By David Lund
They go by many names: owner’s commentary, monthly commentary, executive commentary and more. The names can be different but in essence, they are all the same thing – a review of the prior month’s results plus a forward look into the coming months from a financial and market perspective.
The monthly commentary is a great example of the “full disclosure principle” and if you are wanting a brush up on that you can watch this short video.
So, in this piece, I am going to explain a strategy you can use to get your team to produce a great monthly commentary. Not only will you have the information you need to explain to the owner and brand what is going on, you will have a process to follow each month for continuous improvement in your hotel. That is the name of the game with commentaries and it is what this piece is all about.
First, let’s get the rhinoceros in the room out in the open. The reason why most commentaries are pretty useless is they just regurgitate numbers. The same numbers that you should be able to see in your financials are bantered about and cross-stitched into paragraphs that make the average person dizzy. Not only are these meaningless observations ineffective, they are downright annoying.
The reason these commentaries lack meaningful answers as to what happened and what is going on is the person writing the commentary does not know what the real story is. They may be the director of finance, director of ops, or maybe it is even you, but the pertinent facts do not come to the surface and that is because you do not have the right people and process producing the commentary.
Ok, so my rant is over. I think you get what I mean and it is time to lay out the approach I recommend you take. It is centered on the idea that each department has an equal role to play in the financial health of the hotel. That does not mean that all departments are equal, but it does mean they all have an equal arrangement that needs to be to be delivered on each month.
If you do this, you will have a built-in financial intelligence tool. One that will pay massive dividends. The best thing about this is it is free – no software, license or app is required – just some organization and discipline on your part.
When we look at the financial process in most hotels there is what I call a disconnect, that is to say the executive communicates the forecasted numbers to the owner and the brand but rarely are these same numbers used by the operating department managers. We need to fix that and that is the first part of the strategy.
Each and every department manager must be responsible to produce their own monthly forecast for payroll and expenses using staffing guides and zero-based expenses. This forecast needs the appropriate amount of time for edits, never making changes to the details without the involvement and buy-in from the department manager. For the department manager to own the forecast they must be the ones to create it and finesse any last-minute changes that are quite often necessary. Full stop.
Now that the department-level managers know what their financial plan is for the month, they start to execute the month based on their detailed payroll and expenses with the relative business volumes, REVPAR, F&B, etc. Through the early days of the month, then each day to the end of the month, they track the business on the books. They are looking for one key piece of information. Will they make our forecasted numbers for REVPAR and F&B, plus the same attention given to any other large contributor?
Hands down the morning meeting is the best place to get and communicate the revenue progression in the month – for the month. Some months it is very clear they will make it, some months it is right down to the wire, and some months they are seemingly sunk even before they really begin. The key is to closely track the build in the month, for the month.
This is the pivot point. Now that they are in the month and the word is out that they will probably miss their monthly forecasted REVPAR target by 10%, the department managers know what they need to do. They need to trim the sails! What can they carve back on in their payroll and expenses?
Now that the department managers know the details of their forecast, they can remove, adjust, forego, delete or re-engineer purchases and schedules. That is the name of the game.
Moving right along, just like any hotel the month flies by and now the books are closing, and each department manager gets their “draft” financial statement and their general ledger detail report. Their job is to ensure each one of their accounts is right, clean and complete. If there are mistakes, miscodes, or other discrepant information, they are caught before the books close.
Back to the central idea of this article – How they can now write a departmental commentary that speaks to what worked and what did not? What did they learn from both and what will they do differently next month? That’s something to get very excited about. A process where the information in the hotel can come bubbling up to the surface. All you need to do is make sure everyone writes their part of the commentary and now you have real meat on the bone, answers, details and most importantly, a process for continuous improvement.
It is not rocket science, but most hotels do not do this because they do not have the discipline. Some say they do not have enough time. Malarky, I say. They have the same amount of time as the rest of us, they just choose not to do it because it is seemingly more work. But that is just not true. You see that once this is working. Your role as the leader changes from the doer to the conductor.
That’s what it’s all about.