Value with Hotel Group Business Intelligence Gains
Internet Back-Office and Business Intelligence Reduce AP
Staff 33%, Cuts Month-End Close 20%
June 3, 2004 - Anyone visiting
a Peabody flagship property in Memphis, Orlando, or Little Rock knows these
beautiful hotels are about more than ducks. Although the trademark
Peabody ducks are frequently seen in advertising and splashing in the marble
fountains adorning the lobby of each hotel, the three Peabody properties
are clearly about luxury and service. What is not so obvious is that
these properties are integral to a business strategy that is actively building
overall corporate value for their owner, Memphis-based Belz Enterprises.
How Belz makes this happen is a compelling business case.
When Peabody Hotel Group wanted to streamline its accounting practices, it evaluated several companies including corporate giant Merck Pharmaceuticals in New Jersey. “In hospitality the month-end closings are very standardized and for the most part ‘old school;’ but if you look at a Fortune 500 company like Merck an organization of this size can close the month within the following three business days,,” Winslow said. “These kinds of sound accounting practices are valuable because a company that can close its books in such a short period of time can spot revenue and expense trends quickly, and monitor its corporate value almost daily.” Peabody also performed a needs analysis of three processes pivotal to boosting its overall corporate value: management efficiency; resource allocation; and overall bottomline performance. The result of that analysis was Peabody’s decision to implement an integrated financial management platform that supported all Peabody Hotel Group properties on a single system to obtain better operating information more quickly. “We wanted centralized back office accounting and a business intelligence system for the Hotel Group with a relational database for efficient data extraction and faster analysis,” explained Winslow. “As of January 1, 2004 we transitioned to the accounting and financial analysis applications from Aptech Computer Systems, Inc. to accomplish this. We also linked all our properties through a secured Internet framework that allows real-time reporting and data collection across the organization.”
Peabody has always maintained a good understanding of its historical financial information, but it wanted to measure where it was now and develop an automated method of objectively evaluating its performance. “When you bring together data integrity, timeliness of data, and the ability to merge data for corporate forecasts, it boosts corporate value because a company then has the ability to make future decisions more intelligently,” said Peabody Hotel Group Corporate Controller Warren Winslow. “The most important aspect of implementing any financial analysis system is benchmarking and the use of new performance metrics; but benchmarking against what? We want to look at profitability and expense measures, capture ratios, and trends in other industries besides hospitality and be able to ask, ‘Do our numbers seem reasonable?’ Aptech’s Execuvue business intelligence system allows us to do this.” Peabody Hotel Group also uses hotel industry benchmarks to validate its corporate value by comparing its performance with other non-hospitality organizations to evaluate and understand the similarities among various metrics.
Uses Manufacturing Model for Accounts Payable Processes
The method the company used to streamline its accounts payable process is a good example of how Peabody brings together best practices from other industries and applies them. Warren Winslow continues, “We installed Profitvue, our vendor’s enterprise back office accounting system across all our hotels, and then looked at the manufacturing industry. Manufacturing is a process-driven function; so we flow-charted our accounting activity as though it was a car going down an assembly line, and then paralleled that incremental process with our A/P department. After our analysis we were able to reduce our A/P staff by one-third within 90 days of the transition.” Soon after using its back office system to implement their new process-driven accounting method, Peabody Hotel Group went on to reduce its month-end closing timeline by 20 percent. “It still takes time to close the books, but we anticipate we can shrink that time by another 25 to 35 percent easily,” said Winslow.
Real-Time Information Replaces Familiar Delayed Reporting
Peabody also installed Webvue, an Internet-based financial application from its vendor, that allows Peabody Hotel Group property managers to enter their daily operating numbers at anytime without resorting to faxes or emails, and evaluate their property’s performance reports the same day. “Our general managers are hands-on operational professionals who are not accustomed to looking at a desktop all day,” said Winslow. “Our centralized Web accounting application lets them quickly assess their hotel’s achievement online daily, check their trends and gain an understanding of how their property’s month-to-date activity will contribute to bottomline performance if it continues.” Peabody Hotel Group’s current real-time information environment replaced their previous delayed-reporting routine familiar to many companies.
The company’s new financial management platform includes the Execuvue business intelligence application that will give the company the ability to pursue financial planning goals more easily while putting high level financial tools in their managers’ hands. “We run all the applications directly from our corporate headquarters,” said Peabody’s Winslow. “Every hotel has access to its database. Webvue is an Internet tool our general managers use to look at any general ledger account they choose. The complete system offers a flexible accounting structure with drill-down reporting. Through the Execuvue business intelligence system we advocate a more robust and transparent corporate reporting model supported by new reporting technologies that improve the access, comparability and analysis of our information.” The benefit is Peabody Hotel Group can use the information to manage its cost contingency plan anytime during a given month. “We are close to operating in a nearly paperless environment due to the real-time data availability,” said Winslow.
Although Peabody Hotel Group is focused on raising corporate value; it also understands the success achieved in the hospitality business is determined by the guest. “Our hotels are assets designed purely to satisfy the needs and wants of our guests,” concluded Peabody’s Winslow. “If we cannot continually satisfy the guest it impacts our entire operation. The purpose of making our organization more efficient is to be able to funnel more dollars to an enhanced guest experience.”
About Peabody Hotel Group
Peabody Hotel Group
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