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 Guidelines to Opening a Hotel from a
Financial Controller's Perspective

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by NP Chandrashekhar CHA,MHCIMA,  January 2006

Anything that has to be started afresh requires a “little more effort” than that is already existing and running.  It is very true in case of a hotel.  Opening of any hotel requires that “little more” as this involves the needs of operational expertise, systems expertise, back office expertise and marketing expertise before starting of operations.  Coordinated efforts of all these expertises make it easier to the opening of a hotel.  Many non-hotelier owners do not understand the importance of back of the house and makes lot of compromises. This results in various problems at a later stage.  The owner only looks at the beauty of the lobby and Restaurant, but, not kitchen or stores.  Kitchen cannot deliver to restaurant unless they are well equipped.   Back office is the backbone of the hotel without which front office cannot exist.  The classic example is the Disney Land.
 
It is very important to understand the needs of the hotel before even the construction begins.  This can be done only by the Facilities Managers, who understands the pre-requisites of a hotel.  There are specific needs in the construction of a hotel, mainly Security and Safety needs.  Infrastructural requirement in a hotel are different from normal buildings, this includes HVAC, Drainage system, Garbage disposal, Fire alarm, sprinkler system etc.  Understanding of these requirements is also very important for opening of a hotel.
 
Main activities involved in opening of a hotel may be classified as follows:
 
1. Back office activities.
2. Human Resources Development & Training.
3. Operational Activity.
4. Sales and Marketing Activity.
 
1.  Back office activities:
 
Establishment of a back office, that includes, Finance Department, Purchase Department, Stores/Receiving Department,  Human Resources Department and IT Department.  Accounting starts from the day one of the opening activity.  Pre-opening activity include preparation of expense budget for pre-opening, procuring materials and storing, choosing of a property management system that suits the hotel, preparation of various policies, procedures and manuals for the operation of the hotel, filling-up of various positions through advertisement and recruitment agencies.  Obtaining various licenses and government approvals before opening of a hotel is very important.  Financial Controller is the one normally takes the responsibility of Purchase, systems and IT, legal and Stores Department apart from his Finance and Accounting functions in small hotels, however, this differs in large hotels.  All the back office activities must be coordinated by the General Manager in the preparation of opening of a hotel.
 
2   Human Resources Development & Training
 
A hotel building may look very beautiful, but, the life is given to the building only by human resources.  Human Resources are the biggest asset of any hotel.  One has to realize the uniqueness of the hotel industry that lowest paid employee is servicing the highest paid client.  Establishment of standards of service is very important.  This can be achieved only by developing the existing human resources through training.  Getting the right kind of people is the biggest task of Human Resources Department.  Due to the scarcity of the required talent, one may have to hire expatriate although they are expensive.  Payroll costs are the main ingredient of the total cost in the hospitality industry.  Often, the owners would like to know the payroll cost with comparison to the other hotels in the region.  Getting right people at right cost at the right time becomes a task for the Human Resources Manager.
 
Many hotels does not give importance to training as there is a cost involved and they feel employees learn on their own while doing their job.  In order to establish a standard, training is the only answer and it has to be continuous.  As there is continuous change in all walks of life, in order to satisfy the changing need training is a must.  Once the selection is done, next comes the training.  Training of personnel has to be done in parity with the standard of service that is expected from them.  Each hotel has to set its own standard of service depending on their classification and positioning.
 
3.  Operations Activity
 
In every hotel operation, first comes the General Manager and Financial Controller but, many tend to forget a very important position for a new hotel “Chief Engineer”.  Chief Engineer must be the first person who should be appointed after the General Manager.  Chief Engineer will be able to asses and foresee any problems that may arise due to the lack of any facility provided by the property.  He will be able to guide the General Manager in rectifying or correcting any problem that may directly affect the guest service in the future.
 
Next comes, the establishment of other operational heads such as Executive House Keeper, Front Office Manager, Food and Beverage Manager and Executive Chef.  These operational heads must make their team in co-ordination with the Human Resources Department and General Manager.  All appointments of junior staff must be chosen by the departmental heads and approved by the General Manager.
 
All Department Heads must be involved in the pre-opening process, such as, training, making budgets and preparation of standard operating procedures (SOP).  They must ensure they have all equipments in place required in their department for smooth operation before opening of a hotel.
 
4.  Sales and Marketing
 
Along with the above activities sales and marketing activity must start in parallel.  Marketing activity includes focusing on business that includes, making competition analyses, SWOT analysis, positioning of the hotel, establishment of market segments, Advertising and promotion.  Director – Sales and Marketing must make his own team of sales personnel who should co-ordinate with him in preparation of Sales Budget and Marketing Plan.  Often felt by sales personnel first year budget is bit difficult to prepare as historical data not available.  Still an experienced person can easily draw out a sales budget and marketing plan based on the current market trends in the region.  Once the sales budget is prepared and approved, expense budget also can be prepared by other department members and sent to Finance for consolidation.
 
This is a coordinated activity, supervised by the General Manager.  Owner need to decide the date of opening well in advance and communicate to the General Manager.  Understanding of all the activities becomes very important for successful opening of a hotel.  Ultimately it is the guest who makes judgment whether the hotel is worthy of stay or not!

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Contact:

NP Chandrashekhar CHA,MHCIMA
Group Financial Controller
Chelsea Group
Chelsea Tower Hotel Apartments
Sheikh Zayed Road,
Dubai. United Arab Emirates
Tel. 971 4 3434347
shekhar@chelseagroupdubai.com

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Also See: Marshall Management, Inc. Signs Contract to Manage La Quinta Inn & Suites in Albany, New York / October 2005
Charles Marshall Elevated to Chairman and Founder of Marshall Management, Michael Marshall Named CEO and President / August 2005


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