Hospitality Financial Leadership - The Basic Principles
Hospitality Financial Leadership - The Basic Principles — By David Lund

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).”

Why Financial Acumen is So Important to Your Hospitality Career
Why Financial Acumen is So Important to Your Hospitality Career — By David Lund

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.

What is “Hospitality Financial Leadership Anyway?”
What is “Hospitality Financial Leadership Anyway?” — By David Lund

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.

Zero Based Expenses – How to Plan and Manage
Zero Based Expenses – How to Plan and Manage — By David Lund

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.

Lies Financial Leaders Tell Themselves; The Lie: My Balance Sheet Accounts Can Go a Month Without Being Completely Reconciled
Lies Financial Leaders Tell Themselves; The Lie: My Balance Sheet Accounts Can Go a Month Without Being Completely Reconciled — By David Lund

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.

Conducting Financial Operations Reviews
Conducting Financial Operations Reviews — By David Lund

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.

Hospitality Financial Leadership Benchmarking and Key Business Indicators
Hospitality Financial Leadership Benchmarking and Key Business Indicators

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

Hospitality Financial Leadership - What Do Indy Car Racing and the Hotel Business Have in Common?
Hospitality Financial Leadership - What Do Indy Car Racing and the Hotel Business Have in Common? — By David Lund

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.

Hospitality Financial Leadership - Engage Their Hearts and Minds First
Hospitality Financial Leadership - Engage Their Hearts and Minds First — By David Lund

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.

Hospitality Financial Leadership - The Financial Forecast Disconnect and How to Correct It
Hospitality Financial Leadership - The Financial Forecast Disconnect and How to Correct It — By David Lund

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.

Hospitality Financial Leadership - Investing in Financial Leadership in Your Hotel
Hospitality Financial Leadership - Investing in Financial Leadership in Your Hotel — By David Lund

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?”

Hospitality Financial Leadership - Negative Flow Thru
Hospitality Financial Leadership - Negative Flow Thru — By David Lund

The Hotel Financial Coach · 23 Apr

One of the most read articles I have written is on the topic of flow thru and how to use it in your financial statements. Understanding flow thru is not something that comes easily to most people immediately, but once you look at it and do the calculation it usually clicks. Once it drops in place you have got it for good. To take things one step further in this piece I am going to discuss negative flow thru.

Hospitality Financial Leadership - Nobody Gets to Be Wrong, Everyone is Wrong, No One Gets to Be Right, Everyone is Right
Hospitality Financial Leadership - Nobody Gets to Be Wrong, Everyone is Wrong, No One Gets to Be Right, Everyone is Right — By David Lund

The Hotel Financial Coach · 15 Apr

I use this quote to start many of my workshops. To me it’s the way I want the participants to stand in their individual power during our time together. It’s also how I see our industry. In the hotel business we all need to have an opinion and even more important we need to be able to share those thoughts. Reason being is, we all have something important to bring to the table.

Hospitality Financial Leadership – Hotel Finances For Dummies
Hospitality Financial Leadership – Hotel Finances For Dummies — By David Lund

The Hotel Financial Coach · 1 Apr

My primary responsibility as the head of the finance and accounting departments in the hotel was to ensure the books were clean and balanced. What I really got paid for was serving as the "chief financial information officer." The reality was the financial information I had to work with stunk!

Hospitality Financial Leadership - RevPAR vs. GOPPAR and Why We Need a New Champ
Hospitality Financial Leadership - RevPAR vs. GOPPAR and Why We Need a New Champ — By David Lund

The Hotel Financial Coach · 25 Mar

I have been around awhile and it’s not like I’m ancient or anything, but I have seen some BIG changes in how we as an industry look at numbers and what numbers we focus on. What’s important and what people are talking about for metrics is always changing—albeit slowly. Inside the current look is the driver for how we operate. For the longest time RevPAR has been the king. However, it was not always that way and I think it’s time for the king to move on.

Hospitality Financial Leadership - Understanding the Concept of Owner Spend
Hospitality Financial Leadership - Understanding the Concept of Owner Spend — By David Lund

The Hotel Financial Coach · 19 Mar

The hotel business is unique with owners, brands and assets all vying for their individual needs and attention. All the while this delicate balance has some interesting business characteristics that are essential for hospitality financial leaders to understand. It's not terribly complicated, quite the opposite. It hides out in plain sight, so it can be easy to miss if you're not looking for it. I can remember an old boss telling me his thoughts on what I call "owner spend." I thought at the time he was full of whatever, yet the concept was bold and incredibly clear. It also struck me in that moment that no one else had ever spoken of this, in exactly this way in my many years working inside a large brand. Owner spend is the key to understanding the relationship between the owner and the brands and it plays out inside each individual asset on a daily and annual basis in a managed hotel.

Hospitality Financial Leadership The Next Big Thing
Hospitality Financial Leadership The Next Big Thing — By David Lund

The Hotel Financial Coach · 12 Mar

For almost 10 years our industry has been a rocket ship of top-line growth driven almost exclusively by big gains in RevPAR driven by solid increases in occupancy and rate. You also can't go too far inside the online world without finding articles that speak to when and if this growth will stop. We all know it will and it's never been a question of if it will stop, the question is when it will stop. Knowing this growth inevitably will stop and being cognizant that when it does stop it will go backwards, what can you do? History always repeats itself.

Contra or Barter Exchanges - How to Record Them and Some Tips
Contra or Barter Exchanges - How to Record Them and Some Tips — By David Lund

The Hotel Financial Coach · 4 Mar

Contra, barter, trade outs, exchanges - they are all the same thing. Exchanging goods and or services is older than currency and it's still used today, especially in hospitality. How you can use this tool effectively and how to properly record these transactions on your books is the meat on the stick in this article.First thing you need to know that typically stops most people from pursuing trade out agreements is they do not have a direct positive impact on your profit and loss statement. The trade out itself if it's recorded properly will not reduce expenses. It only saves you cash. So, if cash flow is a concern and let's face it, it is for many hospitality operations especially seasonal ones, then contra agreements might be something to consider. Lastly before we get into the body of this piece is to do your local homework and get the tax facts straight. Each jurisdiction is different. What I will describe here is a generic version but don't rely on the process as it's laid out here. Get the local facts on exactly how it is treated in your location.Typically, in the hospitality business we trade rooms and food and beverage for advertising; this is by far the most common. The second most popular trade I have seen is our services for transportation - air, rail and car rentals. The third is health club memberships. In all three instances the advertising aspect is the main driver on the hotel side.It goes like this.How can I get advertising on my regional radio station to drive room nights? Or, how can I get an ad in the airlines magazine or how can we participate in a promotion that features our hotel as a prize? How can I get the local popular health club members to use my bars and restaurants? The answer many times is let's try and set up a trade out with one of these organizations so we can get some increased visibility without having to use cash.We can use our "unused" room inventory and our capacity in food and beverage operation to help drive more sales of rooms and F&B. Remember, if we don't occupy a room tonight or one night next week, we can resell that inventory. This is a main driver for hotels to use trade outs to help boost business. In my experience it's also a tool that General Managers and Directors of Sales love to use because they get to "make a deal" and for most of them this is an exciting prospect.But beware of the rules and the proper treatment of the transactions before you jump in with both feet. First off, your state or national income tax rules probably preclude your business from treating the trade out any differently than any other sale. Same with your municipal sales tax rules. You will have to come good on all taxes due just like complimentary rooms in most locations. I strongly recommend checking with your accounting leader before any deals are made. I can't tell you how many times I have had to "counsel" my fellow executives on the proper treatment of these exchange agreements that caught them completely by surprise. Don't think you can simply trade your stuff for theirs without paying the piper. Do this and you're both liable for some trouble.First off, when we trade it's important to know that rooms and F&B are very different from a cost point of view and, as such, the rooms typically should trade on a 1-1 basis at rack pricing with your trading partner's rack prices. Or we both agree on a price that's going to stand up to scrutiny, certainly an exchange price on our side that is equal to or above our average room rate. If it's below that level, then local taxing authorities will ding you for the difference, plus a penalty and interest. Don't be tempted. Second, where we are trading F&B you are going to want to get a 2-3 times exchange. F&B costs plus labor are extremely high and therefore we want to ensure we get additional advertising or travel as a result.In the F&B trade example let's say you are trading a banquet for 100 clients of the radio station and the bill is estimated at $10,000. You are going to want to bargain for at least $20,000 to $30,000 worth of advertising because you have a considerable cost associated with producing the food and staffing the event. Their costs to produce and run the adds are much less. Be a savvy negotiator and get more.Back to the room scenario and, in this case, we have agreed to exchange two suites for two nights and 30 superior rooms for two nights. The radio station will run a series of ads over a two-week period as promotion to give away two 2-night suite stays to the lucky listener. That is what the hotel gets: The radio station is going to use your hotel and the 30 superior rooms for an event for their staff and owners.The question is how we treat all of these transactions.

Hospitality Financial Leadership She Said She Was Born Without the Financial Gene
Hospitality Financial Leadership She Said She Was Born Without the Financial Gene — By David Lund

The Hotel Financial Coach · 25 Feb

The following is a recap of a single coaching session which turned into a coaching relationship with a client.

Hospitality Financial Leadership City/Region Wide Supply and Demand Analysis
Hospitality Financial Leadership City/Region Wide Supply and Demand Analysis — By David Lund

The Hotel Financial Coach · 11 Feb

When you are preparing your budgets, an incredibly valuable tool is what I refer to as the "citywide supply and demand analysis." I didn't come up with this, however, I am going to explain how it works, why it's so important to complete it at least annually and how to analyze it.

Earned and Unearned Revenues – Understanding the Difference
Earned and Unearned Revenues – Understanding the Difference — By David Lund

The Hotel Financial Coach · 29 Jan

Just like baseball has an unearned run as a scoring feature, in business we have unearned revenues. In this piece I will discuss the difference between earned and unearned revenue and how it applies to the hospitality business.

Understanding the Importance and Use of The Reserve for Capital Replacement
Understanding the Importance and Use of The Reserve for Capital Replacement — By David Lund

The Hotel Financial Coach · 14 Jan

The concept for the use of the reserve account is important to understand. It is also essential that hotel operators ensure the reserve is properly funded per the terms of the Hotel Management Agreement "HMA." The use of the reserve is an important tool to utilize to protect the operator's rights and long-term viability. Many people mistakenly think the reserve account is the owner's responsibility and therefore it's up to the owner to determine and ultimately control the funding. But not so fast, the manager has a right and a duty to ensure the proper transactions are performed on a timely basis using the clauses that are in the HMA. There are many important aspects to understanding the reserve and how it impacts the ultimate success of the hotel. This includes the hotel's values as well as the value of the management agreement. One could say that there is something for everyone here!First and foremost, the intended use of the reserve account is to ensure the hotel is kept looking and functioning at a high standard. It's essential that both the owner and the brand ensure this is the objective and the funds are set aside to properly maintain the asset. The reason it is not simply left to the owner to decide the amount to fund and when is because it's often the case that the money is not available. This is due to the hotel's profit performance or the owner's other needs, which can be many and endless. Whether the hotel is making its profit targets by way of the budget is irrelevant to the requirement to fund the capital reserve in most cases. Owners are usually quick to request or even try and demand the reserving be stopped when the hotel faces a bad year or a cash crunch. These circumstances are all too often and challenging for both the owner and the manager. Operators need to be on their toes so to speak and hold the owner's feet to the fire, to do what is necessary. Protecting the operator's rights is what is at stake here. Although it may appear counterintuitive to have the manager insist the owner fund the reserve when facing a cash shortage, it is what is required. It is in the agreement to begin with because it is essential for the ultimate success of the hotel, which is what everyone wants.

Hospitality Financial Leadership The Matching Principle
Hospitality Financial Leadership The Matching Principle — By David Lund

The Hotel Financial Coach · 8 Jan

I tell my Introductory Hospitality Financial Leadership Workshop participants that the concept behind the matching principle is "the most important concept today." Why? When it comes to producing financial information, it's the cornerstone of understanding why we do almost everything the way we do it in the business world. The profit and loss statement cannot exist and be in any way accurate without using the matching principle every step of the way. Grasp this and you are well on your way to understanding the other principles and most importantly putting these principles to work in your day-to-day hotel leadership role.Some of you are probably thinking this is for the bean counters and the propeller heads to chew on. Nothing could be further from reality. Being a financial leader means you understand and employ business principles. These principles are universal and without them, you're akin to a plumber who doesn't understand why water flows the way it does. So read on and get your schtick together.

The Top 10 Interview Questions About The Hotel's Finances for a General Manager and the Best Answers
The Top 10 Interview Questions About The Hotel's Finances for a General Manager and the Best Answers — By David Lund

The Hotel Financial Coach · 31 Dec

Interviews are tricky, for both the candidate and the interviewer. A GM's job interview is a challenge for the incumbent because they need to be ready for just about anything. This is especially true as it relates to the financial picture of the business as seen through the interviewer's eyes. The opposite is also true as many times the person doing the grilling does not have a broad base of experience relating to the daily inner workings and nuances of the hotel world. Here is a list of common questions and good answers as well as a few bonus questions you can ask the person doing your audition.1. What makes you qualified to be the person in charge of the financial direction and health of my hotel? This is a wide open and leading question. Wide open because the health of the hotel is like your body and every inch counts and needs to be properly looked after because it all adds up. Leading because it's designed to catch up the fair weather GM's that think the finances are the Controllers baby. The best answer here is: as the GM, my job is to lead all aspects of the hotel. The finances are what I consider to be one of the three pillars of our business. The guests, the colleagues and the money are all what I come to work to manage every day.2. Who in your opinion is ultimately responsible for the finances in this hotel?Again, this is a leading question. The inexperienced answer is: the Controller or Director of Finance is responsible for the numbers since they run the accounting department and produce the financials. The correct answer is: as the General Manager I am ultimately responsible for all aspects of the business and in this case "especially the numbers."3. As the GM what is the most important thing you will do to ensure the hotel is a financial success? This is a pinpointed question and there are several good answers. The one that I like the best is: as the GM, my job is ultimately to ensure each department in the hotel has their financial plan. I am also responsible to ensure the plan is executed on a consistent basis with a high level of success.4. What exactly does each hotel department head need to do to be successful with their financial plan and how will you ensure this happens during your tenure? This is a vision and planning question. You already laid out the vision for the departmental finances in your answer to question 3, and the best plan is to ensure each manager is trained to F TAR W on a consistent monthly basis. That is - Forecast, Track, Adjust, Review and Write. For my complete F TAR W recipe read my article at Under your tenure as the GM what are each manager's financial responsibilities? This is a wide-open question that cries out for a cracker jack answer. Exactly what is it you will be asking each leader to accomplish with their financials? The best answer is: there are sometimes three things, but always at least two for which each manager is accountable to me. These are departmental revenues in some cases, but always their payroll and expenses. The answer is simple, but most people miss this because they don't see the effective strategy of having each person on the team charged with their own piece. Many fumble this one with mumbo-jumbo about the Controller and director/divisional organization; the simple and effective method and the response is if someone does the schedule or orders the supplies for their area, they are the ones with whom we will organize and create agreements on the necessary financial responsibilities.6. What will you do when you have a bad month and miss the forecast? This is a great question and one that you should expect. We will all have months when we miss the forecast; that's just part of the game. But what will you do when you screw up is a tough question to answer. The most effective response is: learn from what didn't work, analyze the areas where we missed, examine why and determine what we can do going forward so as not to repeat the same mistakes. There will always be challenges to overcome and learning from our mistakes is the best answer. Skip the Trumpesque answer that we never miss a month or get captured (sorry I could not resist).7. What are your thoughts on managing and measuring flow thru? This is a very technical question, but it's easily handled if you understand and utilize the concept. A super answer is: it's always our focus to maximize profits when revenues are higher in the current period compared to the last and focus on retention when revenues are lower. Each area should have a detailed plan for their payroll and expenses as well as utilize a monthly flow-thru analysis to determine exactly where costs are higher. With this information we can take the appropriate actions going forward to ensure we don't repeat the same missteps. The answer shows you know how to analyze the variances with the flow-thru concept and most importantly how to manage into the next month to continually get better.8. Can you tell me your specific ideas on controlling payroll in the hotel?These guys are tough and it sounds like they are really trying to nail you down, but again if you know your stuff the answer is right in front of you. Each department must have an approved staffing guide and formula in my hotel. An approved list of fixed positions by department and a formula for determining variable payroll should be provided based on rooms occupied or cover counts in rooms and F&B. From this a weekly schedule is produced that revolves around measuring productivity with the goal of always making or beating the monthly productivity targets. Wow - I think you just got the job!9. How do you go about writing an effective monthly commentary that the owners will find useful? This question is calling out your understanding of the "full disclosure principle" as well as your broader leadership philosophy. The seasoned answer falls off the W (Write) in #4. The commentary serves three main purposes to help your hotel move forward:

What Is Leadership?
What Is Leadership? — By David Lund

The Hotel Financial Coach · 4 Dec

Leadership can be a confusing application. Just google leadership and you will get so much information it can make your head spin. I am going to try and simplify the definition of leadership in this article. I am writing this because I believe the idea of leadership and how it's applied is very straightforward and quite practical when its used effectively. I also know that when a person has a clear vision of what's required to move ahead, the trip speeds up.I have learned, over the past 35 years in the hospitality industry, that leadership is about two things. These two things are communication and development. We don't need a longer list because these two nouns encompass everything we need when it comes to being the person who leads in their world. This being is an important distinction from the typical doing part. I learned much of this from the people I have worked with, some great examples and some rather poor ones too. Let's start at the beginning with communication. Being an effective communicator means you are faultless with your words. This ideal is one that will separate you from the field. Every word you say, in every conversation, with the entire universe, forms your personal DNA. If you say disparaging things about another person or situation, that's how you will come across. Make promises or commitments you don't honor, and you instantly and forever lose credibility with your network. As a leader, being able to communicate effectively boils down to being a positive influence in any situation, making a positive environment even better by adding to the situation in a positive way. Even more importantly, don't jump on the negative wavelength and perpetuate the gossip or the complaining. Find the good in everything. My mother would always say, If you have nothing good to say, then say nothing at all. This is what she meant: when you repeat something negative, everyone in your world sees you as part of the problem, not part of the solution. To be a good leader, be the one who has a solution or an idea that can move situations/problems in the right direction. Don't follow the sinking, smelly ship of complainers and criticizers. Try this the next time you are in a business conversation. Replay what you said and ask yourself, Did I contribute anything positive to this situation or was I also negative? Either way, its just a habit and being aware is the first step to correcting it.

Hospitality Financial Leadership Going Down The Road – Part 1
Hospitality Financial Leadership Going Down The Road – Part 1 — By David Lund

The Hotel Financial Coach · 28 Nov

This title belongs to a classic 1970 Canadian movie about two guys from Nova Scotia, Joey and Peter. They moved to Toronto to seek their fame and fortune. As luck and the writers pen would have it, they found little of either. My story is about my trip from New Brunswick to Alberta, my version of trying to make a go of it in the big bad world.