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Running from Empty

What to Do When the Really Nice Hotel You Own Isn't Full

by Joe Strain, ISHC
July 2012

As a hotel owner, you know the drill all too well. You’ve hired another management company to replace the one not getting the job done. Your new asset management company helped with the selection, but you have a sinking feeling the change won’t pan out.  Your eleven hotels are not performing even though you spent heavily to exceed brand standards, a paltry 92 RevPar Index says it all.  At even-steven—if you had the market share the competitors have—you’d be worth another nine million dollars.  With that, you promise yourself, you’d take a whole year off in the dazzling Caribbean. 

Why spend upgrade money if the cash flow doesn’t follow?  What’s missing?  What solutions are lying under your pale nose?  How do you get to Mecca?

At a fast food chicken place over a travel weekend, your order was taking too long and you were impatient.  The counter clerk saw your irritation and ushered you to a very clean booth.  When the food was ready, she left the counter again and brought it to you.  Who does that?  You tell yourself that life is about the moment and that the food was particularly good that day, but who does that?

Did a light go on?  No.  It wasn’t until service like that crossed your path again that you got it.  Service.  Happy customers.  Repeat business. Repeat business:  isn’t a hotel full of happy returning guests what you are in business for?

Back at the office, you re-examine business models.  You start with franchise companies.  They deliver distribution and brand standards, but they are not in business to return guests to your hotels. They’re happy keeping the guest in the franchise system.   Even when they’ve done their job it isn’t enough.  A 92 RPI is definitely not enough.

The management company?  Sure, everyone knows the management company is supposed to provide a service that brings guests back.  But are they?  Not for my hotels, you decide, not when the experience is described as forgettable.  The General Manager? The GM doesn’t train anymore.  They’re too busy answering to the franchise company, guests, vendors and you, the owner. They have no time for training. Result:  Getting the guest to return doesn’t fall cleanly into anyone’s model.  Should it be in mine, as owner, you ask?  Yes, or course, but how?

You look for training companies.  You should know at least three but you do not.  A web site catches your eye.  You’re impressed by the client list and testimonials.   You study mystery shops and customer feedback used to measure service levels.  They do not offer a hold-a-seminar-and-leave proposition or a 2 hour DVD session held after work hours. Their training looks challenging.   You realize that if attitude and behavior are to change, serious training is required.  To get the nine million dollars, serious training is required. 

Next, you visit a trained hotel.  A room attendant, busy at her cart, delivers the perfect hospitality greeting as you walk by.  A sales attendant describes a room perfectly.  You feel connected.  You see a few physical oddities but you don’t care.  Back at the office you discuss your visit with one of your GM’s and the asset manager.  They aren’t persuaded.  Training is expensive, they say.  That capital could be spent on new tile.  You grimace, knowing the race to keep up with brand standards never stops but you must decide. You hire a training and measurement company but not before they say it may take six months to get the hotel “right”, maybe longer.   You are shocked, thinking service wasn’t that bad.  Little did you know.

The training company trains the executive team first.  Of these, the good ones will train the line staff. But the trainer calls in the second week to say one of the department heads isn’t likely to work out. You automatically know which one it is.  A replacement is hired and trained, by then the line staff has been trained, happy with their new skills.  At the end of training you walk through the hotel.  The entire staff is clearly more positive. In fact, they radiate and guests connect with them.  Department heads, kitchen managers, head housekeepers—they all act like they own the place and they want guests here, in their house.  They are committed to wanting guests here.  Social media buzzes—guests are taking notice.  The bar business is suddenly fantastic. 

After nine months, RevPar is more than marginally higher. But it’s still the first year and the training’s benefit, rooted in repeat business, has yet to fully develop.  Mystery shop scores, in spite of the loss of two staff to turnover, are consistently twenty percent higher than before. 

You think back about brand training.  It was needed to function in the brand’s system, but this is something else entirely.  You worried about conflict between training programs, but the training company included franchise standards into the training, as opposed to challenging them.  Who does that?

You start the training for five more hotels but, despite clear improvements to the first hotel, the management company does not like it.  It’s not necessary, they say.  The “new culture” will provide the same increases—give it time.  Two regional VP’s visit to punctuate the point.  You ask them about the one hour a quarter seminar and the DVD indoctrination they tout.  You listen for a response or new ideas, wonder about the weather in St. Lucia, but hear none.  Asked about regular pre-shift meetings and the standards of the week set by department managers, they give no answers.  So you show them the training schedule, the weeks of in-house trainer training, the lengthy train-the-trainers sessions, and the classroom and elbow-to-elbow sessions and ask for comment.  They stare at you.   They’ll get back to you, but with what you wonder so you press ahead.  Training was not disruptive, turnover is low, and revenues are increasing.  You hear returning guests ask for room attendants by name.   Who does that?  

You believe now.  A year passes and mystery shops, done independently of the training company, find few reasons to retrain.   Named as the award winner for most improved revenue of a franchise hotel, you attend the award ceremony.  So many raves.  People ask you how you did it.  You smile but don’t reveal the 118 RevPar.  You secret another smile because you just signed a binding-contract to sell the portfolio. You got the nine million dollars, and then some.

As you check into a dazzling St. Lucia resort only to recognize the service levels and discover the Caribbean resort was trained by your training company.  You laugh. 

It’s true; the Caribbean is fantastic all year long.

Joe Strain, ISHC, is Cheif Investment Officer of FreemanGroup Hospitality.
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Joe Strain ISHC//FreemanGroup Hospitality
Chief Investment Officer  
T : (972) 863-3723 | C : (425) 260-5606  
3501 Token Drive Suite 100
Richardson, TX 75082


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Also See: Equity Multiples — Can you Double? EM Brings Clarity to When to Sell a Hotel, When to Buy a Hotel, and What to Offer / Joe Strain / October 2010

The Outlook For Hotel Investments / Scott Smith / July 2009

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