In your hotel, you either share the financials with your leaders, the department managers, or you don’t. If you already share the financial statements, you know the power it unleashes with your team and the result it helps to create. In this article, I will explore the relationship we have with the money and how we can get the financials out of the closet and reap the benefits.
Why is financial leadership in hotels so un-evolved? We need to realize that the third pillar, the money, the owner, the profit-and-loss, the paperwork, whatever you want to call it - it needs a proper voice. The right voice - a voice that speaks to the leadership and the highest purpose that a cornerstone of our business warrants.
To maximize your effectiveness with your leadership team around the money you would be well advised to accept the fact that it’s an endless exercise. We must see that the idea of mastering the numbers is elusive. This imperfect reality is comforting and seeing the challenge we have as just another endless mountain to climb is very healthy.
The business of managing the hotel finances is not terribly technical or complicated. What makes it challenging is that it’s usually a very large job involving many people. In a 500-room hotel, you can easily have 20+ forecast contributors. The communication system in the hotel is the key to both smooth management and predictive financial results. This is the how to.
Expectations. I hear this word from almost all GMs, controllers and hotel executives. It’s the wrong word and it’s not an effective way to manage. In our lives, few things make us less productive and more distant than other people’s expectations of us. Expectations are everywhere in our work and personal lives and people detest them. Who are you to have an expectation of me?
In the hotel business, we have three equal pillars. The guest, the colleague and the money. We need to realize that the third pillar, the money, the owner, the P&L, the paperwork, whatever you want to call it, needs a proper voice. The right voice, a voice that speaks to the leadership and the highest purpose that a corner stone of our business warrants. Far too often the voice of the money is scary stingy or down right mean. If the paper is going to have a voice we want to ensure it’s the proper one - the voice that will get and give equity with all of our constituents.
Flow thru, an abbreviation, is a catch all phrase that measures how much made it through your business comparing one period to another. What made it through, from revenues to profit. Another term to describe this measurement is retention. A good analogy to grasp the concept of flow thru is to compare it to your pay cheque. Imaging I give you a $1,000 a week raise. The question then is how much will end up on your pay versus how much got eaten up by higher taxes and other deductions.
Do your hotel financial statements give you the information you need to effectively manage your hotel? Are you able to see if your profits are where they should be in an enhanced top line statement? Do your statements measure flow thru? Do you record your rooms business by proper segments and track the rooms occupied, rate and revenue in each segment?
The Empress Hotel in Victoria, British Columbia, saw massive renovation in 1988. The renovation was so big the hotel was closed for six months. One man died in the construction falling down the garbage chute and it is said that the hotel rose six inches taller as so much weight was taken out of her. I have said many times, you have not really worked in the hotel business until you have worked in a hotel that’s closed.
In most hotels, the system for forward looking for financial management is non-existent. We rely on the top line coming in and if it does we expect a certain profit picture to emerge. When revenues are good this works, sometimes. When revenues don’t materialize because of an event or something that produces headwinds in our business, we almost always fall flat on our face of the desired profitability. That’s flying-by-the-seat-of-your-pants.