Managing the Gap
By Daniel F. Prosser - June, 1997
Remember the story of Alice, when the Red Queen instructed her to run as fast as she could just to stay in place? Hotel managers who are struggling with technology issues know exactly how she felt.
In truth, Alice had it easy. Staying in place isn't good enough in the hospitality industry. Even if your earnings broke all records last year, you are expected to do even better this year. What's more, you must do it with less, because you've already cut your staff and pushed productivity to the limits. In this climate, it's little wonder that many of us turned to technology for salvation.
The computers on our desks were supposed to help us cut costs and pull ahead of our competitors. But guess what? You could invest a fortune in fancy new computer systems, and you would still be waiting for the pay-off long after the technology is obsolete. Unfortunately, shoving money into hardware and software won't make you a bit more profitable. It's simply what you have to do to stay in place.
Now for some good news. Although the computer itself can't help your bottom line, you can learn to use the information it produces to achieve unprecedented results. But first, you'll have to change the way you look at it.
Here's what I mean. When the automobile first appeared on American roadways, many people thought it was a foolish fad. True, it was faster than a horse, but in that context, the automobile had disadvantages. Unlike the horse, it required roads and gasoline. You couldn't even plow a field with it.
Those people made an error by looking at new technology with an eye to the past instead of on the possibilities of the future. Cars meant more than merely faster transportation. They meant that people could go to new markets that had been beyond reach. Once there, they could buy products from far away places. Their own products would meet unexpected competition as Henry Ford's new automobile production techniques revolutionized industry. As it became unnecessary to live within walking distance of work, we paved more roads and built suburbs and WalMarts; to ensure a steady fuel supply, we waged wars. And the possibilities are still unfolding. One of these days, someone will ask why a car should be limited to roadways when, well. it could be made to fly above that traffic jam...
Many hotel managers look at computers in the same way that our ancestors viewed automobiles. We expect our systems to help us do the same things we always did back in the days of slide rules and manual typewriters, only faster and more cost-effectively. We use the information our systems produce just the same as always, too mainly to support what we already know. But the promise of information technology goes way beyond kicking out the same old reports and using information in predictable ways.
You could explore that potential in your own hotel using the Average Daily Rate (ADR), for example. Most people manage ADR from a past perspective: they compare current performance to past performance. And that's fine. if you only want to know how well you're doing compared to last year. But that doesn't help you do better. In fact, you'll probably do about the same. You know the old adage 'you get what you measure.
If you really want to increase your ADR, you might try measuring your performance against what is possible. Forget past history and just think: what is the best ADR you could possibly achieve? What if you got rack rate for every room sold? The distance between where you are now and what you declare is possible is what I call the "gap" The way you manage that gap will determine the difference between mediocre performance and extraordinary results.
Managing the gap is different from traditional goal setting. A goal, for instance, might be to improve ADR over last year. Your focus is pinned on achieving an end result to fix what did or did not happen in the past. But when you manage the gap, your focus turns instead to managing what is missing between where you are and where you could be. And you don't accomplish that with the usual goal-setting process of following a "to do" list of steps that may have worked before. Instead, you manage by measuring the practices that determine average daily rate - specifically, the discounting that your reservationists offer. By working to improve each key component, you can move beyond past achievements toward your ultimate possibilities. Suddenly, you have taken the way you use information to a whole new level.
This concept can be applied to virtually every aspect of hotel management. You can begin by asking yourself these questions:
You will, of course, need a powerful information system to support your new methodology. A client of mine said it best: "To achieve breakthrough profitability through people, don't put all of your focus on running the hotel. Design and run an effective enterprise information system. The system will run the hotel. Then you manage the people with the information that the system provides you. "
When properly designed, your information system should actually drive you toward the breakthrough results at the end of the gap. Instead of running as fast as we can to stay in place, we can finally begin to use technology to improve our profitability.
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Daniel F Prosser is the founder, president and chief executive officer of Telman. Begun in 1986, Telman creates technology partnerships with hotels and hotel management companies that maximize the return on their technology investments. Prosser in on the board of advisors for Hotel & Motel Management Magazine and has written several articles for industry publication. He also makes regular presentations for hotel and technology conferences and associations.
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email Dan Prosser: dprosser@telman.com