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    As Major Hotel Companies Are Reporting Gloomy News -  
It’s Time to Do Something!
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by Rick Welch CHA,CHME, July 2008

Everywhere I turn headlines and online internet publications are littered with bad news as major hotel companies and research companies across the country release their second quarter sales. Hyatt, Wyndham, Starwood, Choice, IHG, Marriott, and Best Western are but a few of the companies that issued press releases reporting losses of occupancy and sales in the second quarter from the prior year ranging from 2.4% to 9.2%.  

While the gloomy news was peppered with an occasional positive proclamation, such as improved market yield or RevPAR deterioration at a rate slower than the national average, these were mostly veiled attempts to put silver-lining spins on news to an investment community whose analysts haven’t been very high on lodging stocks, even when times were good.  Nearly all companies cited a lumbering economy as a result of current oil prices as the principle reason for the decline to last year.  There has been no action taken yet as to diffuse the bad news by announcing measures they were taking to bolster profitability in light of shaky third quarter forecasts. “Euphoric operators believe that everything is “OK” which reminds me of the story of an ostrich with their head in the sand. 

Undoubtedly, many hotel operating companies’ area managers and regional vice presidents – are racking up frequent-flyer miles in four-digit increments as organizations fall into ignore survival modes, looking for ways out of the quagmire.  “Reduction plans”, “austerity measures” and “budget cuts” are some of the sound bites I hope to  hear as third quarter results will become news and it appears at this mid-point that news will be no less disappointing than those (everything is OK) announcements made these past few weeks. 

Hotel companies with a strong financial culture, are not using this period as an occasion not  to take from their organizations, but to add to them by using honest forecasting techniques.  “Getting back to the basics” (re-budgeting) has a good  ring to it and doesn’t read as well as “corporate layoffs”. In a press release, but you’d be surprised how much opportunity there is in discovering how far away from the basics hotel companies may have drifted.  Despite the propensity for hotel companies to focus their attention during difficult economic times on austerity plans and staff cuts, I would argue that it is a far better business practice to improve its means of generating revenues and reducing expenses.

SALES
(EXPENSES) 
= PROFIT
What A brilliant idea! That is to say, half or 50% of our job is creating sales and the other half is controlling expenses.

The amount of cash in the “shoe box” is directly proportionate to increasing sales and controlling expenses. It also depends on the ability of operations to forecast their future in small accountable/measurable segments.  No one can refute the observable truth in this statement, yet how are you specifically looking at the numbers? Don’t react six-eight weeks after the period is over to realize that you did not make the money you predicted. The, it’s too late!   

Simple as some of these things are, it takes a major paradigm shift. I know in these times of adverse conditions the profit available has to be made off of the revenue achieved. All of the hotels I have been called on to assist I recognized immediately that each General Manager and Director of Sales were in need of a strong corporate leadership that will enable them “not to fail”. 

Who in your organization realizes that one shoe does not fit all? Each franchise, each location must be treated differently when it comes to maximizing profit potential. Your primary Operations/ Sales officers have to become accountable for implementing a new way to react during a slowdown.  That can only be accomplished with an investment of commitment and time.  

 

Contact:


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Richard J. Welch, CHA, CHME 
The Lakeshore Group
(770) 436-2867
Atlanta, GA.
rjwelch11@aol.com

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Also See MBWA, Management By Wandering Around, My Favorite Business Acronym Since the Early 70's / Richard J. Welch, CHA, CHME / January 2007
SARS, Wars, the Economy and Now Monkey Pox; The Task of Rebounding from these Changes is a Full-time Job / Richard J. Welch, CHA, CHME / July 2003
Too Much Technology May Be Putting Your Hotel Out of Business / Richard J. Welch, CHA, CHME / June 2003
Implement This Successful Hotel Sales Program In Under 30 Days! / Richard J. Welch CHA, CHME / March 2003
Opinion: Hotel Brand Franchise Impact Policies Must Change / Richard J. Welch, C.H.A / June 2002 
e-Commerce Marketing, The Race For Success / Richard J. Welch CHA, CHME / January 2003 


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