How hotels can profit from economies of scale

Economies of scale matter more than ever, yet much of the hospitality industry has been built on personal relationships, strategic partnerships, high-touch customer service and local market culture and focus.

Hotel owners and developers can have it all by investing in people, partnerships, technology and large-scale purchasing efficiencies that allow dedicated teams to remain high touch and focus resources where they’re needed most.

Employing Resources with Intention

Your hotel management team’s human capital should be deployed effectively to serve each area’s geography, culture and owner/employee relationships.

Work with professionals who can address unique area market challenges—including how to effectively navigate labor, wage and employment laws—in major markets such as Canada and California. Teams need to be deployed in each market, in that time zone and in those properties, to support and drive performance at the unit level.

Making the Right Infrastructure Improvements

As a hotel portfolio grows, so should its support team’s infrastructure, by taking advantage of technology that is intuitive and easy to access.

Updated human resources information systems can maintain, manage and process detailed employee information and human resources policies and procedures and provide real time analytics that help drive efficiencies. A comprehensive HRIS can now collect and store payroll and benefits data for every employee, keep track of full-time versus part-time workers, overtime compliance and give everyone access to their benefits information.

A robust automated technology backbone, which is scalable as business grows, should include learning and performance management in addition to payroll and taxes. Employees appreciate being able to access everything in an app, where they can easily change tax allocations or enroll in a 401k on their smart phone.

Adapting Technology to Complement What Works

Keep the legacy systems that work well and adapt new technology platforms and solutions to improve access and functionality.

  • A legacy, hotel-specific, accounting system should be able to streamline accounting functions across an enterprise while maintaining valuable historical data. 
  • A scalable, hospitality friendly accounting platform will give hotel owners, management teams and general managers precise snapshots of performance across multiple properties that help improve efficiency and drive financial improvements. 
  • Work with teams that help develop vendor technology to address issues at corporate and field levels.
  • A thoughtful business intelligence tool collects and aggregates all of a company’s data and information across disciplines to help field teams make real-time decisions and pivot to improve efficiencies, increase performance and drive better results for owners.

The Right Strategy for Each Owner and Market

While up-to-date infrastructure and technology platforms are important, only the strongest strategic entities will continue to thrive in an industry where hotel management companies have been consolidating at a record pace. While this trend began before COVID, it has accelerated considerably in the last two years.

It’s all about people and economics—having the ability, through purchasing and buying power, to drive efficiency and improve profit margin.

At the core, however, you can’t forget the importance of putting people first. Intuitive teams remain high touch and nimble, have a strong, well-defined culture, respect family time and limit bureaucracy. Being nimble allows you to be quick to market, respond to owner needs and meet or exceed deadlines.

To differentiate your hotel, you have to work with a team that knows your brand, your market and your culture. The requirements for running a branded hotel can be rigorous. If something doesn’t make sense in a market, working with a team that has a seat at the table on franchise advisory councils and owner architect contractor meetings—and can introduce new initiatives to vet and pilot─is invaluable.

Structure Business Opportunities for Today’s Employees

During the pandemic, about one third of the hospitality workforce left. Less than 10 percent came back. Yet business came roaring back at an accelerated pace.

With a new generation entering the workforce, it’s essential to track and meet, the expectations of today’s employees. It’s all changing─how employees apply for jobs, how they quit and their long- and short-term goals.

Attracting the right talent and keeping turnover low with a culture that supports employee needs, requires agility and a willingness to try new things.

  • More brands are now using mobile apps that facilitate electronic tipping and daily pay for employees who wish to be paid at the end of their shift. Forward-thinking organizations have been doing this for years.
  • Invest in training. Make it easy for hourly employees to explore opportunities with self-guided online education programs. 
  • A management training program that recruits from colleges with hospitality programs gives top candidates real-life multidisciplinary experience so they can enter the workforce in a salaried position upon graduation. 
  • Developing multi-unit leaders, who are responsible for aligning all units around a brand's high-level vision, is especially critical. 
  • Targeted general manager and director of sales training programs open career paths for motivated employees.
  • Consider a sabbatical program that provides rest and relaxation for tenured general managers and exempt corporate associates in addition to paid time off.

Filling key positions requires paying attention to local markets. If you don’t focus on what you need on your street corner, you will lose the fight. Austin, Texas, is different from Boise, Idaho, and what works at an enterprise level won’t work everywhere. Having a thoughtful, intentional plan around onboarding, retention and succession planning at the unit level is crucial to remain competitive.

Culture is Key

The bottom line: it’s all about culture. Who do you want to work with? Who will best help you achieve your goals?

You can be both big and intimate. Look for partners and platforms that can grow with you while paying attention to the details that matter to you and your property. When you have that: conundrum solved.

Bryan DeCort is chief operating officer for Hotel Equities.