The Hotel Financial Coach · 24 Feb
An old GM of mine was fond of this statement. He usually came at it from the other end of this by saying, "Any monkey could fill this place when the phones are ringing." And I think he is right.
The Hotel Financial Coach · 2 Dec
Being a branded or franchised hotel is an expensive endeavor. Especially when you consider the average agreement is 20 years in duration and you're on the hook for the fees outlined in your agreement plus anything else the management company throws at you.
The Hotel Financial Coach · 11 Nov
Food cost is a never-ending battle in a war that does not end. You can never take your foot off the gas, if you do you will slow down. When you slow down in the food cost world it is costly. Back in the day I cut my teeth as a receiver, F&B cost control clerk and ultimately an F&B cost controller.
The Hotel Financial Coach · 28 Oct
I know a lot of people have some confusion and a slight frustration when it comes to the financial information that's available in a hotel and the way it's presented.
The Hotel Financial Coach · 21 Oct
This is a story about a recent client who hired me to coach her. She was the director of rooms in a large hotel in Illinois and was told that it was possible for her to be promoted to a general manager role in the future in a smaller hotel with the same brand. She was excited and nervous. Excited because of the prospect of becoming a GM which she had longed for and worked hard for. Nervous because she knew, as did her whispering boss who said, "You better brush up on your numbers."
The Hotel Financial Coach · 14 Oct
The Stow has always been a great hotel. Sitting high on the hill overlooking the river its bones and lines are completely classic. The 505 rooms all have a view of something great. For decades, the hotel had been the home away from home for the elite of the world. Rock stars, heads of state, actors, CEOs, you name it and they came, stayed and came back. Managing the hotel was a dream job. I never thought I would have the opportunity to be the general manager of such a fine lady. We call them ladies because they are gentle and beautiful and just a little complicated.
The Hotel Financial Coach · 7 Oct
Just like your auto mechanic checks your car's health you can completely review your hotel's financial performance and get a clear reading on as many as 21 different flow thru performance points. Further to that you can even see what you need to do in most cases to correct the results! It's what I call super revealing. And, the best point is you don't need anyone's help to do it because I'm going to give you the list! Flow thru is an essential concept to understand. If you are new to the idea read, my blog on flow first. https://hotelfinancialcoach.com/flow-through-understanding-how-it-works-and-how-to-include-flow-thru-in-your-financial-statements/Checking performance is a step-by-step exercise and we start at the most vital points. Failure to do this analysis is a costly error. By being diligent we can identify the areas that are affecting our financial health and that's the first step in fixing the problem.In this example the flow is measured to the same time period, year-to-date this year to year-to-date last year.
The Hotel Financial Coach · 30 Sep
What is really important to realize is the food cost calculation in your hotel will always come back to the cost of goods formula. Any attempt to track and individualize the outlet food cost that I have ever seen is a big waste of time. It is a waste of time because it always comes back to the fact that the food cost is calculated by adding the opening inventory to the purchases and then subtracting the closing inventory - as well as any legitimate credits at month end - to calculate the food cost. This is never done in hotels by outlet simply because it is completely inefficient to do so.
The Hotel Financial Coach · 16 Sep
In our business it is no secret that labor is our single biggest expense. Last year the average hotel in North America, according to data collected from thousands of medium- and full-service hotels by a popular industry partner, was right around 50 percent of total revenues. What is a secret is how most hotels manage their largest cost. In this piece I am going to talk about creating and using a staffing formula for all scheduled positions. In addition, I will talk about the best practices as it relates to having and using staffing guides. First of all, let’s define what a staffing guide is and what constitutes a staffing formula. The two are separate but also come together when used properly. Allow me to explain.
The Hotel Financial Coach · 26 Aug
When it comes to payroll we are not just paying the cash wages. We have additional dollars that are substantial in the form of supplemental costs and employee benefits.So, what we want to have are three areas we can see and analyze in our financial statements:
The Hotel Financial Coach · 19 Aug
When you are reviewing a hotel budget you want to ask the right questions—the ones that will yield the biggest treasure. You see, the game of budgets in most hotel companies where the corporate or regional master needs to approve the plan before it is presented to the owner, is a game of under promise now and hopefully over deliver next year. Some people I know call this the practice of sandbagging. It is not mean or deceitful, rather it is a game. If you are asleep at the switch when you are doing the review, well, that is your problem.
The Hotel Financial Coach · 12 Aug
"If Service is Beneath You - Then Leadership is Beyond You." I cannot find an owner on Google for this statement, so I am going to claim it as mine. If someone already coined this phrase I will let it go, if not it is mine. The reason why is because it is the foundation for the transformation I experienced as a financial leader. It is also the basis for the work I do with hospitality financial leaders and their non-financial departmental managers. Let me explain to you what I mean and how these words are the very essence of creating a financially engaged team in your hotel.
The Hotel Financial Coach · 6 Aug
In my recent travels working with clients and delivering keynotes as well as financial leadership workshops for management teams and hotel associations, I noticed an interesting way that more than one client used to "subsidize" their meetings—reducing their costs—and I wanted to share it with you.Having your regional meeting, national meeting or hosting your association event is expensive. There are travel costs, perhaps speaker fees and venue costs. Depending on the type of event there can be accommodations, meals, audiovisual and meeting room rentals. For companies, there is also lost productivity cost associated with having people away from their day role in selling your hotel or managing their team. These all add up to some serious dollars and justifying the costs can sometimes be questionable.We all know how important meetings are but there is no question about the expense. What I have learned is some clever operators are using an age-old system to cut their costs for meetings.What I noted recently with one client that hosted a statewide conference was the level of sponsorship. I have spoken at and attended many hotel conferences and this one really stood out. With few exceptions, everything had a sponsor. The keynotes, breakout sessions, receptions, coffee breaks and meals all had sponsors. In most cases the sponsor was clearly noted in the program, the use of their name and logo being front and center.With group events the sponsors were given a moment to thank the attendees and the association.These partners all had a clear message for the association members. The message was of appreciation and dedication to the spirit of hospitality and the members' challenges and the partnership they enjoyed and appreciated with the association members. Not a sales pitch but one of we are all in this together and we appreciate you and your challenges. Sponsors even mentioned local political issues and health of the owner and operator's business in thanking the members. It was all powerful stuff and very much in line with the goals of the association and its members. Never once did it feel like a sales pitch or a product or service endorsement.Reflecting on this, it is obvious to me that the sponsors all had their "message" crafted and coordinated which resulted in a real and tasteful partnership message.I know when the sponsor of my event introduced me they made specific reference to the challenging situation that hotels were experiencing with minimum wage rates and the government recent and future planned increases. In partnership with members, the sponsor told the audience that they heard their concerns and to help they brought me to the conference to speak about a system that everyone could use on labor productivity measurements specifically for hospitality. You could feel the appreciation for the sponsor. This was so well done because of the alignment with the members' challenges. My sponsor was a wireless provider - go figure.Another great example of a company meeting using sponsors was an annual regional meeting of 10 hotels where the owners of the management company, corporate executives, GMs, assistant GMs and sales managers were all gathered for two days of meetings and team building. What stood out was again the use of sponsors. I delivered a workshop on the morning of day two. While being introduced by the VP of operations, he thanked the audience for the previous night's paintball event and the sponsor for the evening. I was taken aback by the ingenuity. The sponsor for the paintball was an amusement park and several of the hotels packaged admission along with their rooms. What a great way to thank the hotels and their sponsor.Now it is time to talk about me. The VP tells the audience he knows how hard they all have been working on improving their financial literacy and to help them with this cause he brought me in to lead the morning session on Hospitality Financial Leadership. In conjunction with my workshop, their sponsor was the management company's accounting software provider. He mentioned the company by name and he also spoke about the level of progress and all the hard work that the operators had undertaken with their monthly financials and daily reporting. This blew me away. I should have charged more.At the morning break, he had a coffee vendor take a moment to speak to the attendees. The coffee man spoke about his family-owned business and how much he appreciated the support of the hotels and how he felt the use of his product in several of the hotels had helped his retail sales. He wanted to show his appreciation with the sponsored coffee break as well as by giving each person a cool stainless steel coffee container. All of this played right into the theme of the conference which was built around being part of the community and making a difference in people's lives.Having a meeting can be expensive but with some planning and attention to the alignment of goals, it can also be an opportunity to do more business.
The Hotel Financial Coach · 29 Jul
Creating a financially engaged leadership team takes time, commitment, respect for fair play, resources and a sense of adventure.When creating something new, for me there was always an element of the unknown. In writing my book, it occurred to me that if I had a book like this 25 years ago, some of the guesswork would not have existed.
The Hotel Financial Coach · 22 Jul
Tis the season and most hotels are already well under way with their annual grunt work to prepare a 2020 plan for the regional and corporate teams to review and then it is onward to ownership seeking their approval. In most hotels, this process is a protracted drawn-out marathon of such epic duration that it leaves a streak of several weeks, if not months, for some to endure. Revision after revision is the norm and everyone along the path squeezes a little more until there is nothing left to give anymore.
The Hotel Financial Coach · 15 Jul
Accounting was a trade that had a global language much like carpentry or plumbing. There were universal rules that applied and these principles were exactly the same in the hotel business. That was good news. Accounting principles are universal. The way in which accounting is done throughout the world is a direct by-product of these principles: “Accounting principles are the rules and guidelines that companies must follow when reporting financial data. The common set of U.S. accounting principles is the Generally Accepted Accounting Principles (GAAP).”
The Hotel Financial Coach · 8 Jul
There exists a counter-culture to growing up, to raising one's self out of the guest- and colleague-only world into the financial arena. I know and have met many people who camp out in hospitality for this very reason. The idea that they will not have to deal with numbers and the black and white is part of our culture. In this piece, I am going to examine why this exists and what you can do to rise up!The hotel world has changed tremendously in the past 20-30 years. I have been at it for 35-plus years and the most profound change I see is movement away from the owner/operator model to one where most hotel companies become management companies. In simple terms this means the name on the door 30 years ago was the owner of the bricks and mortar. Today the name on the door 19 times out of 20 simply means the brand has a management or franchise agreement with the hotel owner or owners. What this translates to—as far as how the hotel is run— is where we have all seen and felt the changes.The old model had a much kinder and gentler approach to fostering a culture of inclusion, family, longevity and a strong service culture. I distinctly remember my first stint in a "managed hotel" inside my company. People had warned me that it was different and they were right. The owned hotels had a clear sense of togetherness and you knew what was important. I literally grew up with this slogan in my DNA, "Look after the guests and the money looks after itself." Leaving the safety of the owned nest I learned a few new things.The owner needed a certain return each quarter to meet his debt and investor obligations. Back home this was never a topic of discussion. It seemed head office was always grumpy about the results but never spoke of external obligations. These owner obligations had a profound effect on how we operated, especially the first year I was at the managed hotel.
The Hotel Financial Coach · 1 Jul
This is a question I have been asked many times. Exactly what is financial leadership and why hospitality? Finding the three words together "HFL" in a sentence three years ago was not possible. I know because I tried to google them and came up with a bunch of leadership consultants and courses. Even the words "financial leadership" revealed surprisingly little. Some tidbits about CEO's and their role but nothing any broader.Financial leadership is in my opinion the cornerstone of any manager, executive or leader's business acumen. It enables the individual to see the importance of being plugged into the strategy of the business regardless of their vocation or the industry that they are in. They could be a human resources manager, a facilities manager or the head of information technology but they are financially tuned to the business at hand. They know the role they play in delivering the results inside the strategy and they also use their financial leadership skills to communicate and lead their team. They make the numbers in their world just as important as the other disciplines like people, service and processes. Financial leadership skills enable these managers to create a level of understanding and sophistication around the business strategy. They can relate this understanding to their mission and vision of the team they are leading as well as the individual development and contribution of the team members. They see the numbers as a form of currency that provides fuel to ignite and mold the talent and contribution of their team's collective efforts. The executive with financial leadership skills knows that the key ingredient that each of his or her squad needs to propel their individual careers is a sound grasp of the company and industry business strategy. They are in essence an enabler of the financial leadership knowledge within their group and, as a result, they produce leaders who help propel the company's growth. Without these skills being brought out of the individuals by the functional leader, the contribution of the person and the collective team are restricted. Great leaders are developed, and they need the exposure to the financials to grow; without it they are limited. Hospitality Financial Leadership is the missing link for many hotel leaders and executives. It is hard to think or believe that some of our senior members are playing the game with a short hand. If you have been in hospitality for your career you know exactly what I'm talking about. We promote people from operations, sales and other senior roles to be the General Manager. It's been this way since the dawn of time and again, if you're in the business you know what I mean. It's also quite frightening to think we have the most senior person sitting in the seat without the proper flying skills. In many instances they are winging it and if the owner knew just how green they were they would slip a disk. But don't worry too much about the captain not knowing how to sail. He or she will be fine as long as they open up to financial leadership. This is where the rubber meets the road. Knowing you have the ability to manage your people, the owner and the brand is key, but knowing how to make the numbers work, that's the nitro you must have if you're going to get off the ground and stay there. So just exactly what is this fuel? The fuel is the commitment to make the numbers just another equal part to what you do. Holding the direct reports accountable for their departmental results on all levels. Not giving anyone a pass when it comes to their budget just because they are a valuable team member with amazing soft skills in their area who to date has not taken the necessary time or made the required commitment to get their financial shtick together. They are the leader who does not blame the finance department when the operating department numbers are upside down. They are the quarterback who calls the plays and ensures the finance department also lives up to its commitment providing the necessary resources and living up to its own schedules. They make sure the forecasts and budgets all come from the department managers, not from the accounting department. This man or woman of steel ensures each department head writes and owns their own monthly commentary. Our hero makes darn sure the daily communication around the numbers is consistent, positive and clear. Making sure your team is provided with the resources and training to get it going, to get everyone to step up and they take no prisoners. Blame and victims are not allowed on this ship. That my friends is what Hospitality Financial Leadership is all about.
The Hotel Financial Coach · 24 Jun
I help hotels manage their profits more efficiently and in the hospitality world, there are only two main cost types that need a system and a strategy to properly control them. The two culprits are payroll and expenses. In this piece, I am going to talk about expenses, namely a process for establishing and managing your expenses on an ongoing basis in real time using a zero base.Zero based expenses are nothing new. Here is the definition from Wikipedia. Zero-based budgeting originated in the 1970s. Many businesses will budget and plan out things to maintain financials. In the past, businesses would only look at specific things and would assume that everything is already in place and does not need to be double-checked. However, in zero-based budgeting, everything that is to be budgeted needs to be approved. Since zero-based budgeting requires approval for budgeting, this means that budgets are started from a zero-base, with a fresh decision on everything being made every year. In hotels, we find the zero base very hard to establish but, in my experience, it's just the opposite. It's actually easy to find and define the detail but it competes with the other business constituents, the guests and the colleagues. Both of its competitors have voices and they can speak, so unfortunately the expenses in many instances take a perpetual back seat. What this means is hotels operate without a concrete plan when it comes to managing their expenses.Oddly enough this is OK for most hotel managers, but owners have a very different view. Managers are interested in keeping things fluid and smooth. This means department managers can operate with a certain amount of flexibility and their spending reflects this. After all, the top line is coming in and we all know a certain amount of volume hides a multitude of sins. At least that's the case until the customers slow down or, heaven forbid, the phone stops ringing. When it does or when the hotel chooses to make the effort to control their expenses the system they need to use is the tried and true Zero Base.In order to establish a zero base, we need to do some homework - nothing too complicated but it requires a focus and some discipline. When this is required all too often the task of getting the detail is left to a Jr. somebody. This is a mistake. Teaching them the system once established is a good idea, but getting this process working and right requires the individual who can organize and allocate resources within their department and that means they need to be seasoned.To establish the zero base, we need to create our list for each General Ledger account in complete detail. The best way to do this is to run the line by line from each account for the prior 12 months. Once we know the vendors we then pull the corresponding invoices and record the items purchased, the quantities and the unit price. This is not rocket science, but there is no other way. Once this is done you have your detail and now it's time to plan. What are the parameters of your expense budget or historical cost for this expense line? From your research and your knowledge of how your department operates what do you need to include in your forecast? Make your plan and include all the items, the price and the quantity. Taking into account the forecasted occupancy or cover counts for rooms or F&B, and for non-operating departments, it's total revenue you want to measure your expenses against. From the forecast of each line, we now have the departmental total expense forecast for the month in front of us. We submit the totals for each line to the finance leaders and they consolidate our data with all the other departments. When this is done it's inevitably too many dollars of expense and this is the pivot point and the most important part of the exercise so far. You may be asked to reduce your department's expenses by a dollar value - say a $5,000 reduction is requested. Now you have a list to look at and you get to decide what you can live without next month. Remove these items from your forecast detail and retain a copy of what was axed. Now you have the detail to support the forecasted dollars of expenses and it's time to start ordering your supplies. This is another critical junction because we want to ensure our spending is in keeping with the revenue projections. In most hotels, we book a significant portion of our revenues in the rooms area "in the month - for the month." We need to order in 1 or 2 week installments allowing the ability to reduce or even increase quantities needed based on the pickup. This is what we do the zero-based work for, the ability to flex our spending based on revenues, allowing our department to manage its flow thru. If the forecast was for 75% occupancy and a rate of $150 and the projection on the 15th of the month is 70% and $145, I need to adjust my ordering and expenses to compensate for the drop in revenues. If I don't have my detailed list, I'm sunk and I have no way of knowing what to trim.I have a section in my workshops where we discuss zero-based expense planning and I explain it like a household grocery shopping experiment. It goes like this. If I send you to the store with $200 and ask you to buy some groceries, you will spend the $200 and come home with lots of interesting things. On the other hand, if I send you to the store with the same cash and a shopping list you will come home with what's on the list. Now the pivot. I only have $180 this week, so I send you to the store with the same list and I ask you to decide what we can live without this week. Now we have a chance to get what we really need for groceries given our revised forecast. Your hotel departmental expenses control and your zero-based system are the same.It's not rocket science it's just being organized and having a list. With that list you're going to know what you need, what to order and if need be, what to trim. Without it you're sunk.
The Hotel Financial Coach · 17 Jun
It is the worst lie financial leaders can tell themselves. Nothing is more important than the health of your books. If your books are not caught up and if your account reconciliations are not clean and up to date, nothing else you do in your financial world matters. Period. Full stop.
The Hotel Financial Coach · 11 Jun
Hands down one of the best experiences I ever had in my career was being part of the team that reviewed the financial performance of the hotels in my region. The reason I enjoyed it so much, and have such great memories, is because I learned so much at each one and not only did I learn about the business of hotels, I had a lesson in people.The review team consisted of my boss, the hotel GM, the hotel Controller and me. In addition to the four of us, one by one the other executives or department heads would be in attendance or be called when it was their turn to review their area. The examination was a low-tech event. No PowerPoints and no presentations - just financial statements, eyes, notes and questions. We would typically visit each hotel 2x per year to take a deep dive into what they were doing and how they were performing.There was always a bit of pomp involved in our visit. We would typically arrive the evening before and we were always treated very well. A nice room or suites and a special dinner in the hotel or some new hot restaurant were the standard fair. No expense spared here. I almost think it was like they knew we were "going away" tomorrow so they put on a big show just to deny one last time any guilt. They all knew that tomorrow the sheets were coming off and the truth would be revealed. You could feel the curious anticipation of the victims just like in the movies when you know the mobster knows he's going to get whacked!The day starts with breakfast in the private lounge where my boss and I cover some basics. He is a master at knowing what's really going on in each of his hotels. He wants nothing but a path forward to improved financial results for the hotel and he knows all the tricks. We run through the year-to-date performance to budget and the prior year. Flow through is the pulse and blood pressure of the patient. We zero in on what it should be and the difference equals what's been squandered. With our direction clear we head into the battleground so to speak, the meeting room. My job is mostly to listen and make notes. It's funny how some people see things. You see we're all friends so to speak. We know each other quite well. We have been working together for some time and it's a small world we live in. We always start with the welcome. Sometimes we're greeted by the core team for a hello and casual coffee. Often, we are welcomed by the whole department head squad like we're visiting politicians or celebrities. Occasionally they even line up as you would at a wedding to say hello. I remember one time we walked into the meeting room to be greeted by the core management team all sitting on one side of the table, their side of the table, like a military tribunal. Heads were down, books open, pens drawn. Serious business that day! What messages people send by their actions.We always start at the beginning with rooms revenue. What's going on in the market and how is the hotel performing relative to the competition, aka the STR comp set. Where is the RevPAR index YTD and what is driving the results? Product, competition, new supply, sales team, corporate resources, regional economics, renovations, asset, service levels, weather, citywide performance, etc. It all gets laid out to paint the picture of where the hotel is, where it has been and, most importantly, where it's going. A combination of the revenue management discipline, the sales strategy and the marketing plan get flushed out.The director of sales lays out the strategy and the information. You can tell very quickly if he or she has their act together. There is a very small circle of key indicators of performance in this arena and you can easily see what's working or what's missing. The sole purpose of the review is to find ways to improve moving forward. What strategies from the sales and marketing plan are working and what's not? What new ideas need testing and what old processes need to be deleted?From the rooms revenue, we turn our attention to F&B - namely banquets. What has been the performance of the conference services area with conventions and meetings and what's the social scene with catering and events? Banquets are the engine that runs F&B in any hotel with meeting space. Always an interesting aspect is a view of how the meeting space is managed. Group sales vs. catering. A good DOS knows when to release the space and when to hold on to it. Banquet performance is such that a hotel, when it's busy is like a turbocharger on your car's engine; you can feel it kicking in and propelling you further and faster.Now it's time to review the MOD's - any other department that makes revenues in the hotel. Here we take a different approach and do a top-down review looking at the whole picture. My boss is always looking for the path forward. He hates looking at a departmental statement with what he calls hooks! Or expressed another way - a loss. We sift through the revenue picture in each department and then the payroll and expenses looking very closely at each line and always asking the same 3 questions.
The Hotel Financial Coach · 27 May
This thing in the title of this piece, I want to say was a fad that died already. Benchmarking and KBI's were all the rage a decade ago and now, toda
The Hotel Financial Coach · 20 May
I am a big fan of professional car racing. I follow the major series; Formula One, NASCAR and my favorite times 10 is Indy Car. When I think about what I like so much around the Indy Car Series there is a parallel to the hotel business that I think needs to be exposed so people will have a better understanding of why Indy Car is so special and how being successful in the hotel business is kind of the same. You might think I’m stretching things here just a little, but I promise you I’m not.
The Hotel Financial Coach · 13 May
Getting your hotel leadership team excited about accounting is like someone thinking it's fun to go to the dentist. Your average person wants nothing to do with it because they have a predisposed notion that it's yucky, boring and better left for someone who has a hard time walking and talking at the same time.What I have learned about getting your average hotel leader excited about the numbers is just the opposite. Let me explain.Hotel leaders ALL want to have the "financial where-with-all" to dazzle their peers. They know it's the secret sauce to propel their career. They all want their seat at the captain's table. Being close to the engine room and having an invitation to be part of the inner financial circle is exciting and sexy.Why then is there such a disconnect between leadership's desire to be financially astute and their typical complete lack of attention and discipline when it comes to the numbers? It's all because of the approach.Here is the typical hotel scenario as it relates to the numbers and how they are viewed by most leaders.
The Hotel Financial Coach · 6 May
When I work with hotel clients around their financial leadership it’s often centered on getting the team to do their monthly financial forecast. A greater interest in doing it produces better and more consistent results. When doing financial leadership workshops and individual coaching, I inevitably discover the same thing time and time again. It’s the disconnect between the executive team/director of finance part of the operation and the department line managers.
The Hotel Financial Coach · 29 Apr
CFO to CEO: “What happens if we invest in developing people and they leave?” CEO: “What happens if we don’t and they stay?”