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Contrllong Costs: It's Time to Begin Cutting Expensive Amenities


by Rick Welch, CHA, CHME
December 2010

In the past franchisors believed that amenities and services were needed to stay competitive. Hotel owners and operators did not have a say in the matter, it was predetermined for them, by all of the major hotel companies. The race was on to see who could give the most away the fastest.  

The idea was that new amenities and services would make their hotels more competitive.  As a result, pools, hot tubs, and well-equipped exercise rooms have become almost commonplace in limited service properties. Complimentary full hot breakfasts, rather than just coffee and a doughnut as well as an expensive serving bar. Business centers have appeared, complete with internet access, fax machines, and copiers. Automatic open front doors were installed. Lobbies featuring fine furniture, serving tables and side chairs have replaced utilitarian entryways. When economy-hotel guests enter their room today, they expect to find internet access, hair dryers, shampoo, body lotion, combs, tooth brushes, mouth wash, shower caps and the need to package such items in an expensive display. Easy chairs, desks with large work surfaces, and remote-control cable TV with free movie channels. And do not forget the “out of sight” cost of the frequent stay programs that we fought so hard to obtain.

The belief then was this would add significantly to occupancy and ADR. I don’t know if sales were even a consideration then or it was to see who could give away the most the fastest! The need to make a limited service hotel seem like a full service hotel without the service employees. We were fast to react back then but not so fast to react now!

The airlines did not waste a minute to realize that if you are going to compete by cutting rates something has to give. They immediately moved to reduce expenses by cutting out free meal service, free luggage, free snacks and even seating preference. They did however realize that the monster they created thirty years ago, the frequent flyer programs were going to stay, but they were adjusted to cost cutting measures.

Why not the limited service hotel industry? Why do we continue to stick our heads in the sand and ignore the facts that cutting amenities time has come. The need to get back to the basics is here if we are to survive the current economic conditions. We cannot charge the rates necessary to pay for all of the “stuff” that we continue to give away. The local market is dictating what we can charge for a room.

Franchisers have to take the lead here and begin to work with their franchisees to assist them in reducing their operating expenses.

Labor has been cut to the bone and utilities continue to go up. I remember working for a successful hotelier who believed if you are going to cut rates then tell everybody! Franchisers need to develop new advertising that makes the consumer aware that the reason rates are so low is that hotels have returned to the times that made them successful. A good clean room with friendly service!

Begin reducing all of the controllable amenities. Advertise to the public that their hotel chain is meeting the consumer demands for a limited service rate for a limited service product, thus reducing room cost. Let the competition continue to let their controllable expenses run high by not making this change. But, I will bet if one brand does it, the others will follow.

I was also told by one of my mentor’s that we do not make a dollar in this business we make twenty nickels and to continue in-room coffee and a full amenities packages will just hasten the ownership of your hotel to your lender.

Special thanks to Sanjay Patel, Ormond Beach, Florida

Rick Welch CHA, CHME  is currently President of the Lakeshore Group Professional Hospitality Consulting and Asset Management Company.  He recently has consulted to many major Lending Institutions as a Professional Hospitality Consultant. 
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Contact:

Richard J. Welch, CHA, CHME 
President 
The Lakeshore Group 
2034 Ivy Ridge Rd. 
Smyrna, GA 30080 
404-285-4771
rjwelch11@aol.com

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Also See: Successful Hotels Hire Successful Employees / Rick Welch / July 2009

A Hotel Sales and Marketing Action Plan that Will Yield Immediate Results / Rich Welch / June 2009
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