corner stone of our business warrants. Far too often the voice of the money is scary stingy or down right mean. If the paper is going to have a voice we want to ensure it's the proper one. The voice that will get and give equity with all of our constituents.You're probably thinking that the director of finance sure makes enough noise about the numbers and schedules for month end and the variances to forecast. He or she is very vocal at the department head meetings, always telling us what's wrong, what's late, what didn't work. You're also thinking that the owner's presence with their asset manager is obvious. They are always getting the hotel to cut back, we make seemingly endless changes to standards and payroll all to drive the bottom line. The financial voice in the hotel is loud and it's almost always negative, never enough always wanting more, an endless need to be fed. This is what happens to the voice for the money if we don't address the way in which we craft, package and deliver the money message.What if the voice of the money had the same respect and understanding that the voice of the guest has? Or the voice of the colleague. It's possible to create the kind of environment where this is the case and it's built on understanding. Before I go there and tell you what that looks like it's important to understand why the money needs a special voice and why it easily gets a bad rap if we don't take care to give it the proper voice. Money, the P&L, the owner usually gets a bad reputation because of three reasons. One, money is a powerful part of our societies fabric, if you don't have money or you think you need more it is a powerful negative force. Not enough money and the next step is surely death, and so on. I think we all get the picture. Two, money is usually used to shame people, not enough and surely there is something you're missing, not doing and certainly you're not keeping up. Third, as part of our culture the very subject and open discussion about money is still largely taboo. So, the net sum of all of this is; if we want to have a positive relationship with the money in our hotel we need to get the money out of the dark closet and get it front and center. We need to give the money a fair, friendly and equitable voice. After all money is just a way to measure and exchange value in our world.To give the money that kind of a voice requires a strategy and practices we need to adopt. The strategies foundation is open access to financial information. Budgets, forecasts and actual results are all shared in your hotel. Manages and leaders at all levels are part of the creation of the budget, forecast and they share these updates regularly with their departments and colleagues. Success are celebrated and rewards for financial gains are shared. The sharing part is critical, whatever that means in your business is uniquely yours. It could be profit sharing, bonuses, celebrations, it really does not matter as long as your sharing the prosperity. In times of constraint when revenues decline we now have a leg to stand on with our teams. Expenses and staffing need to be adjusted and no one likes to do this but an engaged team that knows what the score is will be much more willing to do their part id they know what's going on financially and if they feel like they are part of the team. This is the only way to break out of the cycle that would otherwise have the money being the instrument that victimizes the workforce when we need them on board more than ever. We can't have our cake and eat it too. If we try too, our colleague and leaders will see through our double standard.In writing this article, it occurs to me that this is the very core of our being in hospitality. We're here to help people and we often associate that with helping the guests. The same is equally if not more important when it comes to the colleagues. If we truly desire a team that actively looks after our guests then the formula is surely one that has the executive, the leadership, the owner, the money looking after the colleagues. A large part of that looking after can be built on the money culture, making its voice one of caring and fairness. All we need to believe is that looking after our colleagues and sharing resources results in one thing, colleagues that look after their guests and this in-turn keeps them raving about your business and coming back. It's like perpetual motion.Giving the money a voice in your hotel enables you the embodiment of values that no other pillar can. It creates an incredibly engaged team in your business, a team that respects you because of your openness. This team lifts your business up with many hands. The voice of the money can be kind and just, it need not be feared and kept in the dark for only a few. Either way its voice will be heard, it's up to you to decide what it will say.Visit my website today for a copy of my guidebookThe Seven Secrets to Create a Financially Engaged Leadership Team in Your Hotel www.hotelfinancialcoach.com
The Hotel Financial Coach - 25 April 2017
"it's great that you increased the rate and overall revenues in my hotel, but what I really want to know is how much you will keep and give me in profits" - anonymous hotel ownerManaging flow thru in your hotel is a key attribute to understanding the profit model for your hotel. The reason it is so important to understand is the different characteristics that emerge when revenues go up or down in different departments. Measuring flow thru by department and by key driver is the basis for understanding your hotels real financial results and most importantly its financial potential.Here are some motherhood questions to get your flow thru imagination going.The overall revenues year to date are up by 1.3 million dollars how much should flow in GOP?Occupancy is up over last year by 5% - and the rate is up $15 as a result room revenues are up $720,000 - how much should flow in rooms profit and GOP?Restaurant average check is up by $2 and as a result food revenues are up $10,000 - how much should flow in F&B profit and GOP?Liquor revenues are up over last year in my lounge by $7,000 - how much should flow in F&B profit and GOP?Banquet food sales are $50,000 higher this month than the same month last year driven by higher volume and average check - how much should flow to the F&B profit and GOP?The way we calculate flow thru is straight forward. The first step is you subtract the revenues from two different periods and step two is to subtract the profit from the same two periods and the thirds step is to divide the difference in revenues by the difference in the profit. See the sample charts below.All the revenue streams in your hotel have two attributes, pricing and volume. Understanding the difference and measuring the impact is the key to understanding and measuring departmental flow thru.Measuring flow thru to the prior period is normally a stronger comparison than measuring flow thru to budget or forecast. The reason being when we compare the flow thru from one real period to another real period it's more of an apples to apples comparison. When we compare flow thru to budget were comparing a real result to a projection. A word of caution, when comparing the flow from one period to another it's important to include any events that may have had an impact on the results. This is where a good memory and a great monthly property commentary come into play. Let's say that last year in the month of May we had a great group month, off the charts because of a city wide. That fact will skew the flow thru to this month. Being able to articulate the impact of past and current events is very important.Negative flow is also an important concept and calculation to master. When revenues decrease, we want to be able to mitigate the impact to the profit lines. We want to be able to retain the profit loss. If we don't act we run the risk of losing 100% or even more of the lost revenue in the form of decreased profits.Rooms FlowThe rooms department is the engine in 99% of the hotels in the world. The greatest contributor to performance is rate and then occupancy. If my rate goes up $10 over the same month last year and I sell 18,500 rooms this month, the same amount as last year, my room revenue just went up by $185,000. The question is how much should I be able to keep as profit. What we need to examine is what else would need to increase to compensate for the additional room revenue? This is the magic in the hotel business as very little needs to go up when my rate grows. Whether it's a transient increase or group the impact is largely the same, i.e. Very Good! Depending on my segmentation I may need to spend some of this increased revenue on third party commissions. I also may need to spend more on my reservation expense from my brand, depending on the mechanics of the charge back. Other than these two cursory items no addition expense or payroll in the rooms department need be spent. Other costs that will be impacted by the increased revenues are credit card commissions, centralized fees and management fees. A good rule of thumb is I should see 90% of any additional revenues flow in rooms profit and 85% in GOP, that result from increased room rate. Your hotel manager may take it upon himself/herself to spend a little more this month to catch up on some cleaning or other expense but it is not directly related to the increase in rate. On the other side of the equation is occupancy. Let's say my hotel this month saw an increase of 6 points in occupancy over the same month last year. This resulted in and an additional 300 rooms sold and an additional $45,000 in room revenue. The question is how much should flow? With occupancy, it's a bit more complicated. Every time I sell a room I have both fixed and variable expenses associated with the sale. Taking the 300 extra rooms, that's an average of 10 more per day. I don't need huge amounts of additional resources at the front desk, in reservations or in guest services. I will however need additional room attendants and housekeeping labor. I will consume more amenities, guest supplies and probably should pay higher commissions to 3rd parties and more in reservation expenses to my brand. I will also pay higher credit card commissions, centralized fees and management fees. So, as a rule of thumb I should see 85% of any additional room revenues from increased occupancy as increased rooms profit and 80% in increased GOP.F&B FlowWhat is the increase or decrease in F&B revenue and where did it come from? In the food and beverage department we need to have a much bigger calculator to see what happened and what the results should be. We want to be able to measure the increase or decrease in all the dimensions that drive our business. Profitability characteristics are very different between food sales and beverage sales. Within food sales the profitability of all the different meal periods as well as distinguishing the relationship between outlet sales and banquets is key. What would you rather have, dinner revenue increase or the same revenue increases from coffee breaks? Would you like to see sales increase in your outlets or in banquets, what would have a bigger impact on profit.? With beverage sales, the profit margins for liquor, beer and wine need to be understood as well as the portion from our outlets vs banquets. When we look at the average cover prices in food we also need to understand the contribution margin. It's nice to see the average cover increase but what profit do I make from the different type of sales inside my F&B operation? All of this looks complicated on the surface but it really is not. With a little analysis and some patience, we can build a model that will help us see the optimal picture for profitability in our F&B operation. With this picture, we can strive to create the optimal recipe for our food and beverage success. That's the key, understanding what the optimal mix is and getting our sales and conference services people selling that. Getting our outlet managers and servers to understand what items have the biggest contribution to profit and have them sell accordingly. If we were selling cars, we would know model that generates the biggest margin, and the accessories that drive profits. Our business is no different. Flow thru and its impact is at the heart of understanding this profit model.Minor operating department flow. Same principles as above, what is the difference in the top line and how much did we make in additional profits. This is valuable information for spa, golf and retail operations.The last part is sometimes the most important, in this case its non-operating department flow. I can't tell you how many statements I see where there is a nice hit on the top line revenues only to have most of the potential profits chewed up in non-operating departmental creep. Administration costs, sales and marketing and maintenance flow needs to be measured, and managed. If you cannot readily see this you're missing a powerful tool.Creating the flow thru measurements in your financials is relatively straight forward. Pulling out the numbers you want to see like the change in revenue and the change in profit from the two different periods and dividing the two is it. Display these on your financials and you will have a whole new understanding of your business and be much more effective in your ability to hold others to managing their departmental flow thru.Mastering flow thru is the key to the hotel profit maximization. Understanding where we win and pointing the team, the sellers, the operators in that direction. Creating alignment around the business model.For a complimentary copy of my excel sheet "flow thru cheat sheet" send me an email requesting a copy firstname.lastname@example.org or visit my website and download my free guidebook, "the seven secrets to create a financially engaged leadership team in your hotel". www.hotelfinancialcoach.comCall or write today for a valuable consultation on how you can create more financial leadership in your hotel.
The Hotel Financial Coach - 19 April 2017
Do your hotel financial statements give you the information you need to effectively manage your hotel? Are you able to see if your profits are where they should be in an enhanced top line statement? Do your statements measure flow thru? Do you record your rooms business by proper segments and track the rooms occupied, rate and revenue in each segment? Do you record customers served in F&B and do you separate meal periods? Do you record liquor, beer, wine and mineral sales on your financials separately? Do you measure labor productivity in your financials? Do you record hours of work in your financials? Do you have payroll segmented by management and hourly classifications? Do you have a separate supplemental payroll and benefits statement? Do you track arrivals and departures? Most statements I see do not have most of these critical elements included. They're lacking these incredibly effective items that can easily be added. Most people use the standard format as outlined in the 11th addition of the uniformed system of accounts for the lodging industry. This is great however you can produce an enhanced statement with just a little more detail added that will greatly assist you in effectively managing your hotel.How would these elements add insight and value to your business? Let's explore this.In part one we covered the Top Line Statement format, Flow Thru, Rooms Segmentation, F&B Customers and Average Checks by Meal Period. If you missed part one check out my website and blog post from February 27th, 2017, to get the article.Measuring Productivity on Your Financial Statements.The only truly effective way to measure labor productivity in the hotel business is by expressing the productivity in hours per room occupied in the rooms division, hours per cover served in the F&B division and EFTE's per 100 rooms available in the non-operating departments. In this article, we will concentrate on Rooms and F&B productivity. The reason why hours per is the best way to measure productivity is we divide actual hours worked by the actual volume of business, units sold. Others may say that measuring labor percentage, or dollars of labor per unit sold are effective but the fact is our managers and leaders have no control over wage rates, but they do have control over hours worked, the schedule, and this is what we want them to focus on. Being able to see the hours worked and the number of rooms or covers served in our financial statements means we need to record and book these statistics monthly in a statistical journal entry. We accomplish this by adding a "stats" department to our chart of accounts and the statistical entry and department net to a big fat zero each month.The beauty of knowing the hours per room occupied is powerful stuff. If we were making cars we would want to know how many hours of work it takes to make a car. We would then want to innovate and find ways to reduce this. In the hotel, it's the same. We split off the rooms and F&B because they are very different. In the hotel business, we want to know how many hours it takes to service one room or one cover. We then want to innovate to see if our malmanagement practices are actually producing better or worse results and adjust accordingly. The only way to do this is with hours per calculations.In rooms, we want to be able to see the hours it takes to service one room. We want to be able to break that down between the front office, guest services, housekeeping, room attendants, and reservations. We also want to be able to distinguish the hourly and management hours worked. Once we have the hours recorded by area in hourly and management we divide the hours worked by the rooms occupied. So, for example, YTD the front office hourly total is 10,434 hours worked and management is 4,976 hours worked. The rooms occupied are 41,975. To figure out the productivity I divide the hours worked by the rooms occupied. My productivity is .249 for hourly and .119 for management. I do this with each classification of payroll monthly and YTD, for all three financial categories; actual, budget and last year. Below is a chart the shows the complete rooms division picture. Quickly we can see if we have better or worse productivity compared to budget and last year. An increase in our productivity will mean my numbers go down. Why would I hire you to run myhousekeeping department if you're going to be less productive than the last manager? I want you to continually strive to improve productivity and the only way I can measure this is by hours worked divided by rooms occupied. We want to include all rooms occupied and all hours worked. Over time hours count as one hour. We do not include hours for holiday pay or vacations, these are nonproductive hours.In this example were looking at an average hotel and it's the May results and YTD May. The left side is the summary of hours worked and on the right side, it's those hours divided by the rooms occupied which are at the very bottom of the chart on the right side.From this simple analysis, we can clearly see where we're improving and where we are falling in the rooms division for the month and YTD relative to budget and last year with labor. We can see this by area and by hourly and management position. In this example, management in the front office, housekeeping, and reservations have had positive productivity changes. With the hourly, we see improvements in the front office, room attendants, reservations, and bell desk. Overall the YTD productivity is 1.755 hours per room occupied compared to the budget of 1.831 and last year of 1.806. Let's now look at the impact this has on the hotel. Comparing the YTD productivity to last year we see that it has improved from 1.806 hours per room occupied to 1.755 hours YTD this year. To measure the impact, we just need to subtract the two and multiply by the YTD rooms occupied. In this hotel, the wage rates with benefits are $30. (1.806-1.755 = .051) x 41975 rooms occupied = 2140 less hours worked x $30 = $64,221 in labor savings YTD after May. If the trend continues we will save over 150k by year end.The chart and the analysis are great tools but the most useful piece of this is understanding what changes were made that created the enhanced productivity. From there we want to see how these ideas can be extrapolated to our other hotels. One of the chief by-products of this type of analysis is benchmarking all the operations in our portfolio so we can see what hotel is best and in turn discovertheir practices and apply them wherever possible and practical to our other hotels. Brands sell expertise to owners and without productivity measurements in the financials, brands and hotels don't know if they are improving or not. A percentage will not tell you as it's a percentage of something else, usually revenue and this can be very misleading.The food and beverage department productivity analysis is the same but uses F&B hours by area and covers. In F&B we need to organize things a little differently due to the various outlets and kitchens. We want to record direct service for each outlet using hourly and management as well as allocated hours for management, kitchen and stewarding.Separate Schedules for Supplemental Payroll and Payroll BenefitsHaving these two additional costs separated and summarized on a separate schedule is both very handy and useful. These costs are usually allocated to each department using hours worked or some other allocation basis. To be able to see them in total is critical. Without the totals, we don't know the overall picture relative to budget and last year. This schedule can be created quite easily and it's important that we distinguish between supplemental payroll which is defined by costs that are directly related to the payroll. Examples are vacations, statutory holidays, sick pay, bonus, severance. On the benefit side, we want to include items like state and federal programs, health care, cafeteria costs, worker's compensation, and pensions. Both of these categories are big dollars to a hotel and their characteristics are different so having separate reporting that summarizes them is very important.Tracking Arrivals and Departures and Average Guests Per StayI once had a hotel in my region that had an average length of stay of 13 days. Needless to say, this hotel was unique. On the other side of that, I also know an airport hotel that has an average stay of less than 1 day. This statistic allows us to measure the amount of activity for the bell desk and front desk as well as the demand on the room attendants as stay overs are easier to clean than departures. Stay overs mean no additional work for the front desk, door or bell desk. The average length of stay also can point to early or delayed capital needs for everything from the room renovation to the carpets and other operating equipment. A general rule of thumb in rooms is, the higher the average length of stay the better the labor productivity should be. This statistic is calculated by dividing the number of rooms occupied by the arrivals. Finally, were wanting to measure and see the average number of guests per stay. We can achieve this by recording the number of guests in the room and dividing the aggregate of these by the total number of rooms sold. This is particularly useful for measuring F&B capture and it also points to linen and amenity consumption. Typically, the lower the number of guests the lower the laundry and amenity costs per room occupied.Visit my website today for a copy of my guidebook, The Seven Secrets to Create a Financially Engaged Leadership Team in Your Hotel. www.hotelfinancialcoach.com
The Hotel Financial Coach - 10 April 2017
"Servants don't know a good master till they have served a worse." -- Aesop, Aesop's FablesThe Empress Hotel in Victoria, British Columbia, saw massive renovation in 1988. The renovation was so big the hotel was closed for 6 months. One man died in the construction falling down the garbage chute and it is said that the hotel rose 6 inches taller as so much weight was taken out of her. The Indian gum wood piles expanded giving the old girl a lift. I have said many times, you have not really worked in the hotel business until you have worked in a hotel that's closed. We take for granted the little things like the cafeteria, the laundry, the washroom! At one point, we had to walk up six flights of stairs to get to our office and six back down to go to the loo.Eventually, the hotel emerged from its renovation and physical transformation and the results were amazing. The renovation costs more than doubled the budget. Once you start peeling back the walls what you find is usually not what you bargained for. None the less, the job was done and the old lady had a new dress and shoes. So, it's the summer of 1989 and the hotel is back online and we were hosting our first big conference: The Canadian Pacific Presidents Conference. Back in the late 1980s, Canadian Pacific was a huge conglomerate of companies sewn together. Coal, gas, paper products, food, hotels, ships, trucking, credit cards, lumber, chemicals, railway, airline, power, telecommunications, consulting, securities, and real estate were all part of the conglomerate at one point or another."I don't think we are too diversified. We would be if we didn't have a plan. You look closely and everything fits. You know, we didn't try to diversify just to look good." Ian Sinclair, President and Chairman of the Board, CP Limited, 1966.While the conference dates had arrived and it goes without saying that we were pulling out all the resources we had to give these folks a great time. Each division of the company would send its president and executive team along with their spouses. These folks came from all over the world and they were captains of industry. As a management team, we were assigned extra duties to help with the conference, especially with the arrival process. I remember having sketchy photocopied black and white pictures from past annual reports to use as clues to who these people were and our job was to find them upon arrival. Each of us was assigned key individuals to meet and greet, escort them to their room, make sure they were welcomed and happy with their suites. Normal stuff.Our hotel company President was one of the first to arrive and his wife arrived a bit later on a separate flight, only to have the airline misplace her luggage. The hotel company President was back and forth between his hospitality suite and the front door, welcoming his fellow company Presidents and having a few cocktails. The biggest arrival by far was the current Chairman and President, William Stinson. He had grown up inside of Canadian Pacific since the mid-1950s and he had quite the reputation. His nickname was 'Old Ironsides'. When he arrived, the hotels' General Manager (GM) took him directly to his office as Stinson had business to attend to which meant he needed a phone to use. In 1989, we had cell phones but not many business executives were using them. The landline was still king.So now it's getting a little later in the afternoon and most of the company brass was in house. I was at the front door and our hotel company President came back to the lobby and asked me how things were going. I said: "We have three more to arrive and I am told they are all on schedule." A bit of b-- but he was happy to hear this. Funny thing was he had a "lime vesicle" sticking on his upper lip and the fragrance of gin was ripe. None the less, he was in a good mood and as we chatted our hotel GM came to the front door as well. The words that came out of their mouths next were incredible.Hotel President to our GM: "Where is my wife's f-- luggage?"GM: "Mr. Stinson is using the phone in my office."Hotel President: "Haven't you got another f-- phone in this hotel!"So, all of this unfolds two feet away from me. I see our GM, who is a powerful man in our eyes, melt. He was speechless. Having been called to the ground in front of me by the President. I felt so embarrassed for him as he retreated to the other end of the lobby to get someone to call about the President's wife's luggage.This story reminds me of a saying often repeated by an old GM I used to work with: "We're all busboys, get over it." And that is so true. No matter how important you think you are there is always someone seemingly more important. So, the grand lesson in all of this is; treat people the way you want to be treated because that's the right thing to do and don't treat others the way the treat you. Don't go there. Rise above. Be the leaders that stands above.
The Hotel Financial Coach - 6 April 2017
Creating financial leadership in your hotel has the same fundamental realtionshift at its roots. The traditional relationship in the hotel with reports and deadlines to submit; forecasts, budgets and commentaries is to have the financial leader tell the non-financial department managers when reports, forecast, budgets and commentaries are due and to send out schedules and hound everyone every month several times about the pending deadlines. This system does not work. I know because that was my system for nearly 20 years and all it ever consistently produced was my frustration and a lack of usable content.My frustration came from not being respected enough by the non-financial leaders or so I thought. The other leaders rarely provided their departmental numbers and reports to me on time, correct and of good quality. So, my assumption was they didn't respect me, they didn't respect my position and I was sick of it. It really was the worst part of my job. Especially when their lack of attention to their responsibilities got me in hot water. I can't sit in my office and dream up what is going to happen next month, next quarter, next year in the other department of the hotel. It does not work that way and without their financial contribution I'm playing Russian roulette. Sooner or later I am going to get it terribly wrong and the department managers will inevitably lead me to produce projections and actual results that are wrong. Even in a small hotel the business needs to be managed departmentally with budgets and forecast that leaders can follow and adjust as business levels change.So where is the shift? The shift for me came from the act of serving. The schedules and reminders and memos' and follow ups that I was doing were not serving anyone but maybe me, selfishly. When I created, and delivered my first financial leadership workshop I had a profound and life changing experience. At the end of that day I had a lineup of leaders waiting to thank me and to share their experience with me. "no one ever explained the P&L to me before", "I had no idea what you did with my numbers", "everyone should have this training before they start" these comments and many more took me completely by surprise and I knew right away that I was onto something, something profound was going on.At the time, I thought it was novel, however I didn't really understand the implications of what I had started. In a short period of time, less than 6 months later I did the same workshop in the same hotel again and I got the same result. Leaders wanting to thank me and share their experience with me. Fantastic, nice feeling but something else was going on. These same leaders were now regular getting their forecast, accruals, budgets and commentaries to me on time and with so much more accuracy and clarity. Leaders were now seeking me out to discuss their ideas on how to save money and generate more revenues. I had created a financially engaged leadership team by teaching them the business of hotels and treating them like adults. Investing my time and effort into their prosperity.All of this happened because of the shift that the workshop created. It shifted me from the dreary and negative task of pestering the other leaders to give me what I needed. It shifted me to a place where I was serving them first. Now that I have served they are more than willing to reciprocate. Why didn't I think of this before? Ego is the reason I didn't think to do this workshop and education idea before. Ego is what holds us all back from really leading by serving. I'm the director of finance and they should get me their numbers because I need them and that's my job. I laugh now when I think about it because it only took 20 years to figure it out and it was someone else's idea to begin with. Oh well, now that I know the secret I'm telling others and writing this article to boot.The realtionshift in my hotel and the realtionshift I help my clients create in their hotels is anchored by four distinct elements.The non-financial leaders now see the impact that they have. Impact and making a difference are basic human needs. Maslow's hierarchy of needs identifies that people want to know they make a difference in life and with their work. This is a powerful principle to shine a light on. When you mix this with the other principles it results in a much greater desire to do this financial work. People see they make a difference and that this work will make a difference in their lives and create more, larger and desirable results. It will literally create and lead these managers to greater prosperity in their lives. Financial leadership skills are very valuable to have and once people get them it's like riding a bicycle, we don't ever forget.They also quickly see that it's not so hard. Financial leadership and knowing your numbers is not hard. It's especially refreshing when you get a group of leaders together and expose the truth about what happens in your department with payroll or expense and then the same thing happens in the sales department and maintenance. Suddenly, the charade cannot survive any longer and leaders see it's the same thing in another department as mine. What is all the fuss about let's get on with it and do this! Before financial leadership training non-financial leaders spend an inordinate amount of time making excuses and basically hiding out. With this training, it's no longer possible to hide out.Return on investment. What would it be like to have your hotel full of leaders that knew their numbers, and managed accordingly. Do we think it might lead to higher profits? The answer is a resounding yes! We all know there are a million ways to save money in our business and we all know the opposite is true, there are a million ways to waste it. All it comes down to what kind of a team do you want to create? A team that is financially engaged or one that is not. It's really that simple. What you tend to grows. Creating a financially engaged leadership team is essentially no different than creating a great guest service culture or a team with high colleague engagement. When we focus our time and resources on financial leadership we get results. We go from having few leaders that know their numbers to having lots of leaders that know their numbers.Leadership is the fourth element. This part took me the longest to see and it has had the most profound impact. Creating a financially engaged team means your committed to the non-financial leader's success. You will be there when they have challenges and you will support them, and you will also be there when there is success. The commitment you have to help them grow is the most powerful element. Remember what it was like when someone took you under their wing and helped you. This is what's possible with financial leadership. I teach my clients to make agreements on how they will support each other on the creating and ongoing maintenance of the numbers. Leaders will literally love you for helping them with this and it's not long before they get it and your world of frustration is all but gone.To wrap up the RelationShift its important to put things in clear perspective. The hotel business is about people, guests, colleagues and leaders. We're not perfect, any of us and we never ever will be. So just like service deficiencies were going to drop the ball with the numbers. Just like colleague engagement we can operate at a high level but were not machines and we will make mistakes. However, it is entirely possible to manage the numbers with great skill and it is possible to create a financially engaged leadership team in your hotel. No superstars, no exceptions, no excuses, no victims. Just team work, support and commitment to constant improvement. We approach guest service and colleague engagement this way, no one gets to ride the train with a free pass, were all in this together. Make financial leadership the same. RelationShift.Reprinted from the Hotel Business Review with permission from www.HotelExecutive.com.
The Hotel Financial Coach - 5 April 2017
We seemingly have no way of knowing what's really going to happen financially in our business. We roll the dice every month. When we are in a fly-by-the-seat-of-your-pants hotel and we have a good month, things are great, but we really don't know why. For example, why were expenses so low this month? Or, perhaps payroll seems too good to be true. When we have a bad month, the sins are obvious: missed invoices from prior periods; over forecast in payroll and revenues below forecast. Didn't anyone see this coming? Well, actually, no. No one saw this coming because we don't have a financial communication process to ensure we are on top of the business.When we are in a fly-by-the-seat-of-your-pants hotel and we have a bad result the GM points fingers at the controller. The controller blames the department heads who didn't submit their forecast on time. The department heads blame the controller because he/she created the forecast anyway! You see, it just goes around and around. No accountability, no ownership, lousy results and no financial leadership!This is a dangerous and irresponsible practice that almost always leads to financial failure at some point. It is common practice in our industry and one that has led to many financial meltdowns. For some, the argument would be that the finance department is responsible of managing the numbers. That might sound like the right idea to the lay man but in practice it is short sighted. It rarely works because the finance department has no real way of knowing what is going on in the various and numerous departments within the hotel. The fact is the accounting departments' job is to record what happened, capture the data in the month for the month, report on the results and ensure the assets and liabilities are properly recorded and safeguarded. It is not to know what each area in the hotel will do next month, next quarter, next year. If we want that kind of forward looking intelligence in our hotel we need to create a system to generate it. What can we do to create this system?If we want to have a system in our hotel that allows us to manage the financial picture properly we need to give our managers and leaders the responsibility for their results which means they need to create their budgets and forecasts. They need to know what is in the middle of their statements. Budgets and forecasts must be zero based and each area leader needs to own them. There is no other way to create this. If we try and manufacture numbers and give them to our leaders to deliver on, we are going to fail. Your department leaders and managers want to be fully and completely responsible for their departments' finances. And what they need to accomplish this, is training, support and your guiding hand.So, there you have it. Stop flying-by-the-seat-of-your-pants and get your financial leadership on!Call or write today and arrange for a complimentary discussion on how you can create a financially engaged leadership team in your hotel.
The Hotel Financial Coach - 28 March 2017
I think leadership is about two things that are continuously and endlessly evolving: communication and the development of people including you.Financial leadership is also about the same two processes.If you're the leader of a nation, an army or a company, you need people to understand you and you need to understand them. Your constituents must be able to hear your message clearly and your message needs to resonate with them to allow them to follow you and do great things. Being compassionate, listening to the needs of others and making challenging decisions that move people and situations forward, allows people to really become who they need and want to be. This is where the communication transcends the art of effective speaking and listening into thoughts and actions that move people forward, including you, in the development of your mission, culture and company."True leadership lies in guiding others to success in ensuring that everyone is performing at their best, doing the work they are pledged to do and doing it well." --Bill OwensFinancial leadership means you're able to clearly articulate the goals and means to achieve these in your company. And, you have an effective means to gather and process the needs of others thereby allowing them to contribute their best performance. Their contribution is a direct reflection of your commitment to developing them. The way you do this is by creating an environment that has their success and development come first. The support you give allows them to develop. You cannot expect the development to happen first and your support follow. People need you to light the way."But all I really want to know.... I want you to show me the way" - Peter FramptonLogically that makes sense. People need us to show them the way. If we don't, they go their own way. We need to see this and get in front of it. However, all too often we get lost in the busyness of what we do and who we need to be as that leader. We follow a downward trajectory as a result of our lack of a work system. The key is to be more than we do. 'Being' means creating a consciousness that can see the path and guide the 'doing' down the needed path. Stepping back every day to ensure the work is done and the ship is still heading in the desired direction, the being. That's the key: have the disciplines in place to get the work done and have time to guide the journey. Continuous communication with your stakeholders allows them to develop and this happens because you create the environment.