Why Do Hotels Underperform?

Posted on : 29-Sep-2012


Worried about the performance of your hotel?

Every tried to analyze the causes for your hotel to perform below the market benchmarks in an otherwise well performing market?

We discuss here the possible reasons and causes that could be the culprits for your hotels under performance and your worry. It is well understood that you invested in the venture as a pure business proposition, expecting returns that are at least at par with the market, if that is not happening it is the first symptom of the presence of system malignancy. The sooner you cure or remove it the better it is for you, the hotel and its team. I have found one or many of the following reasons that may have attributed to this stage of performance.

You and Your Team

Analyze if you are the right person to lead the management or operating team. No doubt you are the owner, but do you have the knowledge or experience of operating a hotel in today’s competitive environment. Is your team qualified and experienced to support the demands of hotel operations and marketing, its guests and the market? While doing so one would be well served to keep the head and the heart at a distance and to take a very impassionate view to remove all emotional and personal biases.

There are only two possibilities, a “Yes” or a “No”, and you would know what to do in either case if you do not wish to bleed any further. ACT! Make whatever changes that the situation demands. Now here is a word of advice. Take the help from a profession consultant before you start trimming and sifting the team. While it just takes a second to fire someone, it takes tremendous amount of time and effort to find a replacement and to make him or her part of the team.

Your Product and Services

For every owner or team leader, there is no product like his. The best in the market, no one can compete with my product, we command the premium are some of the terms that one generally hears. But stop for a moment; think what the guests think about your hotel, its food, its services and its staff. Are they happy or are they coming to you as a last resort. An indication of this would be your number of walk-ins. If the walk in percentage is high, that reflects that you were the last choice or that people know that they can get a room at your place in any case. I have come across many General Managers who are very proud of the fact that they get over 50% of their occupancy through walk-ins, totally unaware of the fact that walk-ins are not stable customers. Remember that there is no substitute to sending back a happy and satisfied guest so that he becomes your spokes person, promoting you. This requires a well kept product supported by implacable quality service delivered by well trained and groomed staff. Absence of this would spell disaster for the performance of the hotel.

Your Systems

An excellent product, led by an able and result oriented leader can do nothing in the absence of a proven hotel management system in place. I have felt very sorry for owners who spend millions on the hotel project but feel shy to spend money to buy the best suited operating system for the hotel. This results in a number of things. The operations become a free for all game. Each department carves out its own operating system and style creating a total mess. You get operating results in form and style that is not comparable with the industry norms making it virtually impossible to compare the performance with that of your competitive set. In fact I have even seen month end reports that hide more than what they reveal, yet the ownership gets the report that has over fifty odd pages, instead of a simple and meaningful top sheet.

Your Goals, Targets and Budgets

A very important aspect for the hotel to underperform is the absence of targets for each operating area or having unrealistic targets. In such case, the team and leadership feel directionless. It is a fact that if one does not know what he is supposed to deliver, whatever he delivers is right. The question is if that is right for the business or the hotel? I have recently come across a case study where the General Manager did not believe in the term “Budgets” or “Business Plan”. The results, though shocking, were not surprising. A brand new hotel was bleeding month after month. I hope, wish and prey that you and your hotel follows a well planned budget system where targets are set after taking market realities.

Your Marketing

Do you have a qualified and experienced marketing and sales team? Do you have a solid and interactive online presence? Are you hooked to the popular GDS systems and does your local sales team cover the market in a way that the presence of your hotel is felt in the market? These are some important factors that one must think over to ensure that your hotel performs to the expected levels of performance and that your hotel gets a major market share and commands a leadership position in its segment in the location and city.

We have discussed a few important factors that need attention to ensure that your hotel does not underperform. It must be remembered that we are dealing with a product that is highly susceptible to fashion and trends, moods and attitudes and above all highly perishable in nature. If the leadership and the team are not reactive to the market dynamics, guest’s preferences and state of the art technology, underperformance should be staring in your face, don’t get surprised or shocked. You have asked for it!

Ram Gupta is a professional hotelier with over four decades of experience in India, Far East, Middle East and Europe. A Member of Institute of Hospitality, U.K., he is also a Certified Hotel Administrator from U.S.A. He has worked for some of the best hotel chains and was associated with over two dozen hotel projects in varying capacities. He is now an independent consultant in the Industry. His web site can be viewed at www.bcgglobal.com and can be contacted at ramgupta@bcgglobal.com


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