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Survive and Thrive, or Death by a Thousand Cuts? Which Would You Prefer?

You know, it is funny (and sad) the amount of owners and operators that I have encountered during my hospitality career that have chosen to die by a thousand cuts rather than transform, differentiate and succeed.

When times get tough sometimes, as they inevitably do, these owners and operators make a conscious decision to take the route of cuts.

Most often the first decision is to cut rates, or alternatively give more rooms to the OTA’s. Less sales efforts, right? Now they can cut one of their agents and still keep occupancy up, right? That cannot be good for the long term health of the sales and marketing team, right?

Next they take a look at their loyal staff and see where the knife can cut, since payroll is their highest expense. One or two in the front desk, a couple of waiters, maybe a cook or two and a handyman and presto, you have considerable savings.

Next comes a review of procurement. Cheaper equipment, cheaper cleaning materials, cheaper quality food, everything has its own turn at cuts with the knife wielding operators.

Scheduling is now under the microscope, and perhaps shorter restaurant hours and bar hours are cut. That will save some funds, right? Training is completely cancelled of course.

So now they sit back and wait, thinking that they are lean and mean. It reminds me of the horseman who wanted to train his horse lo live without water. He almost succeeded but the horse died just before he became accustomed to live without water.

Anyone seen or experienced owners and operators that have managed their properties as I have described?

Quite a few right? But it could have been done so differently when times get tough, and it could have left them with a better, smoother and more successful organisation than before.

When they finally lament and put their hotel up for sale, perhaps they regret not having taken different actions.

Let us analyze the death that they chose and see how it affected the operations and developed into the downward spiral.

Cutting rates will do immediate and long term harm to revenues stream. There may be an increase in total revenues but this comes at a much higher cost ratio. It is also easier to increase reduction as occupancy lowers, and much more difficult to raise when times get better. Do not forget that the hotel is not operating in a vacuum, but that the competition is also doing or can do the same. The independent hotels are more likely to opt for this seemingly easier path.

Laying off staff will have a short term effect, but will lead to disaster down the road. If scheduling and HR resources are compatible with the needs of the operation, laying staff off will really hurt when good times come along and hiring is necessary. Who will want to work in an organisation in which loyalty is just a word with no meaning? And who wants to work with no direction or training?

Maintenance and cleanliness will suffer from inferior materials and will shorten the life of the equipment. Guests will experience lesser quality amenities, from cheaper soap, toilet paper and towels. That is how you ruin a good reputation.

Cutting hours in restaurants and bars may be a good idea for a short term saving, but in the long run guests want facilities they can enjoy during a stay. What will happen if the food quality also worsens?

The first results come in and show considerable savings all round, and the operators smile and are pleased with their work, but I guarantee that the smile is not for long.

What is the alternative you ask?

Firstly a clever operator will have put in place plans to weather the storm of lower occupancy. He will plan for vacation time so as not to lose valuable employees that know the hotel, many of the guests and are trained.

He will work diligently to lower costs by procuring just what it’s necessary, and will make use of locally sourced produce that is seasonal. He will adjust the menu to suit the times but not cut quality.

He will create new sales efforts and send out his team to drum up business and look for new niches, not layoff sales people to rely solely on the OTA’s for traffic.

He will carry on training because there is time for this when quiet, and because he can come out of the storm with a much better team than his competitors.

Very importantly he will differentiate the property from the others in his competitive set. Although I have written about this last, it may very well be the most important point to consider. If you are just selling what many others are in your neck of the woods, why should they consider giving you business at all?

In the market of today and in the future, it is not enough to keep a clean house, give good food and service. There needs to be a clear and different reason and identity to the property with additional values that will attract the clientele of today. The largest consumer group of today, the millennials, are looking for a difference, for values that will make their stay worthwhile.

It takes years to develop a great culture, operation and reputation, but just a few weeks to destroy it all

You need to give your guests a unique and value filled reason to come through your doors, or you will die by a thousand, self-inflicted cuts!

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