News for the Hospitality Executive
|Lessons from the Field
A Common Sense Approach to Success in the Hospitality Industry
|By Dr. John Hogan, CHA MHS CHE, August 10, 2009|
Hotel Common Sense –
Effective Sales Management: Short and Long-term Planning,
Forecasting, and Expense Budgeting
Part 2 of 2
|By Dr. John Hogan, CHE CHA MHS, August 10, 2009
Observation from a former government insider
This quote was used as an illustration of what faces all of us in this global economy of events and situations that we cannot control. The global economic news continues to be rather solemn. Declining occupancy in many markets, the lingering effects of the terrorism in India, political protests in Pakistan, Iran , Afghanistan and the unknown relating to a number of industries worldwide are all having their toll on the hospitality industry. Even markets such as Dubai, London and other high demand centers have had to re-examine their strategies.
This 2 part series is very direct and applies common sense in approach. The first part addressed Mapping out Your Sales Plan and Preparing and Revising Your Sales Forecast.
The second examines
1. Aligning Your Expense Budget With Your Forecast and Sales Plan
Consider these lines of attack when trying to assess all factors in looking for ongoing success in tough times:
A. Re-examine all operating budgets.
Successful managers usually prepared their annual budgets 4 to 6 months before the beginning of any year in advance, which often means projections could be as far out as 15-18 months from the actual time. While most of us projected potential trouble in 2009, few of us anticipated the depth of international financial meltdown that unraveled in late summer 2008. It is time to re-evaluate all operating budgets immediately and determine planning for action steps that need to be taken NOW.
The first thing I believe one has to do to accurately assess probable revenue lines. This means reforecasting based on what has been occurring in our market and projecting trends for certain periods ahead. Following is a strategy that I have seen effectively work in almost every kind of business.
Many hotels continue to spend a significant portion of their marketing and advertising in traditional ways. They commit hundreds and thousands of dollars for billboards, magazine ads, brochures and other print materials. These medium have their place IF they can be proven to drive business to your hotel.
Billboards, for example, make sense IF they offer directions to your property and/or IF you can measure that they contribute to drive in business. Ads in your local chamber or CVB publications can contribute to your market share IF these publications are used to solicit group business to your area.
If you are part of a franchise or referral group, you want to make certain that any shared cost programs promote the location or services of your hotel, rather primarily promoting the brand itself. The major hotel brands are usually well-known and familiar to prospective guests, and that is why they have moved to a greater focus on online marketing.
Internet marketing in a wide range of approaches is known to generate up to 50% of some entire systems of revenue generation. The key to successful online marketing is to attract interested and qualified traffic that is interested in your particular property. An interesting piece on this is available from eMax Hotel Internet Marketing in a piece titled: Maximize Your 2010 Marketing Budget with an Online Marketing Strategy
EXAMPLES in Expenses
We are in the hospitality business, which includes travel as a major component. We do not want to reduce travel, but we do want to maximize the use of our staff travel dollars. Consider these basics when examining your travel budgets:
B. Initiate aggressive, but realistic goals for achieving specific expense savings that are linked to any changes in the operating budgets you have just re-forecasted.
There may be revenue lines projected at lower levels and the expenses associated with them should be identified. I am not a big fan of zero-based budgeting unless it is realistic, but the approach is worth considering in times like this to be certain that ALL expenses are directly anticipated and linked to volume.
This can include a wide range of services and products, including utility purchasing options that might offer incentives or access through energy cooperatives. It is not being suggested to break contracts, but every company in every industry is feeling strained resources these days. Discussions on terms, pricing, quantities, payment schedules and other factors are all items that should be analyzed short term and ongoing.
Justin Martin of CNNMoney.com posted a 6.25.09 column titled Make Purchases Without Cash This article offers a range of ideas on how business owners of a range of size and type of business are using successfully to conserve cash. The article gives examples of restaurants, contractors, farmers, publishers and other professionals who participate in one of the oldest forms of compensation – the barter exchange.
A clear advantage of barter is that is does reduce cash commitments, so one can keep staff employed because the business cash is not used for products. It also tends to keep business in the local community. This can have a short and long term positive effect on hotels, as when the business cycle returns to better times, the base of local community support will continue and the new business will help hotels to reach new success levels in revenue, guest satisfaction and profitability. I encourage you to read this article.
2. Practical Approaches to Opportunities in the Market
A. Carefully Evaluating All Amenities and Packages in Your Offerings.
This is straight forward if your hotel is an independent operation, as you can make decisions quickly on your own. If your hotel is part of a brand, there are agreed upon standards that perhaps may be delivered in alternate ways. Chain management may be open to options if the guest experience is not diminished. For example, there are several chains that are allowing certain items such as shower caps or lotions to be available 24 hours a day but not placed in every room. Lobby coffee may be offered in known peak times or on request, but not 24 hours a day with known waste. Newspapers are part of most brands’ standards, and some hotels I have stayed with recently have offered the delivery option or a small credit to the account can be taken. This approach is both green in nature and a service that is optional rather than wasted or unused products that requires staff services
B. Examining Every Part of Your Credit Policy and Practice
Offering discounts for cash, advance and early payment can be an integral part of a comprehensive business management strategy, not just the responsibility of the accounting department. Julie Rains of Wise Bread offered a series of ideas on cash flow management in a blog she posted on July 31, 2009 titled: When and How to Offer Discounts for Early Payment.
Her main points included:
Too many entrepreneurs new to the hospitality industry disregard the difference between cash flow and profits and even some veterans do not fully appreciate the value of monitoring cash flow. While a hotel or any business needs both to survive, cash flow is the more indispensable of the two. Cash flow basically refers to the flow of cash into and out of a business over a period of time - what is needed to keep the doors open while trying to make a profit. Without adequate cash, a hotel cannot pay its suppliers, taxes, meet payroll, market itself or operate professionally. If an adequate cash flow is not maintained, there is the very real danger of bankruptcy or going out of business.
Planning and monitoring the inflows and outflows of cash must be a top
priority for every hotel owner and general manager. The sales team needs
to be at least aware of this business function, as their sales strategies
are part of the function. Planning ahead for seasonal fluctuations and
unexpected emergencies, such as is now the case in many locations, allows
for dealing with challenges and at least partially reduces stress. Knowing
where you are in cash positioning allows you to also maintain more open
and constructive relationships with suppliers, banks, hotel staff and business
partners. By monitoring your cash, you can better anticipate potential
problem spots and conceivably lessen or avoid a liquidity crisis.
In this type of economy, the potential for shortfall in business levels
is real, which means cash flow will likely be diminished. Being able to
deal with this underperformance in advance will definitely help bridge
I was invited by Lorman Education Services to offer a teleconference on this topic and they have agreed to offer a $50 discount for any of my readers that mention discount code Z7745121 when they register online.
Feel free to share an idea for a column at email@example.com
anytime or contact me regarding consulting, customized workshops, speaking
Autographed copies of LESSONS FROM THE FIELD – a COMMON SENSE APPROACH TO EFFECTIVE HOTEL SALES can be obtained from THE ROOMS CHRONICLE www.roomschronicle.com and other industry sources.
All rights reserved by John Hogan and this column may be included in an upcoming book on hotel management. The opinions expressed in this article are those of the author and do not necessarily reflect the views of this publication
John Hogan, a career hotelier and educator, is frequently invited to participate at franchise meetings, management company and hospitality association industry events. He is a successful senior executive with a record of accomplishment in leading hospitality industry organizations at multiple levels, with demonstrated competencies as a strong leader, relationship builder, problem solver and mentor. He conducts mystery-shopping reviews of quality in operations and marketing, including repositioning of hotels.
Expertise and Research Interest
He writes weekly columns for a number of global online services and has published more than 400 articles & columns on the hotel industry. He co-authored (with Howard Feiertag, CHA CMP) LESSONS FROM THE FIELD – a COMMON SENSE APPROACH TO EFFECTIVE HOTEL SALES, which is available from firstname.lastname@example.org, ROOMS CHRONICLE www.roomschronicle.com and other industry sources. He resides in Phoenix, Arizona and expects to publish in 2009 his 2nd book based on his dissertation – The Top 100 People of All Time Who Most Dramatically Affected the Hotel Industry.
Hogan’s professional experience includes over 35 years in hotel operations, food & beverage, sales & marketing, training, management development and asset management on both a single and multi-property basis, including service as Senior Vice President of Operations in a specialty hotel brand for six years.
He holds a number of industry certifications (CHA, CHE, MHS, ACI) and is a past recipient of the American Hotel & Lodging Association’s Pearson Award for Excellence in Lodging Journalism, as well as operational and marketing awards from international brands. He has served as President of both city and state hotel associations.
John’s background includes teaching college level courses as an adjunct professor at three different colleges and universities over a 20-year period, while managing with Sheraton, Hilton, Omni and independent hotels. He was the principal in an independent training & consulting group for more than 12 years serving associations, management groups, convention & visitors’ bureaus, academic institutions and as an expert witness. He joined Best Western International in spring of 2000, where over the next 8 years he created and developed a blended learning system as the Director of Education & Cultural Diversity for the world’s largest hotel chain.
He has served on several industry boards that deal with education and/or cultural diversity and as brand liaison to the NAACP and the Asian American Hotel Owners’ Association with his long-term involvement in the Certified Hotel Owner program. He has conducted an estimated 3,200 workshops and classes in his career.
Service to the Industry and Hospitality Education includes
working with the Educational Institute Certification Commission of the
AH&LA, the Hospitality Industry Diversity Institute, the AH&LA
Multicultural Advisory Council, the Accreditation Commission for Programs
in Hospitality Administration, the Commission for Accreditation on Hospitality
Management Programs, the AH&LA and AAHOA Education and Training Committees,
the Council of Hotel, Restaurant and Institutional Educators (CHRIE), the
International Hotel Show and the Certified Hotel Owner program for the
Asian American Hotel Owners’ Association.
Dr. John Hogan, CHA MHS CHE
|Also See:||Hotel Common Sense – Effective Sales Management: Short and Long-term Planning, Forecasting, and Expense Budgeting / Part 1 of 2 / Dr. John Hogan / August 2009|
|Hotel Common Sense -Recognizing There is More than One Approach to Ongoing Success in Building Revenues / Dr John Hogan / July 2009|
|Hotel Common Sense – A New Look at Awards and Recognition / Dr John Hogan / July 2009|
|Lessons on Brands and Discounting / Dr John Hogan / July 2009|
|Hotel Common Sense Using Business Social Networks Productively / Dr John Hogan / July 2009|
|A Common Sense Review Process for Capital Investments / Dr John Hogan / July 2009|
|Understanding Values: The Challenge to Identify and Keep Them During Tough Economic Times / Dr John Hogan / June 2009|
|Personal Stories of Delivering Hospitality and Pride / Dr John Hogan / June 2009|
|What is Your Definition of Leadership? / Dr John Hogan / June 2009|
|Examining Why Do We Really Do What We Do? / Dr John Hogan / June 2009|
|Delivering Hospitality and Pride / Dr John Hogan / May 2009|
|Act As if You Are Number Two / Dr John Hogan / May 2009|
|A Baker’s Dozen of Fundamentals for Retaining Quality Staff / Dr John Hogan / May 2009|
|Customer Relationship Management Requires a Blending of High Tech and High Touch for Optimal Results / Dr John Hogan / May 2009|
|Do You Know Where Your Customer Is? Or Knowing Where Your Business Originates / Dr John Hogan / April 2009|
|Understanding what we measure and making it count! Strategies for Hotel Controllers / Dr John Hogan / April 2009|
|“A Bakers Dozen” of Strategies for Hotel Controllers / Dr John Hogan / April 2009|
|A Different Appraisal of Our Biggest Challenges in 2009 / Dr John Hogan / April 2009|
|Reflections: Mentors and Friends - Vermont Hoteliers Borden and Louise Avery and their Son Allen / Dr John Hogan / March 2009|
|Remember to Embrace the Essentials in Sales; Revenue and net profits can often depend on how one of the most fundamental practices in sales- how incoming phone calls are handled / Dr. John Hogan / March 2009|
|Getting the Most Out of Your Hotel Franchise Investment; Working With Your Hotel Franchisor for Everyone’s Success / Dr. John Hogan / March 2009|
|Getting the Most Out of Your Hotel Franchise Investment; Evaluating the franchise business model as a potential franchisee / Dr. John Hogan / March 2009|
|Getting the Most Out of Your Hotel Franchise Investment / Dr. John Hogan / Dr. John Hogan / March 2009|
|Four Steps: How to Make More Sales Calls than Any Other Way Or Trade Shows Can Be Invaluable If. . . / Dr. John Hogan / February 2009|
|A Baker’s Dozen of Strategies for Hotel Chief Engineers / Dr. John Hogan / February 2009|
|"A Baker's Dozen" of Strategies for Hotel Banquet Managers / Dr. John Hogan / February 2009|
|Making New Year's Sales and Marketing Resolutions Real and Practical / Dr. John Hogan / January 2009|
|Planning in a Challenging Economy - Probing Hotel Expenses / Dr. John Hogan / December 2008|
|Planning in a Challenging Economy - Fundamentals of Hotel Sales Planning / Dr. John Hogan / December 2008|
|A Message for Hoteliers: Giving Thanks - and Not Just One Day Each Year! / Dr John Hogan / November 2008|
|Hoteliers Must Remember the Lessons of Reasonable Care! / John Hogan / November 2008|
|Enthusiastic and Sincere Attitudes Will Pay Off For Hotel Salespeople / Hotel Common Sense / John Hogan / November 2008|
|Unleash the Potential! Recognize the True Value of Your Front Line Sales People / Hotel Common Sense / John Hogan / November 2008|
|Defining Hospitality - Readers Respond with their Insights / Hotel Common Sense / John Hogan / October 2008|
|Understanding the Value and Power of Breakfast / Hotel Common Sense / John Hogan / October 2008|
|A Bakers Dozen of Strategies for Hotel Restaurant Managers / Hotel Common Sense / John Hogan / October 2008|
|A Bakers Dozen of Strategies for Hotel Food and Beverage Directors / Hotel Common Sense / John Hoganv/ September 2008|
|My Definition of Hospitality. What’s Yours? / Dr. John Hogan / September 2008|
|Principles for Success as a Hotel Manager: 6 Observations on Finding and Employing Problem Solvers / Dr. John Hogan / September 2008|
|10 Hotel Sales Action Steps to Succeed in Today’s Competitive Marketplace / Dr. John Hogan / September 2008|
|10 Hotel Sales Mistakes to Avoid in Today’s Competitive Marketplace / Dr. John Hogan / August 2008|
|Ways to Identify and Build Repeat Guests / Dr John Hogan / August 2008|
|Principles for Success As a Hotel Manager - Maintaining Relationships Throughout the Organization / Dr John Hogan / August 2008|
|Principles for Success As a Hotel Manager - Part four: Communicating with Clarity and Candor / Dr. John Hogan / July 2008|
|Principles for Success As a Hotel Manager - Part three: Using your management style effectively / Dr. John Hogan / July 2008|
|Principles for Success As a Hotel Manager - Part Two: Motivating the Team / Dr. John Hogan / July 2008|
|Principles for Success As a Hotel Manager Part One: Understanding the Organization / Dr. John Hogan / July 2008|
|Updating Hotel Marketing and Sales Strategies Mid Year NOW Is Essential / Dr. John Hogan / June 2008|
|Don’t Underestimate the Impact of the Hotel Sales Office / Dr. John Hogan / June 2008|
|Factors for Successful Interviewing Potential Hotel Sales Candidates / Dr. John Hogan / June 2008|
|The Importance of Meaningful Sales Team Job Descriptions / Dr. John Hogan / May 2008|
|For Hotels with Limited Service, Fewer than 100 Rooms - How Do You Determine if You Need a Person Dedicated to Selling / Dr. John Hogan / May 2008|
|Extending Your Sales Team or Make Travel Agents A Regular Part of Your Sales Programs / Dr. John Hogan / May 2008|
|Finding Business Leads Can Be Easier Than You Think / Dr. John Hogan / May 2008|
|Understanding the Differences Between Marketing and Sales / Dr. John Hogan / April 2008|
|Identifying Your Customers / Lessons from the Field A Common Sense Approach to Success in the Hospitality Industry / Dr. John Hogan / April 2008|