Performance Management for Investors
PITTSBURGH, December 2, 2003 – During the past 48 months the hospitality industry slid sideways in reaction to September 11th, SARs, and a feeble economy. Pundits say this is about to change in 2004 as hotel occupancy, RevPAR and the economy make steady gains in 4Q’03, and an important new technology concept is imbedded in management company infrastructures: Performance Management based on business intelligence, a new process to hospitality.
Performance Management in Hospitality
Performance management is made up of three elements: planning goals, monitoring goals with balanced scorecarding, and analysis of performance on a real-time, actionable basis. Widely deployed across other industries, the concept is gaining acceptance in hospitality as a way to improve return on investment for owners through more efficient reporting, more accurate and actionable information for decision making, and improved customer management. "If you are not conscientious to the concerns of your investors, you should not be in the hotel business. Returning money and protecting assets for investors is key, and having performance data real-time is essential," said John J. DePaul, president and CEO of Philadelphia-based The Melrose Hotel Company, which posts an enviable 98% intent-to-return rating from its guests. DePaul, who scans other industries for best practices that may benefit his company, admits performance management is "a way of life with me." He and his team trimmed a 102% turnover rate to 37% in 2002 and improved labor costs ten-fold through daily real-time labor reports.
In hospitality the three components of Performance Management form a
circle of processes that include budgeting and forecasting, analysis measures
to check performance against goals, and analytical tools that drill down
into all data sources such as Smith Travel Research, and the property’s
PMS, back office and point of sale systems. Hotel operators can enter the
circle from any point. The objective is to evolve accurate decisions as
quickly as operational data changes, which results in an improved Performance
Management capability and increased revenue. At least one company, Aptech
Computer Systems, Inc., has developed an integrated suite of Performance
Management products for the hospitality industry that combines all three
Property Managers Have A Stake In The Process
Although the supporting business intelligence system is maintained at the corporate office, every manager has a stake in the Performance Management process because they are the source of forecasting and budgeting information. Budgets are the standard of how managers think a property should be run, while forecasts are a moving target of business realities. In both cases property managers are invested in the outcome, and timely balanced scorecarding reports generated at headquarters are the reality check of how they are doing. The third key element of Performance Management is database drill-down functionality that lets managers view the actual source data influencing their enterprise, whether it is monthly utility expenses, in-room entertainment take rates, or RevPAR, to verify data and predict trends. Each of these processes automatically gathers information from the data mart on the corporate server, including Smith Travel data, which can be received weekly or monthly. Taken together and applied to any company these three components give operators the tools to monitor their business today and control its direction into the future.
Data Integration From Separate Systems, Coming Soon?
Business intelligence – the foundation of Performance Management - combines data components from all areas of property operations to form a consolidated source of operational information that spans systems. Each type of information is maintained as a ‘data cube’ in the corporate data mart. Data cubes hold much more than accounting information. They may contain guest satisfaction comment-card statistics, employee retention numbers, Smith Travel comp set performance, and property revenue and expenses from all sources, which is united and made available to managers in any format necessary to guide a company. "We are in an un-rolled up industry," said John DePaul, President of Melrose Hotels. "Most vendors approach data like the Old West; we have 25 to 30 vendors whose systems will not integrate with each other. It is devastating to hotel companies. Now we have new Performance Management tools from Aptech and other companies that are allowing us to combine data to develop more intelligent management practices. Our first goal is revenue maximization. As this is achieved in the next two years we will insist on complete integration of all systems on a common platform. Cost cutting measures are over. We as an industry cannot cut any further. It is time to raise our rates and return to profitability through higher average rates. As an industry we must use all our tools, including Performance Management, to bring back higher ADR and RevPAR."
About Melrose Hotel Company
The Melrose Hotel Company operates upscale, traditional hotels in urban locations that include The Melrose Hotel, New York (formerly The Barbizon); The Melrose Hotel, Dallas; The Melrose Hotel, Washington, D.C.; and the Westin Great Southern Hotel in Columbus, Ohio. The Melrose Hotel Company is a subsidiary of Berwind Property Group, LTD., a Philadelphia-based, privately held real estate investment company with a portfolio in excess of 27 million square feet of hotel, office, residential, retail, and industrial properties located throughout the United States. Berwind Property Group is actively pursuing the acquisition of other upscale hotel assets in urban locations such as San Francisco, Los Angeles, Boston, Chicago and Atlanta.
Aptech Computer Systems, Inc. is known for valuing human relationships and evolving technology offerings as the market dictates, a commitment that has earned the company 100% customer loyalty of its 700 users over the last three decades.
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