Surrounded by rich natural beauty, Hotel B—which includes an adjoining spa and cottages—is ideal for a variety of activities. The target clientele is clear: families and groups for seminars and training camps. The staff are also highly motivated. However, revenue has been decreasing, mainly because of the aging building and a high ratio of personnel expenses that make it difficult for the hotel to generate profits.
Hospitality Directions held several interviews with the hotel executives, visited the site and analyzed figures to propose the following actions for the purposes of cost control and revenue enhancement.
■Personnel cost control
Our research and analyses showed that the biggest issue was in staffing. We proposed the hotel introduce FTE (full time equivalent) as a tool to adopt appropriate staffing. FTE converts total working hours in each department into an equivalent number of full time workers. Seasonality affects hotels greatly, and they tend to rely on contract employees and part-time workers, making it difficult to control personnel expenses. Through FTE, the hotel can determine whether or not each department has appropriate staffing. If not, they can adjust, aiming for a 30% of personnel cost ratio, by reviewing individual tasks and shifts. When introducing FTE, we indicate ideal employee numbers for each department and how the hotel can modify their operational structure.
■Food cost control
In general, hotels pursue a food cost ratio of 30%. The ratio at Hotel B was 40%, higher than average, and we needed to reduce it. We suggested using a cost management sheet. The hotel can optimize food cost ratio by raising awareness among all staff in the food & beverage department, where the cost management sheet is shared daily. Monitoring the cost ratio can also assist in a regular review of offering prices.
■Facility refurbishment
The entire hotel building has aged and needs refurbishment. We also found that the hotel has lost some sales opportunities with facilities unsuitable for the target clientele. Hospitality Directions recommended commissioning an engineering report to confirm the building’s condition, then planning and executing refurbishment from a long-term perspective.
■Review of official website
Raising website acquisition and the number of direct bookings can help improve revenue as well as reduce commissions to online agents. Like other industries, page views and bookings through smartphones are increasing in the hotel industry. We strongly recommended that the hotel optimize their website for mobile devices, while proposing other action plans to raise booking rates.
■Introduction of management tools
The hotel doesn’t have sufficient report variations to assist in management decisions. The staff are not very cost-conscious, either. The introduction of daily reports to overview daily revenue, expenses and GOP helps raise cost-consciousness. In addition, three-month forecast reports are recommended so the hotel can take measures to secure GOP well in advance for periods of lower occupancy and room rates.
A Comment from Hospitality Directions
Hotel operations are very volatile and that’s why a review of the operational structure and appropriate cost control can recover profits. Most importantly, focusing too much on cost control may forfeit some of the facility’s attractiveness and demotivate staff. Necessary investment to improve revenue should be made, while at the same time controlling costs. Both measures are indispensable.
