Send in the Cavalry

The hotel arena in South Africa has seen many a distressed business of late. One can attribute this to many reasons: accommodation oversupply, room rate reductions, poor management, hopeless marketing efforts – the list goes on. In some cases, these properties show strong signs in favour of rescue and simply require the experience of skilled hoteliers. Once identified, a strong take-over is required for any promise of recovery.

According to Guy Stehlik, CEO of BON Hotels, a hotel management and owner company who are making a name for themselves in the hotel rescue field, there’s nothing like watching the process of the team take-over of a failing hotel. “Moving into a distressed property is a mass team effort: a successful emergency team can turn a property around in as little as 72 hours. Each individual bringing his own speciality into a highly pressurised environment can often result in remarkable results within a few days.”

Stehlik says that a common denominator and the most typical problem arises out of the owner’s inexperience and interference in managing a hotel. Hotel owners are often extraordinary business people, but hotel management requires skills that are not typical to managing a corporation. Very often these great business people fail at making a success of a hotel for a number of reasons that the BON Hotels task team will attempt to rectify immediately. Financial extravagances will be addressed and the commercial and operations team will investigate and negotiate all agreements and re-negotiate any long-term contracts that the hotel has entered into, such as leases, bank loans, etc. Probably one of the most important factors in a successful hotel is in the management. An incompetent manager or someone in a management position who is “in over his head”, so to speak, will be easily identified as a drowning man and a strategy will be put in place to assist and rectify. Apart from these glaring problems that are usually easily identified by an experienced eye, an emergency task team should be able to rectify the other basic mistakes in hotel management:

Financial Extravagances

Hotel management costs should be restricted to hotel management needs. Often, the BON team will find that the hotel is carrying unnecessary costs on the owner’s behalf. Typical examples are personal vehicles or personal asset finance put through the hotel’s operational expenses; unnecessary staffing or family salaries paid for by the hotel; and suppliers and services which are not required or are duplicated. A common find is IT service providers duplicating services such as point of sale, property management systems and booking systems.

Human Resources

A hotel requires an exceptional hotel manager. Period. Experienced hoteliers will identify these skills or lack of them in a heartbeat. The old adage that a fish rots from the head down could not be more appropriate than in hotel management. A general manager’s role is three-fold, i.e. interacting with guests, being with staff and administering operations of the hotel. If a manager over-prioritises any one of these, the balance will be out and he or she will not be successful. Over and above the manager, often a complete shuffle of staff is required. After interviewing each staff member, a human resources practitioner will easily see if a staff member is more suitable within a different division. Often the least profitable divisions will have the most staff. This is an astoundingly common mistake – how often have you seen a hotel restaurant filled with service staff ambling around whilst there’s a bleeding room service or housekeeping offering?  Whilst we know that often a property that is under rescue means that a lot of jobs are at stake, a quick re-assignment of staff can make the world of difference and result in a much happier team.

A significant follow-on to a reshuffle is that of training. Poor service in a hotel is due to no fault of the staff, but arises from defective training (or none at all). BON have picked this up most especially in out-of -city areas, where staff do not have the opportunities of attending hospitality training or have not even enjoyed the experience of hotel / restaurant service. A trained staff member results in a more confident service provider.

Sales and Marketing

A distressed hotel is often the result of focusing on the wrong market segments or a marketing team which is fishing in the wrong pools. With a quick shift, the BON Hotels team analyse and uncover what markets the property will appeal to and, more importantly, how to service those markets. Stehlik says that they often note that the owner has identified the correct market segment but has done very little to assist or attract that market through the correct facilities and services.

“Our BON Hotels team work off a tried and tested marketing ‘blueprint’ and with the assistance of an identified customer relations executive, we will formulate a marketing and publicity outline for the year ahead that is implemented into actions immediately, and is measured daily, weekly and monthly – just to check that we have made the correct calls, and if not, we will adapt or adjust straightaway.” A management company’s sales director will add valuable input and will be heavily involved with the marketing team, making certain that the team’s actions dovetail with those of the marketing blueprints.

A due diligence exercises (one whereby BON Hotels would investigate the property in depth and decide whether to take it on as a project), will have been completed beforehand with new rates calculated and offered to the market. An important task of sales and marketing efforts would be to rectify incorrectly quoted rates in the marketplace via third-party booking portals and to distribute correct rates to the travel trade.

Facilities Management

It’s human nature to do the same thing every day, which can make you blind to problems that a fresh eye can identify very easily. One frequently much overlooked aspect of taking over management of hotel operations is the art of a fine tooth comb. The problems are usually so gigantic that no-one has the time or thought to comb through a property, checking from A-Z that all is in order. A facilities manager is most definitely required to check and possibly re-negotiate lease agreements, to devise ways of controlling expenditure (for example, electricity and water), and to identify extravagant equipment that could be eroding profitability. The hospitality industry has always suffered from the huge problem of theft, not the kind whereby guests are stealing the towels, but more so that staff are stealing equipment, perishables, and cash sales. It is a facilities manager’s duty to identify and stop the haemorrhage. “Hotel owners are often horrified at our findings,” says Stehlik, “and have had the wool pulled over their eyes whilst their property is being pilfered.” Basic hotel management systems and processes can assist immediately in the management of theft.

Cash Flow

Cash flow is paramount. You cannot manage a hotel if you don’t have the peace of mind that your cash flow is healthy. The BON task team will typically renegotiate terms with suppliers and secure better prices. What they most often find is at the stage where a business has reached rescue status, suppliers, especially suppliers of perishable goods, are demanding COD or not supplying at all. BON will inject cash into the business to get it back on its feet so that it is not in the dilemma of being asset rich and cash poor.

Financial Control

According to the BON team and from experience, financial controls are required at every property. Financial control must be placed under lock and key and streamlined to be the responsibility of one trustworthy person. This is not often welcomed, but it is a necessity. The BON task team usually changes all keys and places the financial control under the hotel’s financial manager only. This includes petty cash, purchasing and signing of cheques, online banking, cash-ups, reception desk, bar, food and beverage till points.

Physical Property Maintenance

Often the horizon has faded and management or owners who have been around for a while cannot see glaringly obvious maintenance issues. At little cost, a maintenance manager can arrange for a coat of paint or a cleaning of all the light switches. A maintenance manager will also be included in the task team in order to draw up an asset ‘blueprint’ which will cover maintenance activities on a daily, weekly and monthly basis as well as checking all compliance issues with regard to the property. This will include fire and safety regulations, business licences, liquor licences and insurance. Not only will the maintenance manager make certain that everything is up to date, he will also re-negotiate more favourable contracts with these service providers.

Food and beverage

A bug-bear of most hotel guests! You often hear that the rooms were quite nice, but the restaurant offering was abominable. Food and beverage managers are not financial accountants. In fact, most of them hate numbers, that’s why they are on the floor or in the kitchen. This results more often than not in menus that are incorrectly costed. It is so important to get the financial team involved when costing a menu. A profitable menu can turn your F&B around.

Another common food and beverage shortfall is stock control. Poor procurement and buying systems result in wastage, theft and stock that is not turning. “We immediately put stock control procedures in place and introduce interim menus that are correctly calculated,” says Stehlik. “This makes a marked difference on food and beverage margins. Oh, and most importantly, we sort out the breakfast. Every BON Hotel must offer the best breakfast in town!”

Hotel owners need to have a hard look at themselves and their business model and seriously consider their strategy before they find themselves in trouble. These exceptional business minds fail to realise that for a small fee an experienced, professional hospitality company can manage their hotel which, in fact, calls for specialised expertise.

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