Hospitality Financial Leadership: Nobody Gets to Be Wrong, Everyone is Wrong, No One Gets to Be Right, Everyone is Right
April 15, 2019 1:26pm
By David Lund
I use this quote to start many of my workshops. To me it’s the way I want the participants to stand in their individual power during our time together. It’s also how I see our industry. In the hotel business we all need to have an opinion and even more important we need to be able to share those thoughts. Reason being is, we all have something important to bring to the table.
That’s what I tell my workshop participants. To illustrate this, I often ask the following question. “What would you rather have to increase your GOP in your 300-room hotel that is currently operating at 75% occupancy with a $150 average rate, a $4 room rate increase or 2 more points of occupancy?” I get a lot of responses right off the bat. People are quick to jump on both options. But which one is right? The simple answer is they’re both right and at the same time they’re both wrong.
That’s the way I see it. Our business is not a science where there is a definitive answer. I have always said, “Put 10 hotel managers in a room and ask one question and you will get at least 12 answers.” Hotel people love to pontificate about the answer to just about any question involving operations or the finances of hotels. You’re never really short of opinions on what you should do. That’s the way it is with most hotel executives. What I want is the same level of bravado in my session today with all my participants, so to stir things up a bit with the audience this is what I like to do.
The participants all have an opinion, but often they are hesitant to produce it right away. Many of the workshop attendees are not used to being in the spotlight or on a stage. It takes them a little while to warm up. Just like the audience at a talk show or a quiz game, they need to be properly warmed up before we can get the most from them.
I say something like this: Depending upon where you sit you will probably have a different opinion about what you would like better, the rate or the occupancy. Let’s play this out a bit longer and do some math on each option to see if one selection is better than the other when it comes to GOP.
$4 in rate seems like a no brainer. We all like rate because it’s almost all pure profit. (300 room hotel * 365 days = 109,500 room available) currently operating at 75% = (109,500 * .75% = 82,125) and $4 more = ($4 * 82,125 = $328,500) in new room revenue. Less some additional travel agent commissions, corporate fees, credit card commissions and we’re left with say…. 90% of that (328,500 *.90%) = $295,650 in GOP
2 points of occupancy can also sound pretty attractive. (109,500 * .02 = 2,190) additional rooms. (2,190 * $150 = $328,500) in new room revenue. Less the additional costs for commissions, cleaning and amenities for the new occupied rooms and the additional fees and CC commissions @ 30% = ($328,500 *.70%) = $229,950 in GOP
At this point I say something like, “So I guess the room rate scenario wins; is there anything else we need to consider?” Then I wait and it usually takes about 2 seconds before it starts.
“What if the new occupied rooms are group rooms?”
“What if the additional rate comes from the OTA’s?”
“What if the new occupancy is on Sundays?”
“What if the new occupancy were all stay overs”?
“What if the additional rate comes from existing corporate clients?”
“What if the additional occupancy comes from transient family clients?”
“What about the additional wear and tear on our rooms with that extra occupancy?”
“What if we had some of both occupancy and rate, what would that look like?”
We now have a full-on debate raging and everyone seems to have an opinion, and some are very strong. The foodies have one slant and the salespeople have another. Rooms division people are all about the right customers staying in our rooms. The administration folks can make the argument either way. The GM says she would take either scenario with a smile. I stop things about now and I make my point. In our business we all have the ability to see things our way. We can justify almost anything as it relates to what’s good or not so good for our business.
Knowing this about the people in the workshop is a good place to start. Showing them that their opinion counts and it’s just as valid as another’s is powerful. I want people to see that they make a difference no matter where in the hotel they earn their paycheck. We are all in this together and whether the subject is more business, right sizing the head count or what’s for lunch in the cafeteria, everyone is entitled to their own thoughts. Nobody gets to be right today, and everyone is wrong and while we are at it everyone is right, and nobody is wrong.
If we can truly model this philosophy, then we can get the entire team to lean into the challenge of figuring out this thing we call a hotel. What is the best way to move forward? There are so many aspects of the business we need to attend to. What can we do to truly engage the hearts and minds of the entire team?
That is what it’s all about. Getting everyone to play. If we sit on the sidelines waiting for the GM and corporate to fill our heads with what to do and how to think we just ordered the worst dish on the menu. Be a hotel full of the mindset that it’s all about having everyone step up and truly contribute!
Tags: david lund,
hospitality financial leadership,
budget & finance
David Lund is The Hotel Financial Coach, an international hospitality financial leadership pioneer. He has held positions as a Regional Financial Controller, Corporate Director and Hotel Manager with Fairmont Hotels for over 30 years.
He authored an award-winning workshop on Hospitality Financial Leadership and has delivered it to hundreds of hotel managers and leaders. David coach’s hospitality executives and delivers his Financial Leadership Workshops throughout the world, helping hotels, owners and brands increase profits and build financially engaged leadership teams.
David speaks at hospitality company meetings, associations and he has had several financial leadership articles published in hotel trade magazines and he is the author of two books on Hospitality Financial Leadership. David is a Certified Hotel Accounting Executive through HFTP and a Certified Professional Coach with CTI.
For a complimentary copy of my guidebook on creating a finically engaged team in your hotel head over to my website, www.hotelfinancialcoach.com and don’t forget to email me email@example.com for any of my free hospitality financial spreadsheets.
Contact: David Lund
Hospitality Financial Leadership: OH, BROTHER
Sonnenblick-Eichner Arranges $36.3M of Acquisition Financing for Doubletree by Hilton Hotel Campbell Pruneyard Plaza Campbell (Silicon Valley), California
Hospitality Financial Leadership: Hotel Finances for Dummies
Hospitality Financial Leadership: RevPAR vs. GOPPAR and Why We Need a New Champ
Hospitality Financial Leadership: Understanding the Concept of Owner Spend
Hospitality Financial Leadership: The Next Big Thing
Hospitality Financial Leadership: Contra or Barter Exchanges – How to Record Them and Some Tips
Sonnenblick-Eichner Company Arranges $26,500,000 of First Mortgage Financing for The Inn at the Pier, Pismo Beach, California
Hospitality Financial Leadership: She Said She Was Born Without the Financial Gene
Hospitality Financial Leadership: Roger Penske & The Hotel PMS
Hospitality Financial Leadership: City/Region Wide Supply and Demand Analysis
Hospitality Financial Leadership: The 5 Hidden Costs of Being Branded
Knighthead Funding, LLC Originates $36 Million Loan to Refinance Newly Constructed Luxury Hotel at Hartsfield-Jackson Airport in Atlanta
Hospitality Financial Leadership: Earned and Unearned Revenues – Understanding the Difference
Hospitality Financial Leadership: Bring Multi-Tasking to an End for Hotel Leaders
Hospitality Financial Leadership: Understanding the Importance and Use of The Reserve for Capital Replacement
Hospitality Financial Leadership: The Matching Principle
Hospitality Financial Leadership: The Top 10 Interview Questions About The Hotel's Finances for a General Manager and the Best Answers
Hospitality Financial Leadership: OTA’s and How Hotels Can Best Use Them
Hospitality Financial Leadership: What Is Leadership?
Please login or register to post a comment.