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Hospitality Financial Leadership - Catch Me If You Can

The Hotel Financial Coach ·16 April 2018
Frank Abagnale is arguably the world's most famous modern-day impostor. Leonardo DiCaprio played his character in the 2002 movie directed by none other than Steven Spielberg, with the same title as this piece. The movie was based on the 1980 book that Frank wrote. I am writing about Frank Abagnale because I had the pleasure of meeting him personally, and experiencing his trickery, just a little. Also, there is a direct link between what his story is all about and your own financial leadership journey.If you have not seen the movie, watch it. Tom Hanks plays the lawman chasing after Frank and it is a wild ride. The book is also a must if you are even mildly interested in a good con man's story.My story of meeting Frank and the parallel to Financial Leadership starts early in the winter of 2003. I was the hotel manager of a popular downtown hotel in Vancouver, Canada. The movie "Catch Me If You Can" had just been released and a local business association had booked Mr. Frank Abagnale to speak at a luncheon in my hotel. I had the pleasure of attending the luncheon, listening to him speak passionately about children and the role of a parent or guardian. We even held a private reception the evening before he spoke, and I got to meet the famous impostor. I was a big fan, having read the book and seen the movie just days before. Frank has a cameo in the movie and I had seen his picture, so I was a little familiar with what he looked like.For those of you who are wondering about my character and you have not heard of him, he successfully pulled off taking on eight different identities from the age of 15-21. He traveled the world as a commercial pilot (jump seat only), physician and lawyer, just to name three. He also was a master at check forgery. He was caught by Hanks, turned legit and has worked with the likes of the FBI using his talents for the good, and he has even testified before the US Senate about his former life as a master counterfeit check man.The funny thing was--he was even an impostor at our reception.Here is how we metI was speaking with a couple of people at the reception and all of a sudden there was another person engaging in the conversation. We were talking about our guest of honor and what a great story he had and his movie. All positive things, thank goodness because he was now part of our discussion and I, like the other couple, thought Frank was someone else. I am not at all sure who I thought he was, but he simply assumed the role of a person who made me believe he knew me. The other couple experienced the same comforting feeling. I do not know what he said to gain our confidence and allow us to drop our guards, but it was pretty cool. We continued our dissertation of our guest of honor until he spoke and introduced himself. We were all quite embarrassed and completely surprised at the same time. He smiled, and you could tell he was a master in action, simply practicing what he does, pretending to be someone he is not.After he left our little group at the reception, the other couple and I marveled at his bravery and the pure entertainment we just experienced. How he made us all think he was someone we knew. Actually, he convinced me he knew the couple and, in turn, the couple thought he knew me. Genius.This is the magic of being an impostor. Knowing enough to fool someone who should know something about how you need to look, sound, smell and feel like. That is the con. It is a confidence game and to be successful you need to show up with that level of confidence in who you are and what you are doing so other people do not get suspicious.The Tie to Financial Leadership - My First Budget Review MeetingI vividly remember the first time I had the opportunity to see the corporate budget review team in action. I was invited to the meeting where we reviewed the hotel annual budget. I really had no idea what to expect. I was nervous, and I had convinced myself that I would be found out and singled out for not really know what was going on. You know, the impostor syndrome. I know this is what holds many people back from jumping into the numbers game in their hotels. Fear.What I experienced that day was nothing short of theater. A lot of chest pounding and pontificating in that room. Who had the best stories, the most convincing comparisons, the examples that paled the rest? Each person in the meeting that day was in some way an impostor, playing a part and trying to convince the others that they knew what they were talking about. All the while we followed the president's lead. If he liked a particular story or theory, we all followed that dog. It was an amazing dance to watch. I barely said a word beyond hello, goodbye and kissed my calculator. But what I did see that day was that these captains of my industry, they were all trying to convince one another and the boss they knew the story. It is a confidence game. It is how human beings play together in the business world. If you have been there you know what I am talking about. If you have not experienced this yet, be patient, be ready and above all else take your shot.Here is the parallel: being an impostor and financial leadership. You must be willing to walk into the meeting room like it is your room. That does not mean you are cocky or arrogant. Humble and respectful is the demeanor you want to have. Your number one job is to listen, observe and learn. You also need the stomach for what is coming your way, and the willingness to respond. This is where most people turn away. They do not feel they have the knowledge or the experience, so they do not feel they can play, let alone play at this level. This is a big mistake. What you do not realize is everyone in that room is in the same boat as you. At some level or another, they are thinking the same things you are, namely, who am I to be here with my limited knowledge and sooner or later will someone find me out?I have seen hundreds of examples of people playing this game and I want to share a few things about this experience with you. In fact, once you see this you will realize everyone you encounter is playing the game at one level or another.One, the biggest impostor is almost always the bossThat is right--he or she ultimately knows the least about the detailed subject matter. That does not mean they lack the experience or the knowledge to do their job, they just do not have the knowledge and firsthand experience you do. Do not think for a moment they know your reality. At the time my experience began, our president had just joined our hotel group from a sister company that made baking supplies. Now he is in a boardroom with 15 hotel people talking about our business. The best con man that day was him.Two, people have your backThe people in the room want to hear from you and they have your back. They have a natural desire to want you to feel comfortable and to hear your thoughts. They instinctively know you are the rookie and they want to put you at ease and they do not want to see you suffering. They will not hang you out to dry.Three, play the gameIf someone you work with thinks enough of what you are up to and they have invited you to the big show, then you are ready. The only thing that is missing is you and the courage to play the game. To listen and learn.When you are called upon, speak from your heart and above all else do not try to BS your way. If you do not know the answer, ask a clarifying question. Someone will bail you out. Many times, not having the answer is the best strategy.Point to a possible answer or conclusion and watch others fall in.Fourth and final, they've been in your shoesEveryone in that room has passed through the same door as you. They have all been in your shoes and in some way, they are all impostors just like you, so enjoy the show. You are about to witness human interaction at a whole new level. Be conscious enough not to miss this. Over the years, every time I have attended a similar meeting I received an education that cannot be taught in school. Do not lose sight of this.What "Catch Me If You Can" taught me was a willingness to get it wrong was more important than being right. The readiness to show up and see what happens is more important than staying home until you are ready because you never will be completely ready. Taking the numbers in your hotel by the horns is the way to go. Trust yourself enough to walk into the cockpit and take a seat and welcome those probing questions."All the world's indeed a stage / And we are merely players / Performers and portrayers / Each another's audience / Outside the gilded cage" - Rush "Limelight"
Article by David Lund

Hospitality Financial Leadership - Management Incentive Plans

The Hotel Financial Coach ·10 April 2018
Recently I have been working with a client who has four hotels and we worked on putting together an incentive plan for his executives. This is a story about how we structured the incentive and the goals around the plan and his business.Bonus plans or management incentive plans are nothing new. Even a recent client had almost always given his senior people an annual bonus, typically at the holiday time. When I asked him what it was based on, he said it was just the overriding feeling of his thanks for a job well done.We then discussed the very real fact that he had not shared his financials with his leaders and this was something he wanted to do. This is a good thing because without it and other measurements the real power of the incentive is lost. Sure, his managers appreciated the bonus, but no one knew what it was really for.We discussed creating an incentive plan that is broad-based, measurable The hotels were relatively small, less than 150 rooms each, but still they had some very good tools to put to work in the incentive arena. We decided the first year's incentive plan would have three components and it would also have three performance levels.First component: Guest service score His hotel used an app that gave him good data on a daily, monthly and annual basis. The guest service score was a percentage up to 100 percent. The score for the prior year was 84 percent and the score from 2016 was 85 percent. When I asked him what his goal for 2018 was he said it was to get the score back up to 85 percent. OK, so now let's look at the kickoff and touchdown levels. He is a big football fan, and this was exciting for him. I asked him if he would pay an incentive for service if the score for 2018 was 84 percent again. He said he would. I then asked him if he would be willing to pay a higher amount if the score was 86 percent or higher. He said he would.So, now we have an important part of the incentive. The different payout levels. We used kickoff (starting point for payout), goal (the full payout) and touchdown (the outstanding result). With this breakdown, participants can see the importance of the measurement and it is not an all or nothing result. He will still reward good results that do not quite make the goal and also will allow participants to "double up" on the result of each individual component.Second component: RevPAR index He used STR and the previous year's result was 107 percent. One big challenge with this part of the incentive was new competition. Late in 2017, a new hotel which was a direct competitor entered his market. So, I asked him what a really good result would be for 2018 on RevPAR Index. At this point, he had two full months under his belt and his index year-over-year had dropped to 98 percent. He thought about this one quite a bit and decided a really good result would be 100 percent. We then came up with kickoff at 97 percent, goal 100 percent, and touchdown at 103 percent.Now for the third component: Profit He had his financials for the last two years and we zeroed in on the Gross Operating Profit number. Why GOP? Well, that is the number the manager can control. Pricing, staffing, supplies and overall efficient management cumulate at the GOP number. Most brands use this as well for management incentive plans. The GOP in this property was $2,001,418 in 2017 and $1,955,008 in 2016.Now, for the toughest question so far: What's the budget for 2018? He took a while to explain he did not really have a budget. This is not uncommon, and we had a good discussion about what he thought should happen in 2018. With the budget rhinoceros on the table, we agreed the most effective process would be to map out 2018 month-by-month using occupancy and average rate to produce room revenues and then model the payroll and expenses on 2017 levels. In short order, we came up with a GOP goal for 2018 at $1.95 million. Given the new competition, he would be very happy with that. We then established the kickoff $1.85 million and the touchdown at $2.1 million.We have the framework for the plan He now has a decision to make on the incentive gatekeeper. Will the profit target be the gatekeeper? In other words, do we need to make the profit kickoff point for the other components to pay off? Or, will the fact that the other scores are achieved generate an incentive payment?He decided that no gatekeeper will be necessary for 2018 because it will be a challenging year and he does not want the team to be discouraged if the profit is missed. Focusing on the service, in the long run, is important. The market is changing and it is also the first year for the plan, so he wants to give his managers a fair shot.Next step: Decide on payout percentages He decides the "goal" is 12 percent and applying our kickoff, goal and touchdown metrics we put the data above into an Excel spreadsheet. The very last thing he had to decide before we were done is what weight each component would carry. He decides guest 30 percent, RevPAR index 30 percent and GOP 40 percent, adding up to 100 percent.Three scenarios are mapped out, and the payout can go from 1 percent to 200 percent of the targeted 12 percent. So, a manager making $100K can earn a bonus from $120 all the way up to $24K.The last part of what this client needed to do to put some wheels on this plan was to meet with his incentive plan participants. This is necessary to review the structure of the three components as well as the different levels of the program. This ensures the members understand the system and, most importantly, see that the goals are achievable.One last note (play)We agreed to visit the plan each quarter, and he, in turn, would update his team through regular communication and monthly copies of the guest service score, STR and financial statements. This is the best part because we will see how managers react to the plan and what ideas they put into action this year in those hotels to create better results.That is the middle tasty part of the incentive plan sandwich. It will be interesting to see how this unfolds and how effective it is.
Article by David Lund

Hospitality Financial Leadership - The OTA Distraction: Pushing Rather Than Pulling

The Hotel Financial Coach · 4 April 2018
You cannot go a day online in the hotel community without seeing a ton of OTA related discussion. Hoteliers are like scared kittens when it comes to how they have been treated by the evil empire that the "On-Line Travel Agencies" has created. There is no doubt that the OTAs have dramatically changed the landscape in the last 20 years since Expedia bounced into the world under the strict parenting of Microsoft.In this piece, I want to offer a different perspective--one based on a different view of the OTA revenue creation and resulting costs. I also want to look at and analyze some black and white revenue and profit facts from industry leading organizations that I researched for this article.Hoteliers complain that the OTAs are greedy and they take too much commission. They especially feel the pinch when the commission hits their room P&L statement in the form of a commission. With the merchant model all but on life support, hotels in most cases need to record the gross revenue paid by the guest to the OTA on their income statement. In turn, the hotel needs to pay their room reservation commission expense which is recorded in the rooms department as an expense. On top of this, the hotel needs to pay the credit card commissions and all the other brand-related fees that ramp up on total room revenue or gross hotel revenue, etc., as dictated by the franchise or management agreement.For many hotel owners and operators, this is a bitter pill to swallow. But why so bitter and hard to swallow?My perspective is different The hotel just got a room night or several and, in exchange, they pay a fee--the dreaded commission--and additional ancillary fees. I believe we need to be fair and look at the transaction just made. In the old days, hoteliers were happy as could be to pay the travel agency commissions to the tune of 10 percent of room revenue. This was largely a manual process with a fax or phone call to the reservations office. No one ever complained about this other than perhaps the person who had to manage all those pesky $12 payments and the reams of TA commission inquiries the hotel received and had to research.The comparison to today is hotels allow distribution channels to manage and accept reservations, payments are electronically processed, and they pay roughly double the commission, to the tune of approximately 20 percent. They have, in effect, traded the additional commission--the plus 10 percent--for additional distribution and shear advertising horsepower that the OTA delivers. We can argue all day about the amounts, the pluses and the minuses and how much more we are paying in commission expense. That's not my point or the intention of this piece, so stay with me.Rather than do that let's take a radical approach and disrupt the jailer. Much like the story of the prisoner who needs to pull rather than push his cell door to escape, hoteliers are held prisoner by the expenses they see pumping through their P&L. They are prisoners simply because they look at the cell door and how it works the wrong way.Let's look at another aspect of the business to get a clue for how to operate the cell door--to look at it through a different lens: banquets. When a banquet customer comes knocking, we don't try to kick him in the knee because we will have to record the "cost of sales" from the event she just proposed for the hotel. We welcome them in and service their needs all the while knowing we just added a 20-30 percent food and beverage cost of sales to our operating statement, plus the direct payroll and other expenses. So why then do we scoff at the OTA who brings us business and in turn gets a fee? I say it is because we simply look at it, "the commission," differently.We want our cake (the room revenue) and we detest the commission. But we can't have one without the other and maximize room revenue capture in today's world. We would like all our business to be commission free but that is not the way the game is played. We all know that to maximize RevPAR we need more rooms distribution horsepower than we can ever create by ourselves.Let's look at this scenario with some fresh eyesWhat if we looked at the OTA transaction and the resulting commission as a cost of sales? In F&B the whole profitability deal is built on volume. Get the F&B machine pumping at a good rate and we are profitable. But wait a minute. For every dollar we let in the front door we automatically need to recognize the cost of sales (20 to 30 percent). We never have a problem with this so why is the commission to the OTA any different? We know without the volume cranked way up high in rooms operation we will not hit the desired profitability.I say it is simply because we are pushing rather than pulling. Bring me another 1,000 room nights this month through OTA that I cannot and will never have the distribution to generate and let's both have a good look at the financial result. We all know there are many days and months in the year when we cannot fill rooms with only direct sales tactics and brand efforts. The way we can look at the cell door most effectively is to not get hung up on the percentages.Financial facts boiled down into profit dollarsI am going to use data from the 10-year period 2006-2015. According to CBRE hotel rooms department, profit went from a high in 2006 of just over 76 percent to a figure of just under 75 percent in 2015--down 1.25 percent. This, on one hand, is alarming. But I believe this is where we are pushing rather than pulling.According to a Cushman and Wakefield report, RevPAR in the US has increased over 35 percent in the same time frame as the falling rooms department margin. This room revenue growth is on top of the additional supply growth of more than a half million rooms. Who in their right mind would not like that deal? The adage that we do not take percentages to the bank is our industry "pushing the rooms profit percentage myth" and it is completely misleading. Profit margins are down but the growth on top is a trade anyone in their right mind would jump at. We have enjoyed record growth in RevPAR in the last decade which has been in no small part because of the OTAs investment in computing and marketing that our industry, if left to its own devices, would never have accomplished.I cannot prove the statement I just made about the revenue impact the OTAs have had, but think about it for a moment and imagine the hotel world without the OTAs in the last decade. A decade led by brands continuing to exit the ownership piece. A decade where hotel companies continue their quest to become management companies. Not a decade of bold hotel innovation and distribution investment that was led by who? That is the pedigree of hotels and why OTAs emerged because there was a need and an opportunity not being delivered by the hotel industry because the investment fundamentals are always backward. OTAs made the investment and they created a huge hotel industry windfall. Thank you very much.Now for some facts, I can proveAccording to my math, using a RevPAR of $57 dollars in 2006 and $78 dollars in 2015, that is a 35 percent increase and when I apply that to the 5 million guest rooms (AHLA 2015) in the US I get a whopping $38 billion increase in room revenue. Let's back out the additional supply over the same period (500,000) and I still get an additional $35 billion in room revenue. Apply that figure to the 1.25 percent decrease in rooms profit margin, I get a $26 billion increase in rooms profit over the same period. When it comes to rooms flow thru on that additional income, it is just north of 74 percent. I ask again, who in their right mind would not take that deal? Especially when someone else (AKA the OTA) is laying out the capital expenditures to create the RevPAR universe.My question after all of this is: How much of this increased RevPAR in the last 10 years is due to the OTA effect? And what effect has that had on hotel profits that left to our own devices would not have materialized without the OTAs? That answer is beyond my calculator, but I know a very good portion is due to their continuous innovation and our industry's use of their service. I put my stake in the ground and say there is no way our industry--without the OTAs--could have had the same proliferation of global RevPAR impact, travel growth, and sheer distribution might.It is time hotels stop their bellyaching.My comment and conclusion: What a good problem to have.Stop pushing and start pulling.

Hospitality Financial Leadership - Creating and Using Your Own Labor Productivity Tools

The Hotel Financial Coach ·27 March 2018
With major wage increases in many jurisdictions, it is more important than ever to have a system for planning and measuring labor productivity in your hotel. This article explains how you can do this and it is not just for the big boys, you can utilize this system in any size operation.I am working with a client who is just in the throes of getting this going in one of his hotels. It is a bit of work but well worth the effort as the results are going to pay off big time. I want to share what is working for him because I know it will work for you as well.The first thing to create is a baseline for current productivity in your hotel. If you have a food and beverage operation in addition to your rooms, you should create two baselines: one for your rooms operation and the other for F&B. The productivity measures to establish are hours per room occupied in the rooms department, and hours per cover served in the food and beverage department.For your system to produce the numbers you need, you must split the payroll hours into three main groups (or buckets): rooms, F&B and other. Once you have the three main groups, split the first two groups again, so you will end up with five groups. The American Hotel Associations 11th revised edition of the Uniform System of Accounts for the Lodging Industry (USALI) revenue and expense dictionary lays out all the positions that fall into all the various departments of any hotel. For this exercise you will use only three. You need to use three so you can get the two to measure separated from the third. Here are the three:Positions in the "Rooms Department" include all persons with guest-facing rolls: reservations, guest arrival, reception (day and night), concierge, all housekeeping positions, public spaces cleaners and, if you have a laundry, include it as well. Add all positions, both salaried and hourly, union or non-union. For this exercise now split the rooms section into two separate buckets: housekeeping and front desk.Positions in the "F&B Department" include all persons who contribute directly to the service and operation of your restaurants: beverage operations, banquets, kitchens, meeting spaces, cleaners and stewards. Include servers, bussers, hosts, runners, cooks and dishwashers. Include all positions, both salaried and hourly, union or non-union. Now split the F&B bucket into its two parts: kitchen and service."Other" will include all general administration, sales, maintenance, retail, spa, golf, grounds or any other position that does not directly support these departments.Do not fuss too much about positions that seem to not belong in either bucket. Make a decision as to where you will record it and just be consistent. The key here is to create the analysis and the productivity system, not to be perfect.Once you have the positions organized into the five different buckets, group all record-keeping efforts in the same manner. All schedules, time sheets, payroll classifications, department numbers, etc. They need to be set up, so you can subtotal all the payroll activity within the five separate groups--both hours and dollars.Now that you have the payroll organized by group you can start your analysis. The first section is the rooms, housekeeping and front desk. Pull your time sheets or run reports from your time clock or payroll system. What you are looking for are the total hours worked in these two rooms categories by all colleagues for the past full calendar year. Yes, that's right: one full year. You are only interested in productive hours, not vacations, holidays or sick pay. When you have the total hours worked in each category divide it by the rooms occupied. Here is where you see the first light of day.In a 75-room hotel that runs an annual occupancy of 75 percent you are servicing over 20,500 rooms.xxxDetermine the total productive hours for each category, housekeeping and front office and divide the hours by the rooms occupied to establish the base line productivity for a full year. Overtime hours are just another hour, do not add a multiple for over time, it is 1-1.xxxNow you have your baseline of .89153 for housekeeping and .337 for the front desk. What you want to do now is use this baseline to target your productivity, information that will be used for improvements. From this point forward, use the same buckets for weekly schedules and on these, add the forecasted rooms occupied daily. Also total the hours worked and divide that by the rooms occupied, producing a daily productivity and a total productivity for the week. Tracking and managing productivity is like a baseball game, with innings. You are going to win some innings and lose some but what you really care about is the final score. Productivity is the same concept. You will have good productive days and poor days, mostly dependent on volume.Always remember the most important things about managing labor:Your managers have little control over wage rates. Someone else sets most of these.Your managers have little control over business levels. Sure, you do right things through your advertising and promotion efforts. But the business that walks through the door, good or bad, needs to be serviced.What your managers do control is the schedule. This is where you want them to put their focus.xxxLooking at this schedule you can see the productivity scheduled for the week is below the annual standard of .892. The housekeeper must find some hours in their schedule. Looking at the least productive days of the week, he reduces the schedule by a total of 30 hours over three days.The final and most important step is to update the schedule spreadsheet each day with the actual results for both rooms occupied, and the real hours worked.xxxIn the scenario above, the hotel managed to almost meet the annual productivity target. By having a productivity target and something to measure by, they managed to save 26 hours from the original schedule. Do this every week and I'll let you do the math on that. Big savings and this is only the beginning.IncentivesNow that you have your baseline and your housekeeper is tracking and making improvements, it is time to introduce an incentive. Knowing that last year the baseline was .892, you will want to improve this in 2018. That means a lower number. Say target a 5 percent improvement with a threshold improvement of 3.5 percent and an exceptional target of 8 percent. If housekeeping productivity increases by 5 percent that means a thousand hours less payroll at 75 percent occupancy. Depending on your wage rate and benefits, this could easily be $25,000 in savings. Structure the incentive so it equates to a targeted $3,000 bonus, hit the threshold and it is $1,500, hit the exceptional target and it is $4,500.By using a productivity improvement target, you are looking at potential savings if the goal is met and it can bet met regardless of occupancy. Let's say the year is a tough one and occupancy dips to 70 percent. You still focus on productivity because it can be achieved at any occupancy level. When you are achieving a higher productivity level, having incentives is smart when business is good or bad.InnovationThat is a natural by-product of focusing on increasing productivity. Getting your team focused on what brings better work processes to the table is powerful. Your leaders and staff all have ideas and when you set the stage to welcome those initiatives people will appreciate you for taking their ideas and making them a reality. Many hands make light work, my mother would always say. Being more productive is not about working harder, it is about working smarter. If you can study the processes and materials, you will find ways.Efficiency is doing better what is already being done. ~ Peter DruckerBack to the other bucketsOnce you have your payroll positions organized and the baseline established, do the same processes with the schedules and the daily tracking for the front office, food and beverage service and kitchen operations. In the food and beverage space it is covers you want to measure against the hours worked. A cover by the new definition is anyone who you serve who orders any food or beverage item. A table of four who all have a meal and drinks is four covers. A table of four that orders chicken wings to share and a round of drinks is four covers. A table of four that orders a round of drinks is four covers. Training your staff to record proper cover counts in your point-of-sale system is key.Having a manager in place that sees the value in better productivity is essential and part of the culture you want to promote and reward.Make sure this conversation is part of the hiring process as well as the merit review discussion.
Article by David Lund

Hospitality Financial Leadership - Never More Than Two Degrees of Separation

The Hotel Financial Coach ·19 March 2018
Finding good people in our industry is a tough job, especially in certain economies. It is extra tough when you are looking for a particular skill set. Hospitality does not have the reputation for paying well. We have the reputation for long hours and working on weekends and holidays. Not exactly the millennial's picture-perfect career profile.Hospitality is special and either you get it and you drank the Kool-Aid or you don't. According to salary.com a hospitality degree is number four on the top eight college degrees with the worst return on investment. How is that for a hard pill to swallow. There is hope and there are strategies you can employ that can give you a leg up. I want to tell you a story about finding--by accident--a key employee right under my nose. This might just cause you to have a more serious look around your hotel to see what might be waiting for you.I was the director of finance in a large hotel back east. Finding service staff was never a problem for this hotel. Waiters, room attendants, bellmen, they were always in good supply. Good paying jobs for hard working people. Finding desk clerks, concierge and the like was the same. But trying to find individuals with special skills like accounting or IT was next to impossible. NO one wanted to work in a hotel if you had a computer science degree. You were in demand elsewhere and why would you go work in a hotel if you are a geek and want a career in systems. The salary we had to offer was not great. On top of this challenge we needed someone who could speak two languages. Not to mention we wanted this individual to look after some 100 personal computers, miles and miles of wiring, a lineup of aging file servers, and be on call 7-24. Oh, and get ready to get your clothes dirty because you are the one who needs to crawl under the desk and in the housekeeping closet to fix whatever needs fixing.We looked and looked, put ads in the papers--online job postings were just getting started--and nothing. Weeks went by and the mess in our server room was piling up. Service to the networks, applications and PCs was also falling way behind. A certain looming disaster felt closer every day. In the hotel business, losing your systems for even a day can mean disaster and a huge financial hit. I was more than a little worried that this might happen, and under my watch this could mean curtains for me. The regional guy was a big help but he could only come by a day or two at a time and we desperately needed someone full time.It seemed there was little hope in finding someone until something incredible happened. I was having lunch one day in the employee cafeteria and sitting next to a table of valet parking staff and doormen. They all sit together like the room attendants and, like my table, the office people. I heard something from the table next to us, the door people who were talking in the other language--the language I was not so comfortable with. I heard two words and the name of a local university. I was pretty sure he said computer science. He now had my full attention. The conversation from the other table continued but no more computer talk. I finished my lunch and went back to my office.I did not think much more about this moment until a couple of days later when I had cause to use the front door of the hotel returning from a Chamber of Commerce luncheon. Who was at the front door? None other than the kid I had heard speaking geek at lunch in the cafeteria. I could not resist. I introduced myself and asked him his name and how long he had been at the hotel. Three weeks, he said in perfect English, and my name is Bernard. I asked him how he found his way to the hotel business and he smiled and said, "I just finished my degree in computer science and I'm not sure what I want to do and there are few jobs to be had right now. I don't think I want a job in my chosen field. I just didn't know what to study so I got a degree in systems." Interesting.With this information and my introduction to Bernard I immediately asked him if he ever considered a systems career in hotels? He looked at me like I asked him if he had ever been a ballerina. No, he said. I smiled and asked, "What time are you done today?" He said 3:30. I asked him if he would come to my office as there was something I wanted to show him that I thought he might find interesting. He showed up on time and I took him on a tour of our server room and I also gave him a copy of the job description we had for the vacant IT manager position. He was practically speechless. I told him I was interested in him applying and if he was interested the regional manager would be on property the following Monday and I could arrange for him to spend the day with the regional guy to get a feel for the job requirements.The following day my phone rang early and it was our Human Resources manager. She was just a little excited, agitated is a better word. What was I thinking? This kid just started three weeks ago! We have minimum six months before you can apply for another job policy. He has no experience. He is in the union! You can't just offer people in other departments jobs! On and on she went and when she was done I said, "I have arranged for Bernard to spend next Monday with Paul. Let's see what Paul thinks."I could feel the steam coming through the phone lines and then she hung up. I was very impressed that Bernard had applied for the job so quickly. Always a good sign.Monday arrived and I introduced the two geeks and I didn't see much of either of them for the entire day. At 5 p.m. Paul came to my office and he had a big grin on his face. He said, "Mr. Lund, where did you find him?" I smiled back and said the cafeteria. Paul ran through the day he had spent with Bernard. The kid was a wiz. A real propeller head. He ate, slept and dreamt computers. Networks, software, switches, routers, PCs, printers. You name it and the kid was a natural. Paul concluded by saying he had spoken with HR and he got an earful as well. I thanked him and said we would see what happens.As they say in the movies, the rest is history. Of course, we hired him. We had no other option. He was a great hire and the kid was amazing. Good with people, good with technology and especially with this new thing he called the Internet and a term I had never heard before, intranet. He was the key to helping our hotel win an innovation award the following year for our little guest service "intranet." Some 20 years later and the kid, the last time I heard, is running the systems regime for half of the country for the same company.The moral of this story is thisYou never know who you have working in your hotel unless you get lucky like me, or up the chances and do a little looking. Your hotel is full of people that either just landed there or they are trying to support their family with this hotel job until they figure things out with their other career and education. You do not know their skills or their experience. You just might be sitting beside your next star. Take a walk to HR and ask them to run a report from their system and include the fields, prior experience, and education. Bang. Now you have a list that might just help you find your next Bernard. No system like that in HR in your hotel? Go sit in HR. Better still, have someone else go sit in HR and read the resumes of the staff you already have. Make a list of the underutilized talent that already works with you. I guarantee you will be amazed at what you find. I once worked in a hotel where my accounts payable guy had a degree in astrophysics. I am not sure how we could have better utilized this skill but you get my point....Hotels have long been pipelines into our communities for immigrants and young people that come for a summer and often stay a lifetime. Attracting established skilled and educated people to hospitality for non-service positions is not easy. Use the resources you have that are close to you and discover what hidden talents, experience, and education you might have right under your nose.Don't overlook the possibility that the talent you are looking for is already there. I know if I had not heard what I did at lunch that day--and if I didn't speak with Bernard at the front door--he most probably would not have found his way to the path he did.We might still be looking!

Hospitality Financial Leadership - How to Read Hotel Financial Statements and The Link

The Hotel Financial Coach ·13 March 2018
The first thing you need to know about reading a hotel financial statement is there are basically two different statements you will want to get comfortable with. The two are the income statement--some call it the P&L or profit and loss statement--and the second is the balance sheet.Now I know what you are thinking, balance sheets are for the accounting types and they are complicated. Nothing could be further from the truth and I am going to give you a new understanding and share a secret about the balance sheet and the relationship to the P&L.Let's start with the income statementSomething to note here: Hotel income statements are free-form items and are not all created equal. One characteristic they all have in common, however, is they are all set up by department. They always start with the rooms department, then F&B, then the minor operating departments like golf, spa, telephone and laundry. These departments are what are called operating departments because they all have income. Then you will find the non-operating departments, i.e., administration, sales and maintenance. These departments are called non-operating because they do not generate any income. I know some of you think the sales department makes money--not so fast. Sales book business but the rooms department generates the income when the guest actually stays in the hotel. Funny, the P&L is organized and laid out just like a hotel.Inside each department you will see the same layout: income first, then cost of sales (if required), then payroll and last, expenses. The P&L usually starts with a great summary or overall report. This is where you will want to start your review. Here you should find total revenues for all hotel activities and the total costs, leading you to the gross operating profit and net operating profit lines. The statement is usually laid out so you can see the results of the month compared to the budget and or forecast for that same month and a last year comparison. In addition to the month's numbers, you will want to see the accumulated year-to-date results, normally to the right of the monthly numbers.In the YTD you want to see the accumulated result--let's say for November vs. the accumulated budget values up until November and the accumulated YTD last year results for the prior year up until November. Always compare like periods of time in the budget and last year to the actual monthly and YTD amounts. A good summary P&L is probably the most read and highly anticipated financial statement in any hotel.One thing to always keep in mind is the fact that many miss. That is, we do what we do the way we do it in hospitality, because of the book.The 11th edition of the Uniformed System of Accounts for the Lodging Industry lays out in nauseating detail the standards for our industry. Here is a link:https://www.ahlei.org/Product_by_Category/Featured_Products/Uniform_System_of_Accounts_for_the_Lodging_Industry,_Eleventh_Revised_Edition_-_PRINT/It is a great resource for defining what goes where and standard formats, but it does not include several aspects like flow thru and productivity reporting that are incredibly powerful and useful tools. If you are serious about hotel financial knowledge, then I highly recommend you get yourself a copy.Leaving the summary statement, you will find the balance of the income statement laid out by department in the same order you see the top level. Each of these departmental statements will have totals for revenue, cost of sales (F&B, Spa, Telephones), payroll and expense that need to tie back to the summary statement. Once people make this connection it all comes together rather quickly. What you previously thought was so complicated and confusing is pretty straightforward.The profit and loss statement is the most interesting statement because it shows how you are doing as it relates to profit for a given period. It is a snapshot of what revenues and costs are for the period you are looking at. If you are looking at the June statement and it is December, it really is not relevant. The income statement tells how you are doing financially regarding operating profit. It is how you keep score relative to the budget (the promise) and last year. You can clearly see these comparisons for the most current month and year-to-date. You also can see where there are successes in operations and where there are challenges. This is pivotal. Seeing where you are not having the level of success you planned and having the ability to manage around that challenge is the highest sole purpose of the income statement.How can you improve your results? Is payroll too high? Are expenses out of control? Are revenues falling short of the budget? It all comes out on the income statement. Like a report card and a wake-up call to pull up your socks and your marks too. This is where the income statement transcends the black and white piece of paper and becomes the vehicle for change and ideas. Get your team involved and change the way you manage.That's the result that's possible using some financial leadership.Balance SheetThe second most common statement you want to be comfortable reviewing every month is the balance sheet. The balance sheet tests the fundamental accounting equation. The equation states that assets equal liabilities plus equity. Most people get quiet here when we start talking the mumbo jumbo but this concept is super easy and once you grasp it you are going to see the world of finance in a completely different light, like riding a bike.When I teach my students this concept in my workshops they often comment that they had no idea that the fundamental accounting equation was so simple.Here goes: I liken the explanation of the fundamental accounting equation to the ownership value relationship of a house. You--along with the bank--own the house. In this example, the house has a market value of $500,000 and you have a mortgage of $350,000 on the house through the bank. You subtract the two numbers and that's your share or, as described in accounting terms, your equity or sometimes called owner's equity:$500,000 (assets) - $350,000 (liabilities) = $150,000 (equity)This basic concept is exactly the same as the balance sheet mechanics. It is the "fundamental accounting equation."You can be the most complicated business in the world and it all boils down to the same concept: Assets-Liabilities=Equity. In the example of the house, you get the fact that the $150,000 is yours. That would be your right to the upside of the sale price less the mortgage. In business, the assets minus the liabilities is what the owner is entitled to, their equity. It is also important to remember that the equity can be a negative. Using the example of the house and given the recent financial crisis, you know houses can have bigger mortgages than value if the market goes down. In a business, you want to have a healthy asset to liability ratio but this is not always the case. So, knowing this simple equation you can now test the health of the business by examining the values of total assets and liabilities.The quality of those assets in a hotel should be relatively easy to measure. Cash, receivables, inventory, prepaid expenses. You use these items to make money, hence they are assets. The liabilities are all the commitments you have that you must honor. Vendors to pay, deposits for future guests, taxes collected that need to be paid, employee wages and vacations to honor. In simplistic terms, you have the good stuff, the assets, less the bad stuff, the bills you need to pay, and the difference is the equity. Same concept as the house above.The LinkThe link between the income statement and the balance sheet is an important and powerful concept.When you make a profit or have a loss in your business, you can see the bottom line number on the year-to-date column on the income statement.The link.What you also can see is that it is the same number you find on the balance sheet when you look at the current year's retained income line in the equity section.The other line called retained income from prior periods, is the accumulated profits and losses since that business was created. This is the link between the current year's profit performance and the lifetime of the business's accumulated results.The business gets created when it is bought/sold. A new set of books is created and you start everything from the purchase price values. Everything from that point forward moves from the income statement each month to the balance sheet and its accumulated profit or loss is found in the equity. Assets - liabilities = owners' equity. See? Not so difficult.I have written five other blogs on hotel financial statements and the powerful features you can incorporate into your statements, check them out if you have not read them already and learn how you can supercharge your financial statements.http://hotelfinancialcoach.com/do-your-hotel-financials-statements-pass-the-test-part-1/http://hotelfinancialcoach.com/do-your-hotel-financial-statements-pass-the-test-part-2/http://hotelfinancialcoach.com/flow-through-understanding-how-it-works-and-how-to-include-flow-thru-in-your-financial-statements/http://hotelfinancialcoach.com/hospitality-financial-leadership-measuring-labor-productivity-part-1/http://hotelfinancialcoach.com/hospitality-financial-leadership-measuring-labor-productivity-part-ii/If you would like a copy of any of the following send me an email at david@hotelfinancialcoach.comEFTE and Productivity ExerciseHotel Financial Policy Manual - Inventory of "Sections"Hotel Financial Coach "Services Sheet"F&B Productivity SpreadsheetHow the Hotel Financial Coach Helped MeRooms Productivity SpreadsheetFinancial Leadership Recipe F TAR WHotel Financial Coach - "Speaking Sheet"Flow Thru Cheat Sheet - EnhancedVisit my website today for a copy of my FREE guidebookThe Seven Secrets to Create a Financially Engaged Leadership Team in Your Hotelwww.hotelfinancialcoach.com
Article by David Lund

Hospitality Financial Leadership - Who Has ALL the Risk and Why?

The Hotel Financial Coach · 6 March 2018
What happens in the hotel business when the phones stop ringing? Who must pay the piper?It has been seven great years in most markets in North America that the hotel sector has been strong and growing year over year. Some markets have produced several years of strong single and even double-digit RevPAR growth. With the great RevPAR growth comes solid profits, more than enough to cover wages and expenses, leaving a nice profit. But what happens when the music stops? Who will find a chair and who will not?The last hotel business down cycle occurred in 2007-2009. During this downturn, a typical hotel may of had revenues decline for three years in a row. This could mean a 20+ percent decline from their peak in 2006. GOP in this scenario in the same years would have down +30%. Flow-thru retention was dismal given the large fixed cost of labor, union contracts, and benefit costs. Revenues would have been down because of less occupancy and fewer banquets but the big culprit was the rate. Cash flow before capital was suddenly backward. How can this be? What happens when things (the top line) stopped growing?In the hotel business owners have all the risk. Brands largely get paid by fees off the top. In this scenario, their management fees decreased in proportion to the revenue drop. During this downturn an average 15 percent decrease in fees. On the other hand, the brand still provided its other management services. Owners tried to get the brand to throw anything and everything off the sinking ship but that was never enough to right the equation. The manager and executive got squeezed a lot during this period but they survived because they were essential to mitigate the ongoing financial disaster. The owner had "all" the risk.So, how can it be so dangerous to be an owner of a hotel? It seems like a sound investment. A hotel might be in business for decades and could be a popular location and destination. To see and understand the realities of the business, you need to go behind the curtain. There is a saying in the hotel business that I like, "You cannot save your way to prosperity." It is very applicable here.But behind the curtain the total payroll cost, including benefits was huge. This was the large unmovable object that killed the desire for hotel ownership. Payroll is like a field that needs to be burned every few years. The one big problem with the payroll in a hotel is you can't get rid of it, you can't even get it to go down in many cases! There is only one number that you can count on in a hotel to increase every year and its the average hourly wage.There are two competing facts in a hotel: One fact is the average rate in a hotel will go up and then down. The second fact is the average rate of pay never goes down.For hotels to survive the next big downturn, they must act now. Take measurable steps to innovate. I was in a new hotel in NYC a while back and no bellman, no doorman, no front desk clerks and that is just what I could see perusing the lobby. I'm not saying this is the solution for you. You need to find your own way. But rest assured of two things. One, it's not a matter of if, its a matter of when we slip into the next financial mess that kicks hotels in the teeth. Two, ownership will carry the burden.Don't wait for trouble to come knocking. Be proactive. The best time to paint the deck is when it's sunny, not when it's raining.If you would like a copy of any of the following send me an email.EFTE and Productivity ExerciseWhy Are The Numbers The Hard Part of Hospitality?Hotel Financial Policy Manual - Inventory of "Sections"Hotel Financial Coach "Services Sheet"F&B Productivity SpreadsheetRooms Productivity SpreadsheetFinancial Leadership Recipe F TAR WHotel Financial Coach - "Speaking Sheet"Flow Thru Cheat Sheet - EnhancedVisit my website today for a copy of my FREE guidebook'The Seven Secrets to Create a Financially Engaged Leadership Team in Your Hotel'Call or write today and arrange for a complimentary discussion on howyou can create more profits in your hotel.Do you need a dynamic speaker with a unique and creative financial message for your next hospitality event?Are you thinking about your management team and what to engage them with this year? Consider a full or half day hospitality financial leadership workshop.Give the coach a call and let's get going!Contact David at (415) 696-9593.
Article by David Lund

Hospitality Financial Leadership - Create the Monthly Financial Circle!

The Hotel Financial Coach ·27 February 2018
Practice is what we are missing. Practice with the financial piece is somehow a foreign concept."Everything we do is practice for something greater than where we currently are." - Adam Kirk SmithIf you and I worked in banquets and we were both rookies, we would show up every day and listen, work and learn, and in a relatively short period of time, we would both be pretty good at setting up, servicing and tearing down the banquet. How is this different from learning the financial piece? It is not, that's the illusion. It looks different because it is money and it has a certain illusionary power.The monthly financial circle in a hotel is a practice schedule that includes different routines you must rehearse to improve your whole financial game. The circle repeats itself each month like clockwork, always overlapping and never missing a beat.In the hotel business, it can seem like the financial machine never stops, it can seem relentless. You just finish one month's commentary and it is forecast time again, and before you know it, it is time for the month-end close and statement reviews. These tasks seem to pour over each other and the timer never stops.The real beauty in all of this is that the financial window opens and closes 12 times each year in your hotel. To look at this in a positive light means you have 12 opportunities each year to practice and learn. Twelve opportunities to re-set and discover what worked and what did not work. Throw out the bad and keep the good. If you look at each monthly financial cycle as an opportunity to learn and grow, you will move toward mastering this financial discipline.In most hotels, the circle will start a week or so before the end of the month with the timely arrival of the rooms on the books and the occupancy, rate, and room revenue projections for the next 90 days. From this data, you plan your department's payroll and expenses. You know based on the budget what you have as a base. You know the zero-based expenses in the budget for your department and, based on the projected volume of rooms, you plan the month's activity. It really does not matter what department you are in. What matters is how the next three months look and you adjust payroll hours and expense dollars accordingly to match those projections. Managing the flow thru.You submit your forecast on time and the next day you get the properties consolidation report. From here you have a quick conversation with the financial quarterback and she tells you to improve the bottom line in month one and two--month three, for now, looks OK. She asks you and several of your counterparts for an improvement in payroll and expenses in the next two months. She gives you a real number to hit, you go back and forth, and agree on how much you can reduce the costs. She leaves it up to you to find these dollars in the details. This is nothing new, you do this every month and sometimes what you propose is on the mark. Other times you get a recommendation to add and--some months like this one--you need to trim. You make the changes, resubmit the numbers and a day later you have the final forecast for the next 90 days.From the forecasting stage, you move into the actual monthYou know the total volume of business anticipated for the month and even have it day-by-day for your area. You prepare your work schedules and purchase orders for the first part of the month, all the while keeping an eye every day on the pickup report, the daily sales, and the month-to-date sales all relative to the latest forecast. You quickly see and hear where there is a softness in the month and where the pickup is behind. Based on this trend you know you will not hit the monthly total, so you adjust the work schedule, send a manager on holiday and reduce expense requests for the coming weeks, all the while balancing where you see the business ending up and what you need to maintain the standards in your department.Because you have a zero-based expense budget in detail and a staffing guide that has fixed and variable positions, you know what levers you can pull. As you move through the month you look at the stats daily and it only takes a few short minutes.You finish the month and receive the general ledger detail report and the financial statement first draft. You go right to the top level and look at the revenues and business volumes and they are exactly what the last daily report said they would be. You then flip to your page of the statement and look at payroll and expense lines. You then review the general-ledger (GL) detail for your accounts and compare this quickly to your checkbook. You find two items that do not belong to your accounts. You communicate with accounting, they make the correction and now you know you have a clean statement. A couple of days later the final statement is complete.You have another look and your lines of the financials to ensure they are correct. From this phase, you sit down and write your piece of the commentary: What happened in the month with payroll and expenses relative to the volume of business expected vs. what materialized and what changes did you make to what was originally forecast?You submit your portion of the monthly commentary. It is consolidated and edited. A couple of days later you get a final copy of the property commentary and now the monthly circle is complete.But wait! The next month has already started. You have already completed the next 90-day forecast and are already tracking the new month's volumes and adjusting your spend accordingly.This is fun! ---If you would like a copy of any of the following send me an email.EFTE and Productivity ExerciseHotel Financial Policy Manual - Inventory of "Sections"Hotel Financial Coach "Services Sheet"F&B Productivity SpreadsheetRooms Productivity SpreadsheetFinancial Leadership Recipe F TAR WHotel Financial Coach - "Speaking Sheet"Flow Thru Cheat Sheet - EnhancedVisit my website today for a copy of my FREE guidebook.The Seven Secrets to Create a Financially Engaged Leadership Team in Your HotelCall or write today and arrange for a complimentary discussion on how you can create more profits in your hotel.Do you need a dynamic speaker with a unique and creative financial message for your next hospitality event?Are you thinking about your leadership team and what to engage them with this year? Consider a full or half day hospitality financial leadership workshop.Give the coach a call and let's get going!
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Hospitality Financial Leadership - Creating A Hotel Accounting Policy Manual - The Do's and Don'ts

The Hotel Financial Coach ·21 February 2018
I know that it's a big challenge to get a policy manual together for a hotel or hotel company. The big brands have the resources to get the job done but the smaller brands and management companies don't have the same bandwidth. It's a project that always gets kicked down the calendar to another month or quarter. I wrote another article on why creating a hotel accounting policy manual is so challenging. Check it out.http://hotelfinancialcoach.com/hospitality-financial-leadership-creating-hotel-financial-policies/One aspect that often gets in the way of completing this task is because a bit of confusion surrounds polices. My client on this assignment was also confused about the same details at the start of our project. Making the task more difficult by piling on more information is a common mistake and in this case, it's an error we want to avoid.Quite often hotel financial executives and managers confuse accounting policy with procedures. I had to explain this to my client and it took a little time to get him on the same page as me. Once we broke through this barrier it was much smoother sailing. Policies and procedures are very different and mixing the two together is not a productive exercise. I think a little explanation is required here.Policies are like the laws that form the fabric of your business. They are the do's and don'ts of your company. The policies are the black and white structure you want in place so people can clearly see what the rules of the financial road are. Understanding these rules completely is the first step to compliance. Making the rules simple, clear and understood is the key to creating the strong financial culture in your hotel and hotel company. You also what concise policies so you can have the basis for an effective internal control review process. More on setting up and using an internal control review process is coming in a future article.Below is a sample accounting policy that does not include any procedures. The policy is clear and concise. The policy reader knows what the expectation is.Policy Only Example:Policy Section - Cash Policy 3-1 Bank ReconciliationPURPOSETo properly handle and control the monthly bank reconciliations.POLICYAll bank accounts are to be completely reconciled by the 15th calendar day of the following month.The standard reconciliation form spreadsheet is to be used.A paper copy of the reconciliation is to be produced each month.Review and approval in writing is to also be completed by the 15th of each month by the Director of Finance.All supporting documentation is to be included with the reconciliation and or the location clearly referenced on the reconciliation for all; 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 statementsThe 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 mail or email statements are to be opened first by the Director of Finance.FORMSStandard bank reconciliation excel sheet and template.The bank reconciliation policy example above outlines only what needs to be done and not. When we mix the policy with a procedure we cloud the picture. Procedures are important but not as it relates to creating and maintaining policy. In the above example if we were to include the procedures we would have three problems.Procedures are prone to be local. Do I start with clearing my outstanding checks or deposits in transit or credit cards? Do I use an electronic system that the bank provides to clear the checks or do I do it manually in my system? How do I receive my chargebacks, on line or in the mail? What about my deposits in transit, do I use a service that delays my deposits or do I deliver the funds directly to the bank?Procedures are prone to have a bias. Who has the best process to follow to do a bank reconciliation? I am willing to bet you if we get 5 hotel accountants in a room to discuss the best way to complete a bank reconciliation were going to have at least 6 different opinions.Procedures change rapidly. With technology procedures change quickly and depending on where your located these changes are not always available at the same time. If I incorporate procedures into my policy I will have a consistency challenge. "Oh, we don't do that part because our system is not on the latest version". This is exactly what you want to avoid with your policy, any wiggle room.All of these amounts to make the policy vague and when it's not crystal clear is much easier to side step the meat of the policy. You do not what procedures mixed in with your policies.The best way to handle procedures is to have a checklist or an instruction guide as a separate document and not part of your policy. A great example of this for me was the manual we used to load data from our GL into the financial reporting engine. In our company we had binder I would hall out and reference monthly to load the data into whatever category I was using. The procedures in the book changed often and depending on what GL system you had there were different instructions. The policy was a different matter. The policy was all GL data loaded into the system was to be verified using the retained earnings, current period and a print screen from both systems was required to be attached to the sign off sheet, approved by the Controller monthly. Don't confuse policy with procedure. You will make your manual much more effective and useful if you avoid this common mistake. Creating a policy manual will also be much simpler if we do not include procedures. It's now time to get off my soap box.Back to my client and how I was able to help him create a custom policy manual. We had been working on financial statement design issues when he told me their company didn't have a policy on recoding hours worked in the general ledger. A bit more discussion revealed that his hotel company didn't have completed accounting policy manual. All they had were a bunch of memo's. This is fairly common. I suggested I could help him create a custom policy manual for his hotels. "How"? he said. I told him I had worked with other clients had had developed a standard set of hotel specific accounting policies. Over 500 different policies in 30 different sections.What I outlined was a way we could work together to create his own custom company manual. Every other week I would send him 3 sections of the manual, via email, approximately 50 different polices. His job was to review these standard polices and think about how he wanted things changed or not for his business. We then convene a call and one by one we review the policies and he tells me what he wants changed. We discuss these changes so were both clear on what he wants. I record the calls. I then listen to the recording and edit the standard policies with his changes. I then send them back to him and now were in action. He likes this because we're making progress in a way that allows him to see and tailor each piece. Before you know it we have his company policy manual completed.He liked the process because he only needs to spend an hour every other week on the phone with me. A little reading and some review on his part and he gets a policy manual that's customized to his needs. I use word and a standard template with his hotel company logo. These policies are now his policies. I also advise him throughout the process on what works or not and what to look out for on hotel accounting policy creation. He also asks for a few additional polices that I didn't have. We create these new policies specifically for him. He also asked that some of my policies not be included because they were not relevant to his business. This is a custom job. We completed the project using only 10 calls.If you don't have a policy manual you now know two important things to help you get this project off the ground. Don't mix policy with procedure and you don't have to do this alone!
Article by David Lund

Hospitality Financial Leadership - Is Your Hotel Culture Blame or Appreciation?

The Hotel Financial Coach ·19 February 2018
In my career, I have seen both. Lots of appreciation for hard work and a challenging workplace. On the flip side a horror story of the blame for "mistakes" and lack of preparedness.Blame is the easy one to master. Management by embarrassment as I like to refer to it. One of my past hotels was a classic blame game hotel. After a much-publicized error or screw up or service interruption the GM would warmly ask, "Where is my victim?" or state, "Bring me the victim." What usually followed was paramount to a public flogging. Everyone got their turn and the others would just watch in stunned disbelief only being thankful that it was not his or her turn today.The weekly department head meeting was always somewhat entertaining and horrific at the same time. Each week someone would be singled out. Always at least one victim and sometimes more than one would get the wrath of our GM and quite often for the simplest, seemingly meaningless, things. No one escaped without a turn in the hot seat. Many times there were tears and many people cited it as the reason for moving on and finding a new job.In one instance I remember vividly a sales manager was asked about the pickup report from the previous day. She had the numbers right and it was a slow day.Our GM asked her, "Do you know how to sell?"She answered, "Yes...," with heavy hesitation in her voice. She knew it was her turn. The oxygen was now being removed from the room as we collectively gasped and all looked around the table at one another in horror. She was innocent--her only crime was being in sales today. Nonetheless, it was her turn to take it on the chin."Sell me this pencil," he said to her. Her words were garbled at best as we all sat in silence. He continued, "Find out what kind of pencil I want, you moron! Then tell me why your pencil is exactly the one I need." She was quickly reduced to tears in the ensuing silence and left the room. This was the typical result. With the carnage complete the agenda continued.Right after this meeting I had a meeting scheduled with him and asked, "Why do you pick on people and single them out, embarrassing them in front of their peers?""I'm an actor doing my job," he smiled and said, "It's my job to hold these people accountable and maintain control."I told him there are other ways to do that. He said he knew that but it's not as much fun.Old habits die hard. About a month later our executive team went on a retreat and the facilitator did an exercise where we went around the table and each person took turns as all other members, about ten of us, told each other what we liked and did not like about the way we worked.Our GM was last. I was first in the rotation to tell him what I liked and did not like. I told him I really appreciated his passion and creativity. Now the hard part: "We spoke about this before one-on-one," I told him, "Your habit of singling a person out at the weekly meeting is shameful and in my opinion, it's the biggest problem that could be easiest solved--just stop doing it."Silence...... You could have heard a pin drop. He simply nodded his head and my turn was over. Well, one after one, the next nine executives told him the exact same thing, "Stop being such a bully." The rules were simple for this exercise: We were to listen, say nothing and acknowledge.In that moment, I learned a lot. Bullies are not only found on the playground and people can change.Appreciation for the people you work with and a commitment to being fair and reasonable are the attributes you want to possess. Create and nurture. It does not mean you are a softy or a pushover but putting oneself in another's shoes and actually wearing them is not easy, especially when there are a few hundred pairs of feet all around you.The best thing you can do when everyone else is losing his or her head is to keep yours.If you would like a copy of any of the following send me an email at david@hotelfinancialcoach.comEFTE and Productivity ExerciseHotel Financial Policy Manual - Inventory of "Sections"Hotel Financial Coach "Services Sheet"F&B Productivity SpreadsheetRooms Productivity SpreadsheetFinancial Leadership Recipe F TAR WHotel Financial Coach - "Speaking Sheet"Flow Thru Cheat Sheet - EnhancedVisit my website today for a copy of my FREE 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 more profits in your hotel.Do you need a dynamic speaker with a unique and creative financial message for your next hospitality event?Are you thinking about your leadership team and what to engage them with this year? Consider a full or half day hospitality financial leadership workshop.Give the coach a call and let's get going!

Hospitality Financial Leadership - Free Property Management Software - More Disruption?

The Hotel Financial Coach · 7 February 2018
The first and largest one that comes to mind is in food and beverage operations. The disruption comes in two forms: pure outside competition and internal desire.The outside disruption--the free-standing restaurant--has been prolific and its effects are debatable, like many aspects of our business. We do not have to go too far back in our history to find hotels with multiple outlets that were busy and chock a block with patrons. I remember the 1980s and 1990s. We had the best facilities, the kitchen brigades that could cook their way into the hearts of our clients and the service staff.For a long time, the real action in the food and beverage world was largely hotels. As we all know that has run its course and what surrounds our city hotels today are a wide range of restaurants and bars that attract our hotel clients as well as other urbanites. You cannot go into a suburban market and find a hotel that has been built in the last 20 years that is not flanked by chain restaurants. They pop up like pimples on a teenager's face.So, hold the tissue box. This food and beverage restaurant and bar proliferation have a double edge and when we examine it closely it does not look so cutting. We all know that even a hotel that shows a healthy F&B profit on their statements, in reality, makes none or very little money. The way we report F&B operations in hotels are misleading and the reality is, for almost all hotel restaurants, we are trading dollars at best. For some hotel restaurants, we may as well hand out $10 bills at the door and send the customers across the street. Wages, unions, benefits are all substantially higher and we cannot compete with the small business lack of overhead and nimbleness. Not to mention that in many cases they have the products and services our customers are looking for. We are a product of our own success. Complacency and the simple truth say that outsourcing our F&B restaurant business has not all been a bad move.To the contrary. Once we have seen the impact of closing outlets, the F&B profit picture in many cases gets better. We have kept the profitable banquet and catering piece and inadvertently outsourced the less than profitable outlets. All of this happened to ultimately show us it is a good thing. Even to the point where today in many hotels we are looking to get someone to operate the outlets that are left. In some hotels, this is a no-win proposition for any operator and, yes, even some of those outlets are closing. Owners and asset managers do not buy the line that we need those outlets to support room rates. Breakfast still works in most hotels, cocktails in the lobby can still survive, but in almost every other case the profit from F&B outlets is backward. Thank you for the disruption.Now back to the title of this piece: PMS connectionIf you operate a hotel today, you know how much of a cluster your PMS system is. Getting service for the never-ending upgrades and even the smallest of changes is like trying to get into a Rolling Stones show. On top of the lack of response from vendors who think they have a monopoly, they charge an arm and two legs for their crappy products and appalling service. I better stop here.Well, shall some disruption enter to help us along? If you Google the words, "free hotel PMS app" you will find vendors who have developed products that are free! Yes, free. One that jumps out at me is called Softmogul. All they want is to provide you their free property management and restaurant software in exchange for your credit card processing business at competitive rates. Now, I know what some of you are thinking. Where is the hook? Surely they will hold us ransom for double the processing fees soon enough. I say it is high time someone sees the value we currently pay on every credit card transaction as a totally disreputable ingredient that is calling out for attention. Why didn't anyone in our industry see this opportunity? What would 2-3 percent of the $600 billion hotel industry be worth? What about 2-3 points of all the standalone restaurants? How much better service do you think someone who wants your card processing would provide compared to what you receive today?A product like this might not be ready for a 1,500-room Hilton today but think of the small hotels that struggle with a legacy system or bounce along without any current or integrated systems. Think about what the world could look like if a large credit card processor overnight developed a PMS in conjunction with a vendor. What if they made that platform so integrable that it is as simple as it is today to sign up your hotel on an OTA. Disruption can come and go in a variety of directions. Hotels are notoriously late to the game and that means others get to clear the land first, build the dream and then hotels scream it is not fair.When will we learn from the lessons of the past? When will we see disruption as part of the business and lead the charge and not follow it after the fifth inning?What else in our industry are we simply overlooking because we are still operators and not developers with a little entrepreneurial flair and why can't we be both?---If you would like a copy of any of the following send me an email at david@hotelfinancialcoach.comEFTE and Productivity ExerciseHotel Financial Policy Manual - Inventory of "Sections"Hotel Financial Coach "Services Sheet"F&B Productivity SpreadsheetHow The Hotel Coach Helped MeRooms Productivity SpreadsheetFinancial Leadership Recipe F TAR WHotel Financial Coach - "Speaking Sheet"Flow Thru Cheat Sheet - EnhancedVisit my website today for a copy of my FREE guidebookThe Seven Secrets to Create a Financially Engaged Leadership Team in Your Hotel - and receive my weekly articles @

Hospitality Financial Leadership - Every Line Needs an Owner

The Hotel Financial Coach ·29 January 2018
It is true in any aspect of our lives at home and work that teamwork makes things easier. The reason it makes them easier is that we have more effort directed toward the thing we are trying to do. The simplest example is trying to lift a heavy rock. If we work in a coordinated fashion and do it together, it is much easier.In hotels, it is precisely the same with financial lifting. If the GM or director of finance tries to do it alone, it is hard. It is impossible to lift this thing alone. But how do they get the others to lend a helping hand?In hotels, you have an amazing tool to help you distribute the lifting. It is called the financial statement or the P&L. What I want you to do with this tool is tear it apart and put it back together, giving every single line of revenue, cost of goods, payroll, expense, and statistics to the appropriate manager or leader on your team. That's right, every single line. By using this strategy, you now have a blueprint of your business that shows whom you need to communicate with when a certain line of a financial statement is out of whack. Agreements need to be made with these individuals, so they clearly understand their role and responsibility regarding their lines of the statement. I ensure you they have what they need to get the job done.Once you have an owner for every line, you then need to work with these individuals to help them learn how to forecast and budget their lines each month. Once the forecast is consolidated, you now have a team member to call on if you need to make changes. You no longer tweak the forecast in a few areas to get the bottom line you need. You go back to the line owners and negotiate the changes.So, stop right here. I know what you are thinking: How is this possible or practical? STOP! This is the most important pivot in the creation of financial leadership. If you change the forecast for that line and give the consolidated forecast back to the team, and you have changed the line items without the agreement of the owner of that line, you have just fallen all the way back down the financial leadership ladder. You will have zero credibility with your leaders; they will quietly thumb their nose and middle finger at you.You are thinking you do not have time for thisMake the time and it will reward you handsomely.The very essence of your hotel and financial leadership is built on this discipline. It is not possible to throw blankets at this and say that rooms look after their accounts and I will just deal with the rooms division manager. Do not do this. It is not an effective strategy because too many P&L lines intersect in your hotel--especially in rooms. Just sit down with the rooms division manager and go through their statement with them and agree on who will be assigned each and every line. Every line needs an owner!A good example of the intersecting is a line like "guest supplies." Housekeeping, front desk, concierge, guest service and even sales spend money that ends up an expense in this account. So, who is the right individual to manage it? Do not be fooled into thinking the rooms division manager will handle it. It will not happen. Get a name that you believe is the right person and make an agreement with the rooms division manager on how this person is going to corral the others. This move is golden. The person you pick to quarterback this account must have great diplomacy and negotiation skills. You have just deputized a leader with a very important task; one that requires your commitment, patience, and resources.Play this right and the leader will love you for this responsibility. Play it wrong and they will resist.Make sure all other constituents who use mixed accounts know and agree that the owner of this account is the one who will prepare the zero-based budget and work equitably with all to make sure they know what they have to spend and when.With most lines in the P&L, the owners are obvious. Take the time necessary to work with every single owner on their accounts. This is the foundation of your financial leadership in the hotel."Every line has an owner" will revolutionize your business and the engagement in your business.This is your garden. Tend to it and watch it grow.If you would like a copy of any of the following send me an email at david@hotelfinancialcoach.comEFTE and Productivity ExerciseHotel Financial Policy Manual - Inventory of "Sections"Hotel Financial Coach "Services Sheet"F&B Productivity SpreadsheetHow The Hotel Coach Helped MeRooms Productivity SpreadsheetFinancial Leadership Recipe F TAR WHotel Financial Coach - "Speaking Sheet"Flow Thru Cheat Sheet - EnhancedVisit my website today for a copy of my FREE guidebookThe Seven Secrets to Create a Financially Engaged Leadership Team in Your Hotel - and receive my weekly articles @www.hotelfinancialcoach.com

Hospitality Financial Leadership - Car Trouble

The Hotel Financial Coach ·22 January 2018
During my career inside hotels I had the pleasure of opening and transitioning several hotels to our brand, processes and systems. This always was a lot of work but well worth it because I met a lot of new cool people, and on top of that traveled to some pretty nice locations.One of the best projects I ever worked on was a hotel transition in the UK. The hotel was owned by a famous doctor, professional car racing team owner and entrepreneur.You might be asking yourself, "What's the good doctor so famous for?" Well, in the late 1960s in America he was in partnership in a pharmaceutical company with another man. My Dr.'s division developed a revolutionary device and his partner refused to take it to market. My Dr. left the partnership and started his own company and obtained a patent for the device. Let's just say the good doctor made the right move. The device was a revolution in medicine to say the least. This made millions and millions of dollars and he still owns the patent today.Fast forward to 2006 and the Dr. now owns a few big things including this resort in the UK. This 200-plus room resort is on more than 500 acres of land and features two 18-hole golf courses and a spa. The resort is beautiful, sitting on a gentle hill overlooking the bay. The two golf courses, a links course and an American style course unfold along the water's edge. Across the bay on a clear day you can see another famous course and its clubhouse stands out like a sleeping giant. What a beautiful place, especially in June, which is the month I was there. In this part of the UK in June the days are super long. The sun rises at 4 a.m. and it is not dark until 10 p.m.One day a few of us were having lunch at the golf course and we had the pleasure of witnessing a photo shoot that featured the Scottish golfer and past British Open Champion Paul Lawrie with the much more famous Claret Jug. It is the trophy the winner of the British Open is presented with. Very cool. In the UK, which is the home of the game of golf, they take golf pretty seriously. Lawrie is the last Scotsman to win the Open. Let's hope there is another soon.The funny thing about these two beautiful golf courses is the hours they keep. Like I said earlier, the days are long in June in Scotland due to its 56 degrees of latitude. The courses opened every morning at 8:30 a.m. and were closed every afternoon at 5 p.m. I mean no golfers before 8:30 and everyone is off the course and the doors are closed at 5. Unbelievable! But it is not America or Canada, it is the UK and that's their way. I think I played golf 30 times that trip. I could walk out of my hotel room at 6 a.m. and play 9 holes before 7:45. At the end of the day I could start at 6 p.m. and play 18 holes before dark. With my own golf clubs in hand, I made the best of it.One of the best activities we had in the month we were there was attending the World Cup Soccer Championship at the local pub in town. The fans--the pub goers--are insane about soccer or as they call it: football. The thing that I did not know was just how much the Scots hate the Brits. Scotland did not have a team that qualified for the WC that year. When England played Ecuador in the first knock out round, the pub was full on in support of Ecuador. "Those English bums and bastards!" they would chant. This was incredible and kind of sad to see. Being from Canada I no idea the UK was so splintered. I certainly remember the Irish Republican Army's activities and especially the pub bombings of the 1970s, but I thought the rest was a peace loving UK. Not so.I remember coming home and having a chat with my neighbor in Ontario who is English. I told him about the pub and his reply was, "Every hoodlum in England is from Scotland." Well, England lost in the second round to Portugal a week later and the pub fans staged an impromptu parade to celebrate in the streets, hundreds of Scots joined them.The best part of the trip happened the last evening I was thereThe Dr. was selling the hotel to an investment firm from England and my hotel company had won the bid and received the management contract to run the hotel for the new owner. The Dr. was packing up so to speak and one of his prized possessions was his Esparante GTR-1 which was always parked at the main hotel entrance. The Dr. and his son operated a Le Mans team and he started the American Le Mans series that still runs very successfully today.I came back to the hotel after an early dinner and was with an old friend I had known and worked with for many years. We entered the lobby and we ran right into the Dr. and he was in a great mood. My friend and the Dr. were talking about wine and the Dr. had the idea that my hotel company should feature his Chateau wines in all of our hotels. Well, it turns out that the Dr. had been suggesting this all week and my friend told me at dinner just a few minutes earlier how BAD the wines were. Too funny. Their conversation on wine trailed off as I listened intently.I then asked the Dr., "What are you doing with the car? Is it part of the purchase and sale agreement?" knowing full well that it was not.He replied, "Do you want to take it for a spin?"I said, "Yes, for sure, that sounds like fun," thinking that he was just kidding. He stepped aside and opened a drawer in the doorman's desk and threw me the keys and said, "Don't come back for at least an hour." Holy Toledo! What a car!My friend came with me and we had a blast. 575 horsepower. At one point we were on the narrowest country lane doing more than 100 miles per hour and I was still in second gear. I have never driven anything like that before or since. The power, the acceleration, the handling and the brute force was simply stunning, and I love cars!At one point I think I really scared my friend and being the passenger is not always easy especially when the driver is me! We bombed around the countryside, blew the doors off most of the shops and restaurants in town and even went to the Old Course Clubhouse for a drink and pictures by the famous foot bridge on the 18th hole.What a blast. We returned the car about 2 hours after we left. The Dr. was long gone and the only thing we had left to do was to head to the hotel bar to reminisce and tell our comrades about our evening adventure.If you would like a copy of any of the following send me an email at david@hotelfinancialcoach.comEFTE and Productivity ExerciseHotel Financial Policy Manual - Inventory of "Sections"Hotel Financial Coach "Services Sheet"F&B Productivity SpreadsheetRooms Productivity SpreadsheetFinancial Leadership Recipe F TAR WHotel Financial Coach - "Speaking Sheet"Flow Thru Cheat Sheet - EnhancedVisit my website today for a copy of my FREE guidebookThe Seven Secrets to Create a Financially Engaged Leadership Team in Your Hotelwww.hotelfinancialcoach.comCall or write today and arrange for a complimentary discussion on howyou can create more profit in your hotel.
Article by David Lund

Hospitality Financial Leadership - Recording Average Length of Stay

The Hotel Financial Coach ·16 January 2018
The one thing I see time and time again with clients is just how poorly their financial statements are set up. The statements almost always lack basic information that is readily available and is critical information for maximizing profitability: poor design and missing features. If they were a car, I would want to call them a Lada. My apologies to any Russian readers.The flip side of this challenge is all the information that is needed to fix this reporting problem is at your fingertips. No new software is required. No real investment. Your team just needs to use what they already have and put it to work.Typical stumbling blocks to creating better more useful reporting are twofoldBefore I get into the two areas that typically hold us back from creating better reporting, let us remind ourselves why we are interested in having good and complete financials at our hotels. The reason we want to have great financial statements is that we want to use these instruments to make better decisions today for tomorrow's financial performance. If you cannot see the results of a certain critical aspect of your business, then how are you ever going to improve it? How will that ever translate into increased efficiency and profits? It always comes down to this simple reality: What you can't see you can't measure. What you can't measure, you can't improve.Imagine if you drove a car without a speedometer, and you kept getting speeding tickets.... The financial statement at your hotel is exactly the same.If it is not hooked up and working properly you have no idea how fast you are really going. Or better still, how fast you could be going.Back to the two stumbling blocksThe hotel business is more like the art world than real hardcore business. At least that is my take on it over the last 35 years. What I mean by that is most of our senior operational leaders are not financial people.They typically come from sales or operations and they have little formal training on the financial piece. This is not a slight to their experience or impact--it is just a fact.They are not programmed or predisposed to getting in the middle of the financial engine and ripping it apart, let alone asking or mandating reporting changes.Their modus operandi is the glitz, the spit and polish, the fun stuff, the art.They love this part and they dig in and put on the show. The show is what they get paid for, or at least that is what most leaders believe. So, they do not usually have any ideas or designs of the financial reporting piece.They take what is given and hope no one asks too many in-depth, detailed questions about the numbers.They are typically handicapped on the financials and they rely on a strong financial manager to make up for their lack of knowledge and experience with the presentation and breadth of the financial statement. This is a big mistake because getting comfy with the financials is not difficult. Once we are comfortable with what we have, we almost always see a way to get more.The second stumbling block is the somewhat typical financial leader who is not really interested in making their day or their job any more elongated or complicated: The fewer interruptions the better.They are already busy enough. Doesn't anyone know how busy I am?They want fewer questions--not more--and they certainly do not want people asking them to add more information to their financial statements.Why? Why is this the case more often than not? Again, I am not trying to paint the entire field of hotel financial leaders with the same brush. I am trying to make the point that most will not take it upon themselves to add financial statement features, or reporting statistics with an eye to having the best financial statements.Why is this the case? Well, I think it comes down to two elements: One, they usually have the attitude that operations people do not know what they need when it comes to the financials. Two, it is in their mind that it is just way too much work to stop the machine, pull out the gears, insert the new gizmo feature, re-boot and see what comes out the other end in the form of a change to the financials.In most hotels, it takes an act of Congress to make changes to the financial statements. Paramount to parting the Black Sea, it seems. But it does not need to be this way and it is certainly not complicated or expensive to make this happen. It is what I call evolution. We never really stand still. We are either hopefully moving ahead or we find ourselves silently moving backward.Back to the title of this piece: Recording average length of stayWhy would you want to have this in your financial statements? What purpose would it serve and exactly how do you calculate this statistic?The reason why you want to know the average length of stay for your hotel as a whole--and let's take it one step further, by major market segment--is to understand your different customers, their stay behavior and to ultimately maximize the average length of stay. Fewer arrivals and longer stays equal lots of good things for your hotel operation and profit.Fewer arrivals and a longer length of stay "usually" equalLess wear and tear in your lobby, hallways and room productLower labor costs at the front, in housekeeping and with your room attendantsLower amenity costsLower laundry costsLower linen replacement costsLower guest supplies costLower energy costsFewer guest requestsBetter capture ratios in your restaurants and barsLess congestion at peak times in your lobbyA better opportunity to capture a return guestLower online travel agency feesMore time to make a lasting positive relationship with every customerDon't forget for a moment that the hotel business is a game of inches. There is no holy grail waiting to be discovered that will save your way to prosperity. We are a high-volume transaction-based retail business. If your hotel has 250 rooms and you run 75 percent occupancy, you sell 69,000 rooms each year. How can you save just a little on each item on my list times 69,000? That is a nice number. Flip it around and ask how much inefficiency you can create and multiply that by the same number. That is kinda scary.Calculating the average length of stay could not be much more straightforward. You only need two numbers: room nights and arrivals. In this example last month, the hotel had 8,900 room nights (rooms sold) and 5,500 arrivals. Both numbers are readily available from your property management system or, heaven forbid, your daily reports. Just dig a little and you will find it.(8900/5500) = 1.62 nights as the average length of stay for the entire hotel last month.If understanding and maximizing the average length of stay is important to you then you will want to take it one step further and measure it by major market segment. In this example, we will use just three major segments. In your hotel, it might look different: tours, crew, sports teams, etc. If it does just pull the numbers apart so you can isolate the activity in the segment you want to measure.Transient, 2300 rooms sold and 1600 arrivals (2300/1600) = 1.44 nights - average length of stayCorporate, 3200 rooms sold and 2700 arrivals (3200/2700) = 1.19 nightsGroup, 3400 rooms sold and 1200 arrivals (3400/1200) = 2.83 nightsIncluding these statistics on financial statements is rather straightforward. You create a stat account in each department of your general ledger and an overall stat plug to zero out the P&L effect. If you do not know what this means, ask your financial leader. If they do not know or say they do not know, then get some help. Having these numbers magically appear on your financials requires a mildly skilled person to go under the hood and add the formula to your reporting application.Again, ask your finance person to just get it done!You will also want these stats in your daily reporting, so you can see in the month how things are developing. Another key aspect is including this information with your rooms forecast. This provides your operations people valuable information for their expense and labor forecasting.The last and equally important aspect of capturing the average length of stay by customer segment is how it should affect your marketing and sales plan.How can you design your M&S efforts to go after the most profitable business from an operations angle as well as wear and tear on your asset?What's the right balance between the different segments mid-week and on the weekends?How does seasonality play into this?How does demand in these segments affect this?These questions lack a definitive black and white answer. However, your ability to answer the questions better will be greatly enhanced with reporting on the average length of stay by segment in your hotel.What are you waiting for?Unlocking this information in your hotel is this simple. Go on, and get on with it already!If you would like a copy of any of the following send me an email at david@hotelfinancialcoach.comEFTE and Productivity ExerciseHotel Financial Policy Manual - Inventory of "Sections"Hotel Financial Coach "Services Sheet"F&B Productivity SpreadsheetRooms Productivity SpreadsheetFinancial Leadership Recipe F TAR WHotel Financial Coach - "Speaking Sheet"Flow Thru Cheat Sheet - EnhancedVisit my website today for a copy of my FREE guidebookThe Seven Secrets to Create a Financially Engaged Leadership Team in Your Hotelwww.hotelfinancialcoach.comCall or write today and arrange for a complimentary discussion on howyou can create more profit in your hotel.
Article by David Lund

Hospitality Financial Leadership - Any Monkey Could

The Hotel Financial Coach · 9 January 2018
A very colorful GM that I worked with many years ago had a lot of slogans he would use to get his point across. One of my favorites is, "Any Monkey Could Fill This Place When the Phones Are Ringing!"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-- and it's really about maximizing the opportunity and knowing that this telephone ringing condition will not last. It never does. So, what are they doing, and what is the plan to $eize 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 is because the business is 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 soul 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 is actually the best time to do it. Imagine doing a staffing review in the middle of the best year we have ever had? That is 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 it is time?The same also true for an expense reviewLooking at your spending when you are 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 morale.The same for looking at ways to increase revenuesDo 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 a quote by Earl Nightingale and 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, seize the opportunity.Creating this kind of culture inside your business and inside the hearts and minds of your team will have an amazing effect and create superior results every time.Any monkey can follow the crowd. It is the clever chimp that knows there are more opportunities when the house is full.If you would like a copy of any of the following send me an email at david@hotelfinancialcoach.comEFTE and Productivity ExerciseHotel Financial Policy Manual - Inventory of "Sections"Hotel Financial Coach "Services Sheet"F&B Productivity SpreadsheetRooms Productivity SpreadsheetFinancial Leadership Recipe F TAR WHotel Financial Coach - "Speaking Sheet"Flow Thru Cheat Sheet - EnhancedVisit my website today for a copy of my FREE guidebookThe Seven Secrets to Create a Financially Engaged Leadership Team in Your Hotelwww.hotelfinancialcoach.com
Article by David Lund

Hospitality Financial Leadership - Financial Statement Analysis and Your Hotel Career

The Hotel Financial Coach · 3 January 2018
If you google the words "financial statement analysis," you will get a long list of definitions like this one by Wikipedia:"Financial statement analysis (or financial analysis) is the process of reviewing and analyzing a company's financial statements to make better economic decisions. These statements include the income statement, balance sheet, statement of cash flows, and a statement of changes in equity. Financial statement analysis is a method or process involving specific techniques for evaluating risks, performance, financial health, and future prospects of an organization."What it will mean to you as a leader in the hospitality business is exactly the same and then some."What information can I get from my monthly P&L to understand my business and make better decisions?" and "What's going on in my business?" The latter is the better, more applicable, piece for an operations manager who has a healthy sense of curiosity and a leader who wants to make a difference.Anyone can look at the statement and see that one number is higher than another. Anyone can see the variance between the budget and actual for an expense line or departmental result. It does not take a rocket scientist to see the discrepancy between this year's result and last year's. It also does not take an accountant to see the variance between the actual and forecast results and do something about it.Seeing the variance is one thing. Doing something about it is quite another. Most leaders will do nothing about it unless they are specifically told to do so. Most leaders will not naturally go there. Why is this the case?Consider this:Leaders typically see that variance as someone else's responsibility. Maybe accounting or some other magical entity will swoop in and make everything all right. Someone or something will come in and sprinkle some fairy dust on things and clean this mess up.Leaders are too busy to bother with the numbers and what is the point anyway? They are just numbers someone else created that really do not have anything much to do with leaders and their performance.These are the problems and they really are masking the career opportunity you're looking for. These attitudes are problems because the messes do not fix themselves. The messes will only ever be corrected if there is a joint effort. The problems reflected in the variances on the financials run deep. Is it the budget or forecast that is inaccurate? Is it the actual spend that is wrong because of timing or changes in the business needs? Are there items that are miscoded due to errors in the data or source documents. Is the alignment of the expenses correct to the budget and forecast plan? All of this is like a big pile of cow dung and it usually reeks just about as bad.So, where is the opportunity for the operations manager?The opportunity is to become the leader that sees a problem, owns it, fixes it and ultimately becomes a star because of it! That is a big statement. I want to tell you I have seen it happen many times. Most operations managers are new in their roles and they are interested in one thing: Getting on their departmental horse and riding. That is one of the secrets in hospitality. We regularly "drain the swamp" and give a new leader a new shot at cleaning up the mess. The mess is always in need of cleaning up. That is the hotel business. Guest service and colleague engagement in that department you just took over needs your fresh set of eyes and heart. Well, guess what? The numbers need cleaning up, too, and the great news is it is not a difficult task to get the numbers working for you.If you just inherited a P&L section and it is a mess here is what to do:Make friends with your payroll, accounts payable and purchasing people. Show them you are interested in helping get things right. They will love this because you just went from being on their list of managers to chase to the much shorter list of managers who have their $@(! together. Now you have allies and they are going to help you.Stop the machine when it comes to the paperwork. Sit down with your invoices and POs and time sheets. Make sure that your processing lines up with the proper GLs. Your new friends in the administration will help you sort it all out. Just ask!When it is your turn to submit the next month's forecast, take the time to have a deep look at what you are projecting. Chances are you do not have the zero-based detail to work from. This is where you put your stake in the ground. What is in the expense accounts and what is the staffing formula for your department?First, look at the expense accounts. Most hotels do their budgets on a cost per room occupied/customer or a percentage of revenue basis. This will not help figure out how to control expenses. You need to do some research. Go to your accounts payable friend and get the details of the last three months for each of your accounts. Get them to run the GL details for you. Then pull the invoices and see what items and their corresponding quantities and prices were expensed in your area. Make your list. What will you need next month to operate? How many of each item and the price? This work will pay off in spades because you will see the inefficiency and what will emerge is a clear picture of what you need to run your department. What should be in your accounts and what is not?Payroll. You have two parts to master: fixed and variable. Fixed positions in your department are the salaried, non-scheduled employees like yourself. You need to know these positions and their pay and their holiday and vacation accruals. Next, the variable positions. What is the staffing formula? If you are running guest services you need to know the seven-day, 24-hour staffing guide. Arrivals and departures, bag pulls, rooms in the house and guest count, both on their own and in groups. From this structure, develop your schedule based on business levels. So many in-house + so many arrivals + so many departures = an 8-hour shift. Do the same for all parts of your day and week. This is where a fresh set of eyes can find gold. Redeploying inefficient labor to need periods and trimming the sails where possible can net you big savings.So, from the chaos, clean up the swamp and what emerges is a new and vastly improved department, including the service, engagement and financial piece. You don't want to be the leader that misses this opportunity.The second and more elusive opportunity comes from gaining perspective through financial statements. What is my business all about? How does what happens inside my business relate to what is on my financial statements? Here is a big clue for this piece and it takes curiosity again. What are these numbers for? Why is certain information that you do not understand included in your departmental financials? Have you ever looked at a map and said to yourself, that place looks cool and interesting? You want to go there and explore things, check it out? Well, your financial statement is exactly the same. Everything included in your statement is there for a reason. It is part of the statement because it is material to the mission of effectively running your department. Like your map, get curious and find out what that information is there for, what does it mean and how can you learn from it?As a leader, your opinion matters--I can guarantee you--and that is a bold statement. Here is what I mean. The hotel business is not a science. It is art, business and personality all mixed together. If I asked 10 of you what you would rather have: a point of occupancy or $5 in rate and why? I am sure I would have at least 12 different answers. If I asked you why your productivity slipped in the last month in housekeeping the same dynamic kicks in. What really happened, how did it affect my team's efficiency? What events and customer mix impacted my result? How about the newly renovated product and the challenges were having with visible dust? What about all the rain we had last month and the hallways needing more housemen hours? What about the flu that spread through the staff and management last month?This page could be filled with what ifs. The point is you need to have an opinion based on what happened and the result. Be the color commentator and tell us why something happened the way it did and on the other side of that coin is a clearer understanding of what you can do to get it just a little better this month.I once worked with a young lady that I will call Anne. She would come to me month after month with all the crap she found in her department's financials. It was really a mess and so was the rest of her department. She never really complained about the content, rather than that she set about doing her piece to fix it, and like magic her understanding of what it all meant arrived like a prime delivery. Before I knew it, she was telling me what it all meant--her version. Man, did it all get better fast in her department. Not long after that, she was promoted to manage another larger, more complicated, better-paying department. Today she is a GM. And she did not get there by accident. She got there through hard work, curiosity and a willingness to drain the swamp.These are the muscles you need to develop as a hospitality financial leader. It is not up to someone else (accounting) to chase you down and to get you on top of your numbers. It is the other way around. The sooner you see the opportunity in all of this the better for you and your career. It is not difficult. If someone stands in your way, find a way around them. Like I said at the beginning of this post, most leaders will not naturally do this, will you be one that does?
Article by David Lund

Hospitality Financial Leadership - A White Paper on a 6-Month Client Workshop/Coaching Engagement - Part 3

The Hotel Financial Coach ·27 December 2017
The following is an overview of a six-month financial leadership project that I recently completed at a full-service hotel. The project consisted of six half-day hospitality financial leadership workshops delivered in house and monthly 1-1 leadership coaching appointments with the 15 managers assigned to the program. Each month of the project we completed a group workshop and each manager had a coaching meeting with me.The project goal had five measurable elements:Complete Forecasts--get the managers and leaders of this hotel to complete their monthly departmental financial forecasts.Track their results throughout the month.Adjust their spending on labor and supplies according to business volumes.Review their month-end statements for accuracy, and finally,Write their departmental monthly hotel management commentary.Get the core management team to do this each month, while improving these forecasts and the hotel's financial results.Part 3 of 3The new GM attended the last two months workshops. I must say that I was a little concerned that he might cancel the whole deal. No reason to think this way other than my own imagination. We completed workshop five and he participated. Throughout the morning I was not sure how he was feeling or what he was thinking. He stood up in front of the group with the talking spoon in hand at the end of the session. He said he had been skeptical about the project given all he had heard and he was not sure at all what was going on. (After all, this is Southern California and the Left Coast.)What he said next was incredible. He said he was totally surprised by the content and the outcome of the workshop."I had no idea what this was all about," he said, "I saw how much it cost and I want to tell all of you I was skeptical that the former GM was smoking the curtains, but I completely see the value and, David, I want to thank you for leading us with this project."He continued, "To me, nothing is more important than each one of you making your own contribution to our success and I see how this program is exactly what we need to help all of us do that with the finances."We finished all six months and here are some takeaways. First off, on our second to the last workshop, I had to stop short on our individual check-ins. People were just taking too long to tell their team all the wonderful things they created, learned and put in place in their department. At the right is the last check-in.I spoke a few times with the President and he reported great things back to me about what he was hearing and seeing from the property. He told me the forecasts coming out of the hotel were now the best and he attributed it to the project. He also reminded me that in the beginning, they were the worst.In months five and six the hotel missed their top line by more than $200K. In both months the retention (negative flow) was more than 75 percent. This was attributed to the team's ability to react to the revenue picture--in the month for the month.The director of finance reported to me that the hotel's performance in these months was much better because of departmental cooperation and communication with serious savings in expenses and payroll when the revenues did not materialize as planned.Making claims about numbers and profitability is impossible. There are just too many factors to consider. However, in a hotel, you know if the team has its act together with their finances or not. When we completed the project, it was clearly a different hotel with a strong foothold in its financial leadership culture.Here are some individual reflections on some of the managers in the programThe housekeeper was a tough nut to crack. He had created an amazing scheduling tool that really helped him control his room attendant labor. Right down to the hours per room occupied every day. On the schedule and the actual monthly results. The problem was he did not want to share his little secret and he certainly was not willing to tell the DoF what his monthly labor forecast was. He had his own financial reporting and he did not believe the hotel financials. He was also pretty sure he would be asked to cut even more. With a little coaching we got him to tell the world what he had created and now it is a tool that other departments use: Hours per room occupied.The chef told me he was very proud of himself. I asked why. He said, "Before the project, I was a good chef who knew how to cook and lead his team. Now, I'm a chef that knows how to run my department like a real business. I now understand what it means to be a real chef." One that can wrap his arms around the financials too. I asked him what was so tough. He smiled and said nothing was tough, he just thought it was.The front office manager was another star in the show. He caught on quickly and was one the first to get his forecasts complete and very accurate. He worked with what I call the back of the house coordinator with what he had created. She, in turn, worked tirelessly to get people's checkbooks and purchase orders lined up.She also worked closely with accounts payable to ensure checkbooks were up to date. He supported her and the system they created for the rooms side was adopted for maintenance, guest services, and housekeeping. These little "bonuses" were not part of the plan, but they were welcomed. I always find a surprise or three like him and her. Leaders want to learn and contribute and sometimes they just need the right invitation.The spa manager was amazing. After the first month, he returned to show me what he created to forecast his payroll. The last I heard it was being rolled out to the other hotels in the company with spas. He used a function in Excel that I had never heard of. It looks at historical data and your latest drivers and it predicts the labor you need! Who knew? This process and his forecasts helped the department to a plus-20 percent contribution margin.--in a hotel spa that had been open less than one year! That is amazing.The restaurant managers were another story. Full of positive intentions but their operation was just too--I'm searching for the right words here--OK, screwed up. In the six months that I was there, we had three different restaurant managers. There is still hope!The conference services and catering manager was a challenge. A challenge because of the business volumes and the structure relative to the sales department, but in the end, she came through. This position is the toughest to get on board. They want to but they are too busy. This department is critical to the efficient operation of so much of the F&B operation. The MO here was like housekeeping. They had their own system and what was reported in the financials was of little importance. We broke through this barrier, albeit much later in the project than I would have liked.The DoF's contribution to the project was significant. He was willing to take the time to work with the other managers as long as the other managers stepped up. It is an interesting dance to watch. Who is helping who? Who thinks they are more important? These are all behaviors that emerge when you are working to draw department managers into the financial game. If the DoF cannot make time for the leaders and do it in a way that is genuine and safe--game over. This DoF made the difference and the results were not 100 percent but the hotel went from zero participation to well north of 66 percent in six months. It is impossible to put a financial return on investment this way but I know the DoF is very happy with the results of the project.The original GM who left after month four was a steady hand throughout the project. He also was frustrated with the turnover, as we all were. He was very quick to point out the positives and the results his team was making via the comments from corporate and feedback from the DoF and department managers. We commiserated more than once over a couple of key players and how to get them to step up.I would ask, "Do you sit down in your 1-1s with these managers and remind them that the numbers are just as important as the guests and the colleagues?"He would smile and say yes, but, "That's also why we have you here, David."The triangulated fire was effective and I know if we had to do it all over again, knowing what we learned, we would have got a couple of more.The new GM was the one who inherited the hotel that missed the top line forecast on his first two months. He was very quick to point out that the retention was impressive. He also wants to circle back and start over with the new managers. To train them and get them on board. I reminded him that I'm available to help and he also has a core team that can do the same.From my perspective, the project was a big success. When I started there was zero participation in any monthly process other than the revenue manager's forecast. When we wrapped up the hotel had a solid process in place to produce monthly departmental forecasts, leaders that now had a new passion for tracking the financial results in the month for the month, managers that wanted to find adjustments to schedules and expenses when revenues did not materialize, a team that eagerly reviewed their month-end statements and GLs for accuracy, and team members who write their commentaries.These are the hotel financial muscles we found and exercised. You can do the same at your hotel. It is not difficult.It does require vision, commitment, and persistence-- but after all, that's the hotel business!If you would like a copy of any of the following send me an email at david@hotelfinancialcoach.comEFTE and Productivity ExerciseHotel Financial Policy Manual - Inventory of "Sections"Hotel Financial Coach "Services Sheet"F&B Productivity SpreadsheetRooms Productivity SpreadsheetFinancial Leadership Recipe F TAR WHotel Financial Coach - "Speaking Sheet"Flow Thru Cheat Sheet - Enhanced
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Hospitality Financial Leadership - A White Paper on a 6-Month Client Workshop/Coaching Engagement - Part 2

The Hotel Financial Coach ·19 December 2017
The following is an overview of a six-month financial leadership project that I recently completed at a full-service hotel. The project consisted of six half-day hospitality financial leadership workshops delivered in-house and monthly 1-1 leadership coaching appointments with the 15 managers assigned to the program. Each month of the project we completed a group workshop and each manager had a coaching meeting with me.The project goal had five measurable elements:Complete Forecasts--get the managers and leaders of this hotel to complete their monthly departmental financial forecasts.Track their results throughout the month.Adjust their spending on labor and supplies according to business volumes.Review their month-end statements and general ledger listing for accuracy, and finallyWrite their departmental monthly hotel management commentary.Get the core management team to do this each month, while improving these forecasts and the hotel's financial results.Go to my blog for last weeks, part 1.http://hotelfinancialcoach.com/hospitality-financial-leadership-white-paper-on-a-6-month-client-workshop-and-coaching-engagement-part-1-of-3/Part 2 of 3The DoF has three critical roles to play in this project. I worked closely with him throughout the assignment to ensure he stayed on track and to coach him on how to get the team to all produce.One, the DoF must really want to get their managers doing their forecasts. Not all financial people are comfortable with this. Many would rather sit in their office, do the forecast and speak to as few people as possible. This will not work. The DoF in this property was very willing to open up to the leader's needs. The first part of this process was to schedule monthly 1-1 meetings with each leader on the project. They met with the DoF and agreed which lines of the P&L they would manage and what exactly that meant as far as data and reports that the manager would need to do forecasts and the numbers the DoF needed from that manager and when. Each leader's needs are different, depending on the department they manage and their level of experience. It is key that the DoF take the individual approach to ensure no one gets left behind. These monthly 1-1 meetings are a mandatory part of the project for the DoF.Two, the DoF needs to communicate the monthly schedule and deliver on their dates and agreements. Critical cutoffs need to be understood by the management team and handicapped by the DoF.If corporate needs the forecast by the 28th, do not set the 27th as the internal forecast deadline. Give yourself time to go back to the department managers after the original forecast has been consolidated to make changes. Make sure the final numbers in the forecast are the numbers the managers produce. This is the number one challenge DoFs have.Here is how it plays out: The DoF schedules the forecast submissions from the department managers, these are consolidated, and the financial picture often does not add up. They are on a deadline from corporate, so they change a few numbers here and there to make the forecast work. You know what i mean, tweak a bit here and there. Meanwhile, the department manager gets the forecast back and someone has changed his or her submission. BIG MISTAKE. This is the number one "manager doing their own forecast" killer. Who would be willing to do this work to have someone change it in the 11th hour? DoF's need to give themselves the time to work with the departments to produce forecasts that will work.Three, the DoF must be comfortable with a little tough love and be able to hold their managers accountable. The monthly check-ins after workshop two are telling. I invited all managers to the front of the room one by one and they told their peers how they did the previous month."Did I do my forecast? Check or not? Did I track, did I adjust, did I review, and did I write?"Sometimes the managers think they delivered, and I want everyone to know it is a black and white answer.I asked the DoF after each person checked in, "Hey, DoF, are you in agreement? Did Chef do what he said he did?"This kind of accountability and the communication of it in a group setting takes a certain kind of loving action and reaction because we are human, and we do not always want to confront one another. This is something I feel is a critical step in the team getting its wings. Are we willing to hold each other accountable?The flip side of this is also key. Are my department managers willing to call out the DoF when they dropped the ball?This particular DoF and hotel were challenged with this confrontation. He moved the needle considerably with managers' accountability and his own responsibilities in the team setting. This was powerful stuff.Switching gears now... about workshops and coachingThe anatomy of the workshops is a 50/50. Half of the time and effort is spent educating managers on the financial system. I incorporate the hotel's actual current monthly statement in my content every month. I can fill the pages with what I teach over the six months, but here are a few of the menu items:Hotel financial statementsP&L and balance sheets--how to readAssets and liabilitiesPrinciples of accounting, the fundamental accounting equationThe accounting function in hotelsForecasting and budgeting techniquesREVPAR analysisFlow-thruEvery line needs an ownerROI analysisCapital planningManagement commentariesGAAP, SOX,F TAR WProductivity, EFTE'sThe 11th addition of the uniformed system of accounts for hospitalityTerms and acronymsThe link between the income statement and the balance sheetBasic business typesmarket segmentationDaily reportsPayroll and benefitsFood and beverage costsSchedulingCheckbook accountingBenchmarkingHMA's, etc. etc.The other half of the time in the workshops is spent in group leadership exercises where we play games and interact. This is definitely the fun part and it is also how people learn best. Teaching adults accounting theory and principles is tough. Hotel leaders are not wired for this. They are GO GO people. The interaction and play time is essential to bring the learning home and allow them the opportunity to express themselves. This connects them with the content and their own personal commitment to moving forward and doing their part.The one-on-one coaching time creates the catalyst to make the program much more effective.Trust. I build a 1-1 relationship with each of the core leaders including the GM and DoF. The coaching is a confidential exchange. I do not share the leaders' concerns or comments with the GM. I encourage the leaders to tell me what is going on and what is holding them back from their financials. What I learn I in turn use to "clear their path."The Want To. If you ask leaders if they would like to be "financial leaders" and have skills and confidence around the discipline, they are all going to say YES. I unlock their want to and turn it into how to. What do they need to do to take the next step in their journey? What do they specifically need to do in their department to get their forecast going? Payroll, expenses and their creativity combined with the overall monthly financial circle.Innovation. Managers of the various departments have an arsenal of tools that no one knows about. I have seen amazing ingenuity and creativity in scheduling and expenses that managers just want to keep to themselves. I encourage them to share their ideas. It always amazes me to see what people have created, but are not willing to share. I make the sharing happen and we celebrate this with the team, and it is contagious.Building a bridge. My coaching helps build the bridge that is always misunderstood in the hotel. That is the bridge between the operations people and the financial leader. They naturally do not understand each other and this masks itself in distrust. I remove this and build the bridge.The last thing I will say about the coaching is it helps your leaders get really clear on who they are being. In the beginning, there is finger pointing and victim thinking. We remove this way of thinking and replace it with what actions they will take. Action is always the remedy.With monthly workshops and coaching what we see is the team members starting to get on board with their financial work. They get on board because their team is counting on them and vice versa. They also get into the game because now they want to. Now they have a system to follow. They get their individual acts together because they see it is not so hard. Each month after the second month we do a check-in. Each team member is accountable for their individual contribution to the group. It is very interesting to see the team's dynamics change as members get on board...and not.The Only Thing We Know For SureI love teaching this part."The only thing we know for sure about the forecast is it's wrong." This is the truth about budgeting and forecasting. Knowing that the answer we produce is wrong is actually very good news. Why would you not want to take a shot and produce your department's numbers for the monthly forecast knowing the results you are going to produce are always wrong? Zero risk is the answer. This is quite often the game changer that helps managers get into the project with both feet. Just do it once. Produce your department's forecast--on time. Once this monkey is off their back, managers are on their way.Management turnover is a killer and at the same time, it is the lifeblood of any hotel especially one that is new. Turnover in the hotel featured in the above workshop, during the six-month project window, was almost 50 percent. The turnover included the general manager. Every month there was another departure, sometimes more than one. This was a challenging aspect of the project and it was also a good thing: A challenge in the fact that the investment of time and resources into that leader was now gone. A good thing in the fact that the standards were suddenly upped. New leaders were interviewed with a much greater emphasis on their financial skills and commitment. New faces attended the workshops and coaching to express all the positive things they had heard and experienced in the financial aspect of their new roles. They were excited to be part of a team that had this financial thing going on. They knew something was up--something different--and each one of them brought new life and energy to the team.The financial leadership bar had been raised.If you would like a copy of any of the following send me an email at david@hotelfinancialcoach.comEFTE and Productivity ExerciseHotel Financial Policy Manual - Inventory of "Sections"Hotel Financial Coach "Services Sheet"F&B Productivity SpreadsheetHow the Hotel Financial Coach Helped MeRooms Productivity SpreadsheetFinancial Leadership Recipe F TAR WHotel Financial Coach - "Speaking Sheet"Flow Thru Cheat Sheet - Enhanced
Article by David Lund

Hospitality Financial Leadership - A White Paper - Part 1

The Hotel Financial Coach ·12 December 2017
The project goal had five measurable elements. It was to get the managers and leaders of this hotel to complete their monthly departmental financial forecasts, track their results throughout the month, adjust their spending on labor and supplies according to business volumes, review their month-end statements for accuracy and finally write their departmental monthly hotel management commentary.In other words, get the core management team to do these tasks each month while improving forecasts and the hotel's financial results.Part 1 of 3Early in 2017, I was contacted by a hotel company president who read one of my articles in a hotel association newsletter. He asked me a little bit about how I worked with hotels and then he asked if I would come to his offices and meet with his people. To which I agreed. I went to his office the following week and the receptionist showed me to a well-appointed boardroom with a big table, beautiful art, and 10 chairs. I waited what I thought was a long time, probably no more than 10 minutes.The company president, the CEO, and VP of Human Resources joined me. We exchanged pleasantries, and then they asked me to explain what I do and how I could help them. I started by telling them my story of how I was a failure at a previous role as the controller of a large hotel some 10 years earlier. Not always a strong start but it usually gets people's attention. I explained that the reason I was failing was because I could not get the other managers to give me their monthly forecasts and as a result, I was communicating financial information that was wrong. I then explained that I discovered the cure. The cure to getting my fellow department heads to do their forecasts was to educate them on the hotel financials. I explained that the education was delivered in the form of a workshop that showed the leaders what the profit and loss statement was all about and why we needed their input.Then I explained the results of the work I did in the hotel and that in a very short period of time we totally turned things around and how the managers really liked the training--how they responded and the great results we created.The CEO asked, "In your opinion, who is ultimately responsible for the finances of the hotel?"To which I replied, "The most senior person, usually the GM."To which he replied, "So, not the financial person?""No," I said, "The financial person has a big role to play but the GM must set the tone and lead the team in all matters including the financial piece."With this 5000-pound rhinoceros on the table, my audience had a moment to huddle and the CEO then said to the president, "Well, that's it then, the GM must be the one to lead the charge and they are ultimately accountable for the financial results," to which the president eagerly agreed.I explained to the group the importance of having the senior leadership of the hotel firmly believe that the money is equally as important as guest service and colleague engagement. This conviction needs to be part of the hotel's culture. Leaders in their hotels need to see this, have a system to use and the proper support. Not that service takes a back seat to profit. Equal, that is the key!With my story told and their revelation out the president asked me when I could start and how much for my six-month program. We shook hands and I was told they would contact me shortly with the details of which hotel would be my first project.The revelation we danced around that day is all too common in our industry. Owners, brands, and executive teams are often confused and misaligned when it comes to putting the accountability for the financial results in the right place.I received an email the following week and the note contained the name of the GM, his hotel, and phone number. I called him, and we agreed that I would come and meet with him and his Director of Finance.We got together in a meeting room and I requested a whiteboard. I explained the same story of my failure and finding the cure. I then drew a chart with fictitious names down the left side with five columns: F, T, A, R, W across the top. Forecast, Track, Adjust, Review, Write. I then said to the gentlemen, I was pretty sure that on that day their department managers' report card probably looked something like that whiteboard--blank and empty.Next, I said, "I will work with your managers, educating them with the workshops and coaching them 1-1 to get them to willingly do their monthly forecasts, track their results, adjust their spending, review their statements and write their commentaries."To which I replied, "Just a guess."The GM was very curious about why a six-month program."Why so long?" he asked. "I get this question a lot", I said. I explained that in reality the project really never ends."The financial discipline in your hotel will never be completely mastered," I replied."It's just like guest service and colleague engagement, the job is never done. We use six months because that's how long it takes to educate your team with the workshops, coaching them individually so we can remove what's holding them back, practice for your leaders on their financials, time for your leaders to see your committed to this, time for your leaders to see that it is not going away, and finally time for your team to get their financial act together."In a hotel, each month equals one financial practice. Like anything in business this takes some practice and, if we are willing to stick with it, we will get results! The GM and DoF looked at each other and again smiled. With this out and on the table, I asked them both if they were committed to this plan. I also strongly cautioned them that if they were not committed to walk away! The GM's and DoF's roles in the process are just as important as mine.I explained this important aspect to both and told them we would be coordinating a "triangulated fire" throughout the venture. The three equal forces that need to be utilized throughout the project: My workshops and coaching, their commitment and support with this project from the top with their leaders and, the third piece, the element of time. Me, you and time will win this.The great thing about the monthly financial cycle in business is we get to start over each month. Take what we learned and fix what didn't work. Every month we are improving and that is what we are playing for.With that out, and clearly understood they made the commitment to the project.The first workshop was critical. I coached the GM and DoF on how to invite their team to the party we were throwing. Leaders will sit back and assess the situation and they can smell a rat a mile away. A genuine invitation to learn and grow with financials is what we created. A steadfast commitment to their personal success and prosperity.In the opening workshop, we were joined by three members of the corporate team. You know how the saying goes, "We are from corporate and we're here to help." In this case, they were a huge help. They provided the leadership their support for the project through their participation in the workshop exercises and debriefs. When we wrapped up the opening workshop everyone knew what we were working on, why and, most importantly, they all had the opportunity to verbalize any concerns they had and express their commitment to the project's goals, F TAR W.Another really important element in this workshop setting is the way we present the project. It is like an invitation to the hottest party of the year and you are invited. We make a big deal out of the participants, their learning and most importantly their contribution. AKA - you make the difference. No mention of corporate mandates, financial Armageddon or any other rat-like tactics.If you would like a copy of any of the following send me an email at david@hotelfinancialcoach.comHotel Financial Policy Manual - Inventory of "Sections"Hotel Financial Coach "Services Sheet"F&B Productivity SpreadsheetRooms Productivity SpreadsheetFinancial Leadership Recipe F TAR WFlow Thru Cheat Sheet
Article by David Lund

Hospitality Financial Leadership - The Trip to the Psychologist

The Hotel Financial Coach · 4 December 2017
In life I have always believed I should seek professional help whenever necessary: doctors, dentists, accountants, mechanics, coaches and psychologists too. My father always said, "If you don't know what you're doing with what you think you are trying to fix, go see someone who knows what the hell they are doing--you have no place messing around with it." He was a master auto mechanic and he was mostly referring to the cars that people had brought him after they tried to fix whatever was wrong and inevitably made it worse, much worse.So I have a similar belief, do not mess with it if you do not know what you are doing. The key word here is "know." Many people think they "know" and that can lead to bigger problems. My trip to the psychologist was a gut reaction to the programming I had: I have a problem and I need some help before it really gets out of hand.The best advice I can give to anyone going through a rough patch is to never be afraid to ask for help. -- Demi Lovato, Stay StrongSo. I had just left my career as a hotel executive. Thirty-one years invested with the same company and I walked out the door. I was not sure that I had done the right thing. I did what was in my heart. I did what I felt I had to do given the circumstances. But still I was questioning myself.Johanne asked, "Why not see someone to talk about what you're going through, a professional?"After a few days of being home and having some really dark days I took a look online with my health insurance and found the nearest psychologist. That was my criteria location, not gender, not name, but could I walk to the appointment. The address was less than a quarter of a mile away. Across the panhandle in NOPA. I made an appointment. Craig was a transplanted Michiganite who had the most eclectic Indian art collection and a very friendly and overweight pug.I went to see Craig four times. I explained how I felt and thought about losing my job. The sessions were 50 minutes and each one was good. I was able to articulate my feelings and mostly he just listened and had the occasional question or two.I vividly remember our last session, when the lid came off. I was telling him that leaving my job was like a river and its strong current was sweeping me away. I really felt like there was something so much stronger than me that was taking me in this direction.He asked, "What was it that was taking me in that direction, away from what was so familiar?"I explained my dream of creating a business around financial leadership, my workshops, my idea to become a coach and change the way an industry leads its managers financially. He asked me why I needed to do this, what was compelling me, and what came out of my mouth was an amazing statement, one that I had no idea was in me.I answered, "I guess I get to decide what I do with the rest of my life."I was stunned, shaken to my core and flying all at the same time. Who was I to say and believe I could decide what I wanted to do for the rest of my life? We don't get to decide these things, do we?The session concluded and I had such clarity and peace in my mind. On the walk home things looked different, clearer and vivid. The smell of the cypress trees in the panhandle was so intense. The sounds of the kids playing in the park was so energizing."There is a tide in the affairs of men.Which, taken at the flood, leads on to fortune;Omitted, all the voyage of their life is bound in shallows and in miseries.On such a full sea are we now afloat,And we must take the current when it serves,Or lose our ventures." Julius Caesar Act 4, Scene 3, 218-224Things happen for a reason in life. That is what I believe. If we fail to see the why and we get hung up on the obvious and misleading misfortune, we miss an opportunity to live the kind of life that is truly an adventure and one that is larger than life. We must be willing to look for and seize the upside.It is always there, you just need to look for it. If you cannot find it - get someone to help you find it.If you would like a copy of any of the following send me an email at david@hotelfinancialcoach.comEFTE and Productivity ExerciseHotel Financial Policy Manual - Inventory of "Sections"Hotel Financial Coach "Services Sheet"F&B Productivity SpreadsheetRooms Productivity SpreadsheetFinancial Leadership Recipe F TAR WHotel Financial Coach - "Speaking Sheet"Flow Thru Cheat Sheet - Enhanced

Hospitality Financial Leadership - Overcoming Challenges - Niki Lauda

The Hotel Financial Coach ·28 November 2017
I've been through a lot and I realize the future can't be controlled. I'm not worried. You can always learn to overcome difficulties. - Niki LaudaOvercoming a setback like divorce or losing a job is very challenging. Overcoming and moving on after nearly being burned to death must be incredibly difficult. Niki has always been one of my heroes.In 2004, while attending the Canadian Grand Prix in Montreal, I met the three-time world champion driver Niki Lauda at the bar in Jacques Villeneuve's restaurant. The restaurant name was Newtown. Meeting Niki was a completely chance affair. I was having dinner with Johanne and some friends and I went to the restroom. On my way back to our table--which took me through the bar--I saw a guy all dressed in red, Ferrari red from head to toe, including a hat. The patron at the bar all dressed in red was alone. I made my way in his direction out of curiosity.For a Formula 1 fan there is no mistaking Niki Lauda. His looks are incredibly distinctive. He was severely burned and subsequently disfigured at the 1976 German Grand Prix in Nurburgring. The old German Grand Prix track was a monster 23-kilometer-long circuit. In the two weeks leading up to the race the Austrian driver lead a group of drivers calling for the race to be boycotted due to safety concerns. With such a long track a driver is much more at risk from an accident because of the time it takes the safety and recovery people to reach the scene. A typical Formula 1 tract is 4- to 6-kilometers long.On the second lap of that race Niki's Ferrari crashed at the very fast left-hand turn before Bergwerk corner. His car swerved off the track, hit an embankment, burst into flames and made contact with Brett Lunger's Surtees-Ford car.Unlike Lunger, Lauda was trapped in the wreckage. Drivers Arturo Merzario, Lunger, Guy Edwards and Harald Ertl arrived at the scene a few moments later. Before they were able to pull Lauda from his car, he suffered severe burns to his head and inhaled hot toxic gases that damaged his lungs and blood.Because Lauda was wearing a modified helmet, the foam had compressed and it slid off his head after the accident, leaving his face exposed to the fire. He suffered extensive scarring from the burns to his head, losing most of his right ear as well as the hair on the right side of his head, his eyebrows and his eyelids. Later, he chose to limit reconstructive surgery to replacing the eyelids and getting them to work properly. Since the accident he has always worn a cap to cover the scars on his head.At the time of the accident Niki was leading the F1 driver points.Niki was back in the car in six weeks, missing only three races. He returned at the Italian Grand Prix and still had the overall season points lead. By the last race of the season at Suzuka, Niki was still in the points lead by three. The race was mired by incredibly hard rain at the beginning and the Austrian listened to his own safety concerns this time and retired after the second lap. With his eyelids severely burned and the tear ducts not functioning properly, he could not blink and he could not see. In retiring he lost the 1976 season title to his rival James Hunt by one point.Niki's relationship with his Ferrari team was severely damaged due to his decision to withdraw from the race. This cost Ferrari the title and that is a big deal. Eight years later he earned his third Formula 1 drivers' title and then retired as a driver.Back to the barI approached Niki, who was standing alone beside the bar, and we made eye contact. He smiled and I held out a hand. We shook hands and I told him I was a fan and how pleased I was to meet him. He thanked me and said, "Enjoy your dinner and the race tomorrow." I left and returned to my table incredibly humbled by my experience. Knowing his story well and meeting him gave me a massive sense of inspiration. How can a person endure such pain and pressure and still be at every Grand Prix? He could have had a comfortable retirement. Even today, some 12 years after meeting him and over 40 years since his accident, he is once again the center of the F1 universe as the non-executive chairman of the Mercedes AMG Petronas F1 Team.No matter what happens we can overcome the difficulties.Just look at Niki and compare your struggle or challenges with his.This is the best example I know of someone who trumps "the want to" every time over the "the how to."If you would like a copy of any of the following send me an email atdavid@hotelfinancialcoach.comEFTE and Productivity ExerciseHotel Financial Policy Manual - Inventory of "Sections"Hotel Financial Coach "Services Sheet"F&B Productivity SpreadsheetRooms Productivity SpreadsheetFinancial Leadership Recipe F TAR WHotel Financial Coach - "Speaking Sheet"Flow Thru Cheat Sheet - Enhanced

Hospitality Financial Leadership - Testing vs. Trusting

The Hotel Financial Coach ·21 November 2017
"All of life is an experiment, the more experiments the better." ~ Ralph Waldo EmersonWhen you really want to do something, the "how to" shows up everywhere. Getting into and staying in action is the key. Having and holding onto the notion that we must have the answer first kills our endeavors. Let me give you an example.A client of mine hired me to help him grow his new real estate business. We did some sessions and something was revealed. He had a predisposed notion of how his business should grow. He was close to trying some new ways to grow his business. He had heard the stories of the other more established and successful agents, and he thought his path should be the same. I was able to get him to see this by asking him what else he had tried and acknowledge the fact that if heREALLY WANTED to grow his business he would be willing to try some new processes and get out of his own way.He said something very interesting in one session: He said he didn't trust an idea.We were discussing a door-to-door meet and greet strategy where every day for two weeks he would spend three hours going door to door introducing himself and giving the people he met a nice little note pad with his firm's name and his name and coordinates. Not rocket science but 10 days @ three hours would equal 30 hours of meeting people. What might that create?"Who knows until you try?" I asked.He said, "I don't trust the process, it seems weak and I'll be like a door-to-door sales person."I said, "You don't need to trust anything, take that step out of your to do list, don't trust it, TEST IT." This was a game changer for him. Get into action, stay in action and test. Be a scientist and do experiments and test, test, test.Testing means experimentingExperiments never fail because we are just experimenting. We learn from experimenting. How did you learn to walk? How many experiments did it take? Thousands. You just forgot.As adults, we think we need to have the answer: the trusted answer, the sure thing, the winner. That's what holds us back. If we are willing to suffer a little injury to our imaginary ego and put ourselves out there and get into action--stay in action--we will find our way. If there was a store where we could go to purchase the code to light our way to success, it would be a busy place. But, it does not work that way.If we are willing to drop the need to know that what we are doing will work and continually get into and stay in action with our business, our leadership and our relationships are going to succeed much faster and better. On the contrary, if we stay shut down and hold onto our limited beliefs of what should work, what should be the way, what worked for someone else, we are out of action and we get discouraged easily. This is poison for growth. Trusting is poison.Inside your business ideas either get blown up or shot down. We blow them up if we are willing to test, we shoot them down if we need to trust."Test! Experiments give you a way to play with the universe. They allow you to interact with the real world and get some interesting answers. What works, what doesn't. Let's try again. This is starting to kick in. You test, you learn, you grow."Steve Chandler - Crazy Good
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Hospitality Financial Leadership - Chasing Your Dream

The Hotel Financial Coach ·13 November 2017
Yeah, runnin' down a dream - That never would come to me - Workin' on a mystery, goin' wherever it leads - Runnin' down a dream - Tom PettyIn life, we think dreams, big ideas, and accomplishments are someone else's domain, but not ours. We think those people are special, gifted, magical. They were the ones who were chosen for that higher calling to be that explorer, the writer or the leader that made a difference and really had something special to do and share wath the world.Well, that is not true.We all have that something and it is right there, inside of us and we can see it, feel it and we know its power. Yet we almost always ignore it, run from it and diminish its meaning and potential. The thing we have inside of us needs to be worked on every day like we are polishing a precious stone. But ignoring it and walking away from it and not doing the work is the path we almost always take.Why?Why do we not follow our path to adventure, pure engagement, a calling of the soul? Why would we not want to have a life full of such enthusiasm and joy?My dream hit me like a big rock, square in the forehead at 4 p.m. I had spent the entire day giving a class inside my hotel to 40 department managers on hotel finances for dummies. I did not tell them that was the name, it was coined something else. I really did not want to do this workshop but my General Manager had made it a mandatory."No workshop, Mr. Lund, and no bonus this year," he said, "It is the right thing to do." He said this because I explained why my forecasts were so weak."The other department managers give me crap information, always late and I end up changing 90 percent of it," I asked, "Why can't they send me good quality information and why do I have to hound them every time?"Well, at 4 p.m. that day class was over and I had a lineup of leaders wanting to talk to me and thank me for the day. I heard some amazing compliments:"Finally I know what you do with my stuff.""Had no idea that my numbers were sent to corporate.""No one has ever shown me the P&L this way.""When are you going to do another class on the financials?" and on and on.Unbelievable. I was elated and stunned. I felt like a celebrity, not the controller that when seen people would normally run in the other direction. These were the same leaders that were always late with their forecast or budget or month end commentary information. That evening I reflected on what happened and all I could think of was, this is a game changer. I am on to something. I remember telling my wife how much I liked giving the workshop and she said, "Do it again!" So I did.Fast forward seven years. I am now the regional controller in another country, having accepted a transfer four years earlier. My workshop had won my company an international innovation award the year after I created it. I had delivered the workshop many times in my hotel and inside my region, and refined its content and practiced my delivery. Every time I gave the workshop my students would line up and give me the most amazing comments. I loved spending the day lighting up these leaders. I also realized that my job as the chief collector of financial information in the hotel got easier and easier the more I educated my peeps.This was magicThe class changed my life and theirs, too. Now they saw the financial piece as not scary and not difficult. Remember your version of the boogie man when you were a kid? Where was your boogie man: under your bed or in the closet? You can insert your version. One day you turned on the lights, looked under your bed or in the closet and GONE! You no longer believed in the boogie man. Well, this belief, "I'm not a financial person," is exactly the same thing. The leaders believed this was something hard, beyond them and scary. The workshop showed them this was not true and, like the boogie man, they stopped believing they were incapable of being a financial leader. This was magic.I often thought about my workshops and dreamed of taking this idea to the world. Be careful of what you dream.One day my job came to an end. When it did I had a choice, go find another job like the one I had or go on an adventure. The idea of the adventure was very scary. So much uncertainty, I did not know where to even begin. But for me the other side of the coin was unacceptable. To go back to the grind, to return to the politics, the greed, was not in my cards. I remember going to an interview for a similar roll in another brand, I nailed the interview, said all the right things. I left that interview, got in the elevator and loosened my tie, and by the time I made it to the street I was pretty sure I was going to puke. I was freaking out. Why am I doing this? I know this is not what I want, damn it!That was it for me. No looking back - just looking ahead. My adventure was now underway. There was no way I was going back to the corporate world. I knew I had an idea that lit me up. I believed it would work and from that day forward, every day when I would wake up it was my mission to put wheels on this workshop and change the way hotels work financially. I could see my path.Funny thing is, the more I worked on my vision the more the path became clear. I know some days I would question my idea. Was this really going to work, would it be successful, would hotels hire me to change their financial leadership?I did not know the answer but I believed there was nothing else in this world that I wanted to do.That is what keeps me in action. I do not want to go back so I better make this work. That is a powerful incentive - to not want to go back to prison.If you would like a copy of any of the following send me an email at david@hotelfinancialcoach.comEFTE and Productivity ExerciseHotel Financial Policy Manual - Inventory of "Sections"Hotel Financial Coach "Services Sheet"F&B Productivity SpreadsheetRooms Productivity SpreadsheetFinancial Leadership Recipe F TAR WHotel Financial Coach - "Speaking Sheet"Flow Thru Cheat Sheet - EnhancedVisit my website today for a copy of my FREE guidebook:The Seven Secrets to Create a Financially Engaged Leadership Team in Your Hotel
Article by David Lund

The Four Things My Hospitality Financial Leadership Workshop Taught Me

The Hotel Financial Coach · 6 November 2017
By creating and delivering my hospitality financial leadership workshops I learned 4 very important lessons. The lessons center around how this workshop helps leaders change and become financially engaged.

Hospitality Financial Leadership - Measuring and Using EFTE's

The Hotel Financial Coach ·30 October 2017
If You Can't Measure It, You Can't Improve It. Management thinker Peter Drucker is often quoted as saying that "you can't manage what you can't measure." Drucker means that you can't know whether or not you are successful unless success is defined and tracked.In the hotel business payroll is the number one cost. STR recently reported that labor made up 50% of revenues for a sample of over 4,000 hotels of all types and sizes. Having an efficient and reliable way to measure payroll is critical in any business. In hotels, the impact of payroll is amplified considerably and the need to have something you can measure is the key. May I introduce the secret weapon and the star of the show? EFTE's!!!!!Abbreviations.com defines the acronym EFTE as "Equivalent Full Time Employee". I know from my experience that most hotels do not use EFTE's on their daily reporting and the use of EFTE's on their financial statements is not prevalent. The creation and use of this powerful statistic is not difficult. All the information you need, you already have, it's all at your fingertips. You just need to organize it and let it tell you what's going on inside your hotel. Measuring the dollars of payroll in your hotel is very important but understanding productivity is the most powerful tool you have. Getting to understand and measure productivity leads to the comparison of like data, this is where the EFTE is so powerful, it's like a power tool! Many industries use this statistic, and therefore it's not unique to the hotel world.First off let's define the use of the EFTE. EFTE's measure the number of "equivalent" full time employees. This is where most people get hung up. In the hotel business; we have full time employees, part time employees, salaried employees, hourly employees, unionized employees and even contracted labor. What the EFTE calculation lets you see is what's the total of these pieces of our hotel labor by area, department and in total. It also allows you to see the same information for a day, month or year in a comparable way. This is very useful and once you get started with EFTE's you're going to be hooked.Second, lets define the calculation. This is the second most common place where people get hung up. If you can manage a little multiplication and division then this is very straight forward. Remember the first work in the acronym is "equivalent". To calculate one EFTE we need to start with the annual calculation. Once we understand the annual calculation we can reduce the same calculation for any month in the year, a week or and a single day. Now, don't go south on me with the following math vomit. Once you run this through your internal bio computer you will get it. I did and I as one good friend like to remind me, I am not always the sharpest knife in the drawer.For the basis of calculating an efte we use 40 hours as the "equivalent" work week, 5 days * 8 hours per day. In hospitality, we all know most managers and leaders work more than 40 hours so don't let this part confuse you. The second part is the number of weeks in a year. (365/7 = 52.14) Leap year we use (366/7=52.29). We then take our 40 hours and multiply it by our annual 52.14 which equals 2086. Which is simply the number of hours a person working 5 days a week at 8 hours would work in an entire year. Note here we don't factor any holidays or vacation. We just want to know the number of hours one would work in an entire year.From this magic number of 2086 we can figure out the daily and monthly EFTE values.For the daily its 2086/365 = 5.715.For a month, it's the number of days in the month times 5.715.A month with 31 days is 31 * 5.715 = 177.1A month with 30 days is 30 * 5.715 = 171.5A month with 28 days is 28 * 5.715 = 160.0Now we know the basis for calculating the Equivalent Full Time Employee statistic for a day, any month and a year. Let's put it to work for your hotel.There are two key areas in your hotel where you will want to see EFTE's in your reporting. The two areas are daily labor/productivity reports and your monthly financial statements. For the daily reporting, we only need to get the report from our time clock or if we have a manual system the departmental hours worked summary is what we need. Taking the daily hours worked by department and major classification and dividing this number by the daily divisor of 5.715. The second part of the daily EFTE measurement is to divide the month-to-date hours by the month-to-date divisor.Daily hours worked in housekeeping in this sample is 185/5.715 = 32.4 daily EFTE'sMonth-to-date hours worked in housekeeping as of the 18th of the month 3725/ (18*5.715) = 36.2 month-to-date EFTE'sWe can use this statistic for any payroll calcification, big or small. From the number of EFTE's in the room attendant classification all the way to the total hotel EFTE's it's all the same math. We will also want to apply this same view to the forecast, budget and last year values, especially for the month-to-date results.With the monthly financial statements, annual budgets and monthly forecasts we also want to incorporate EFTE's. The report writer in your system needs to be messed with here and you will need the right person to go under the hood and write your financial formula. In addition, you will need to incorporate hours reporting on your monthly closing process. Create general ledger accounts to match each payroll classification you report on your financials. Run a monthly report from your time clock or post each pay period's hours and don't forget to accrue the stub period and reverse last months. Once you get into the swing of booking the hours on your financials its business as usual and now you have EFTE's on your financial statements.Imagine how much more insight you can gain on your business with EFTE reporting. With one glance, you can see the total EFTE's for budget 2018 compared to the latest forecast for 2017. Look no further now we can see the A&G EFTE count, the food preparation EFTE count, the EFTE count for the actual, budget, forecast and last year laid out side by side. Things are now much, much clearer in your financial reporting thanks to the super tool EFTE's.With hours reporting on daily reports and monthly financials we can now introduce productivity reporting. If you want a copy of my article on Rooms or F&B Productivity reporting send me an email and I would be happy to send it to you.EFTE use and reporting is going to change your world. Don't let anyone tell you it's not possible or practical. Your prosperity depends on good financial information and organizing what you already have into highly intelligent reporting is just around the corner.If you want a copy of my excel EFTE exercise send me an email and I will send it with my compliments.If you would like a copy of any of the following send me an email at david@hotelfinancialcoach.comHotel Financial Policy Manual - Inventory of "Sections"Hotel Financial Coach "Services Sheet"F&B Productivity SpreadsheetHotel Financial Coach - "Speaking Sheet"Rooms Productivity SpreadsheetFinancial Leadership Recipe F TAR WFlow Thru Cheat Sheet - EnhancedEFTE & Productivity ExerciseVisit my website today for a copy of my FREE guidebookThe Seven Secrets to Create a Financially Engaged Leadership Team in Your Hotelwww.hotelfinancialcoach.com
Article by David Lund

Hospitality Financial Leadership - Food Cost and the 80/20 Rule

The Hotel Financial Coach ·24 October 2017
We have all heard of the 80/20 rule. But I am willing to bet most of you have not heard it in conjunction with the words "food cost."A good friend of mine who was an executive chef explained it to me and I am going to share it with you.So first off, the 80/20 rule states that 80 percent of any result comes from 20 percent of the activity. In food cost, what Chef taught me is the 80 percent of the food cost comes from only 20 items. That's right--the top 20!What he explained was so simple and powerful. Identify the top 20 food items your hotel buys using the dollar value of those items. It takes a bit of work but once you have your list it is impressive. In the hotel we worked in, the gross food purchases were over $10 million.We did the test and we identified the top 20. Here is our list: Bacon, sausage, cream, butter, OJ, dinner rolls, beef tenderloin, shrimp 16-20, individual yogurt, tomatoes, eggs, ground beef, halibut, chicken breasts, French fries, smoked salmon, coffee, lettuce, rib eye and brie cheese. Sure enough the 80/20 rule was right. We had over $7 million worth of these items purchased in one year.His way of managing the costs of these items is magic. Each month on a rotating basis, everyone focuses on one of the top 20 items. The sous chefs, purchasing department, stores, catering, conference services, outlet managers and purchasing service all focus on that one item. When the entire team focuses on one food item and how to improve on buying it, storing it, cooking it and serving it, positive things almost always happen.So, every 20 months, he turns over the list. This keeps everyone on their toes, including the suppliers. When they get in on the game, they come up with new and innovative products. Everyone knows the food item of the month and it is like a mini competition to find savings. He sends our suppliers a note each month with the annual quantity of the "monthly focus item" we purchase with a request to have the suppliers look for a better product. Suppliers love to help and really respond, especially when they know other suppliers are receiving the same request.Some months ago he told me, with the changes he made one month, the hotel will save $100K next year.Once you see the volume of your top 20 and find ways to innovate, your savings are multiplied by huge volumes.Some of the ideas come from the strangest places. Catering suggested the tenderloin be tested. The director of catering bought AA at home and did not think the AAA was worth the difference. Would a grade less be just as good? They brought in samples and did a blind tasting and, Voila! 60,000 lbs. of tenderloin just went from $12.99 a pound to $10.69. You do the math.Another month it was orange juice. The idea was: Why can't we get it in a bigger portion that the 2-liter containers? Sure enough the supplier came back with a 4-liter container from the same supplier. The switch equated to savings of over $30K.Be careful not to make this a math exercise. A lower price is good but the quality and consistency needs to be there. Let the chef decide and also allow a higher priced product if they feel the product is superior and desirable.Your vendors need to work for youContinually ask them to seek out new and better items from their suppliers. That is their job to keep you happy and buying. Know your top 20 and pull your team together to innovate. Find out what your competitors are using. Pick up the phone and call three of your competitors. Have the chef call the other chefs. Ask them what coffee they are using for banquets. I bet you will find a better more cost-effective alternative. Call your supplier and have them send in samples. Do the blind taste test. Always be looking to your top 20.The other side of this is your vendors work in reverse. They know what you buy in volume, and they look to increase your spending not to decrease it. That is their game so be better at the game than they are. They know who has their ducks in a row.80/20 does not mean you ignore the 20 percent. You continually look for better pricing and quality. Just do not lose sight of where the big opportunities are.


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