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Fully Operational

Executives Discuss Key Hotel Management Issues During BITAC® Panel

Thursday, May 02, 2019
Dennis Nessler
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Rising operating costs, renovation strategies and the increasing importance of food and beverage within hotels were among the primary topics addressed during a panel discussion that kicked off BITAC® Operations earlier this week.

The annual event took place at the Trump National Doral Miami and the opening session was entitled “Fully Operational: Assessing The Key Issues For Today’s Hoteliers.”

Jay Litt, principal, Litt Group, acknowledged operating costs are on the rise. “Margins are continuously dropping, especially in full service. It appears as though the advent of boutique hotels is very much part of the fact that the branded hotels are having a lot of trouble maintaining margins. A lot of that is due to increased franchise costs, increased PIP [property improvement plans] costs, and increased food & beverage costs at the select level. The brands are constantly raising the costs for operators to operate hotels; it’s a slippery slope,” he said.

A couple of executives pointed to labor as being a major challenge, not to mention a cost consideration.

Richard Cassara, SVP, operations, Banyan Investment Group, noted, “The most direct impact that I’ve seen from an operations perspective is that we have had at the general manager level fairly consistent turnover. We do everything we can to try and stabilize that turnover but it’s inevitable when there’s a plethora of opportunities for general managers…I would say cost of recruitment is going up as well and that’s escalating costs,” he said.

According to Chaitanya Prakash, CIO, Shashi Group, LLC, “On the labor side costs went up between 5 to 7 percent “across the board” throughout the company’s portfolio.

Meanwhile, Litt offered some perspective on how the company approaches renovations. “We will renovate when something’s broken; when something needs to be done because of the brand; or when something needs to be done because of ROI. And we always look at that ROI to see how that could effect our labor, our beverage outlets, it’s all part of the overall plan. It’s not just ‘let’s renovate,’ it’s a lot more complex than that,” he asserted.

When asked if displacement was an issue for hoteliers during a major redo, Litt commented, “We tell our owners smile, get over it and do it as quickly as possible.”

Prakash touted closing the hotels altogether when it comes to rebranding projects . “When we’re looking at assets that truly need to be transformed, for example, if it’s a DoubleTree becoming a lifestyle hotel I find it useful to just shut down the hotel. Even if it’s two or three months just so you can introduce the new asset to customers in a very different way.”

Cassara stressed that the timing of a renovation can be critical. “Seasonality is critical to consider a renovation. It plays a big part in your time line to determine when you’re going to renovate, the length of your renovation and the amount of time anticipated. You may have to get creative and do it in multiple phases versus in one single phase. One of the cautions I always have for our ownership group is leaving money on the table. If we have an ability to maximize our seasonality and custom tailor our renovation around that then that’s absolutely my guidance to ownership,” he said.

He further added, “When we’re looking at hotel renovations I think it’s very important to consider what you’re up against from a comp set perspective.”

Rory Crawford, CEO, BevSpot, an inventory tracking company, talked about the evolution of food & beverage. “Historically a lot of hotels have looked at food & beverage as a cost center. They’ve focused on the rooms and I think the consumers are increasingly looking to boutique hotels for experiences. They want the glass of wine in the lobby, so whether you’re doing a select-service Hilton Garden Inn or a smaller select-service breakfast buffet, you need to know what your loss is. What percentage of your food are you throwing out every single month? That’s a cost center. If you’re doing a higher end full-service program there are tremendous hotels that are driving lots of food & beverage profits to the bottom line,” he said.

Prakash underscored the importance of food & beverage going forward, particularly as technology allows guests to go directly to their rooms. “We think food & beverage certainly does play an important role today but it will play an increasingly more important role. It’s the key touch point in the future and that’s certainly the case for lifestyle hotels,” he commented.

The executives were asked what they see as top operational priorities for hoteliers going forward.

“From an operations perspective it would be recruitment marketing. I know that’s a simple term, but shifting gears from just standardized conventional recruiting that most people are used to and really marketing those capacities and positions you’re trying to recruit for. Broaden your search scope, make sure that you’re reaching those people that you’re trying to recruit where they are and use social media and different channels,” said Cassara.

Prakash amplified the point. “Recruitment and training I think are huge to get the right people in the door hopefully. Using training as a tool to provide resources to get everybody to do their job makes for a much happier employee workforce. If you keep employees happy they will keep your guests happy. If that’s not going to happen then good luck,” he noted.

Crawford commented, “I think finding ways to align core operations with data collection and analysis is key. What the staff is doing every single day to make sure that the property is running and utilizing those cooperational tasks to collect key data on guest interactions and leveraging that data to improve operational efficiencies.”

Litt noted, “I believe in a max occupancy approach to hospitality. I find 65 percent as the average occupancy in U.S. unbelievable. That means 35 percent of amortized costs to own a hotel are not being met, so I try to get our hotels to focus on dates rather than rates. More importantly never leave a bed empty. As an owner I understand how much it costs not to rent a room and if you have that type of mentality you’ll make money,” he concluded.
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Dennis Nessler    Dennis Nessler
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