Prioritizing Profitability

The ongoing labor shortage, continued wage growth for line-level employees and supply chain bottlenecks were cited as some of the top challenges for today’s hoteliers by a pair of management company executives during a panel discussion last month at BITAC Operations Live 2021.

The panel, entitled “Prioritizing Profitability: Hoteliers Seek Solutions That Demonstrate Proven ROI Returns,” was moderated by Paul Bennie, director, business development, ProfitSword.

Matthew Adams, COO, Santa Monica, CA-based Windsor Hospitality, LLC, framed the discussion in terms of the new normal from an operating standpoint.

“What we’re looking at is we set up a path that says ‘okay, we know we have a reset that’s happening right now in the industry and how do we want to operate post-pandemic?’ That is what we’re focused in on,” he said.

Warren Cruz, CFO, San Francisco, CA-based Sightline Hospitality, emphasized the need to prioritize. “Every company has their own problems. I think you have to focus on what your problem is or what your biggest pain point is. That’s what you try and fix first,” he said.

Cruz elaborated on how to approach some of the key issues.

“I think creativity is important…we’re faced with new problems and we need to come up with different solutions for it. When it comes to labor, do we have to take a page out of Airbnb and say that we’ll only clean the rooms upon check out? Do we do the keypad entry where people don’t actually check in, they just go straight to their room? It’s things like that that we have to really to take a look at. So we’re focusing on being creative as to how to we can address the issues that are on hand,” he said.

Bennie, meanwhile, asked the panelists to discuss some of those issues specifically.

“The supply chain disruption I don’t think any of us saw coming, meaning not just the lack of supplies but also now the new cost disruptions on getting the product. This is just something that we can’t control, but it’s obviously necessary to operate our businesses,” said Adams.

He also highlighted “the labor shortage that many of us saw in the beginning of the pandemic and the wage compression that has now escalated,” as key priorities.

Cruz reinforced the point.

“The labor shortage is driving up. We had to blanket increase everybody’s hourly rates by 5 bucks just to be competitive,” he said.

Cruz further elaborated on inflation and operating cost increases and their potential impact on profitability.

“The forecast for the CPI index increase for ‘22 is 2.9 percent. How could that be when this year already there’s no way it’s only going to increase by 2.9 percent? It’s a small margin industry and if you continue to jack everything up by 6 percent it just continues to erode the profits,” he said.

Finally, the panelists were asked by Bennie what they were looking for from their vendor partners in terms of finding the right solutions. Cruz, for his part, touted the importance of “flexibility” for suppliers.

“One of our problems when I started at Sightline is being from two different companies we had two of everything. If we are to implement technology solutions for all of it we’re doing one right after the other or two at the same time and with the labor shortage nobody has the bandwidth for it. If the vendors say, for example, ‘you can buy this product and you need to spend ‘x’ time in the beginning to set it up to make it work.’ If there’s an option for us for the same vendor to say ‘I know you don’t have time but if you’re willing to spend ‘X’ dollar amount extra we’ll do the setup for you,’ I think that would be helpful,” he said.

Adams provided his own advice for suppliers.

“It’s about being able to articulate how this is going to improve the organization and the company’s ability to operate; that has to be clear. Everyone should be using this is a reset point both from a vendor and operator standpoint to say ‘okay, how can we improve our business model?’ How can we become more efficient, more productive? We all should be gearing towards that goal. If both the vendors and owners can align that’s the best solution and it’s a win/win for everybody,” he said.

Credit

Dennis Nessler

Editor-in-Chief

Dennis Nessler is Editor-in-Chief of Hotel Interactive, parent company of Hotel Community Forum. Nessler brings more than 28 years of editorial experience to his position, including some 17 years in the hospitality industry. As part of his duties, Nessler not only covers the industry editorially but moderates various high-level panel sessions at hospitality events and frequently conducts one-on-one interviews with C-level executives.