Focus on these areas to control costs at your hotel

For hoteliers who want to maximize their revenues and return on investment, controlling costs are top of mind. And, fortunately, every nook and cranny of the hotel and its departments offers opportunities to do so.

“On the revenue side, you can increase your [revenue per available room] and [average daily rate] to have the best chance of producing flow-through to the bottom line,” said Gerry Chase, president and COO of New Castle Hotels & Resorts. “We spend time maximizing how to spend our money.”

Chase said there are three major areas that hoteliers can execute better in an effort to control costs: labor, direct expenses and overhead expenses.

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Labor is one of the biggest controllable expenses, according to Farrah Adams, SVP of hospitality at LBA Hospitality. For example, hoteliers can look at the time it takes housekeepers to clean stay-over rooms versus check-outs. Determine how many minutes it takes to clean each type of room, and then plan staffing accordingly to help control labor costs.

Multibranded properties also have a greater opportunity to share resources such as employees, Adams said.

“Sometimes we see shared management or a shared department head,” she said. “If you’re looking to cut costs or the market is softening, you can start sharing some of those resources.”

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Forecasting plays a huge role in controlling labor costs, Chase said. Associates can be scheduled based on an accurate forecast to better manage service expectations with the right amount of staff.

Beau Benton, president of LBA, agreed.

“You have to start out with a good model and understand what the numbers should be and hold steady to that, with a model that can flex and move with occupancy and demand,” he said. “But it’s hard to manage something if you don’t know what it should be.”

Additionally, Chase said cross-training is key as it not only helps team members grow in their careers but it also can facilitate cost control. Employees can assist in and out of shoulder and peak periods, leading to a more efficient staff with fewer people needed during slower times.

Benton agreed that cross-training can be a boon to cost-control efforts, especially when it comes to food and beverage. For example, in certain brands, a front-desk agent can be trained to make coffee or handle grab-and-go food orders. This type of cross-training can cut down on labor expenses because only one employee is needed to handle both tasks.

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Food and Beverage

Sources said that the F&B department offers many opportunities to control costs at properties, particularly when it comes to food sourcing.

“Make sure that you’re working with the least number of vendors to source all of the food and pay attention to drop sizes to make a huge difference in cost,” Adams said.

She said different food vendors have different allocations. If the F&B department is ordering once a day versus once a week, it will see some major cost differences. Each drop can incur up to $200, so the fewer, the better.

Chase said that controlling F&B costs can come by simple observation and menu audit. New Castle does menu management on a quarterly basis to keep operations in check.

“I always tell the kitchen to take a look at what goes back to the kitchen,” he said. “Are we plating properly and have the right portions for what the customer wants and needs?”

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Other Opportunities

Many other facets of the hotel provide opportunities to control costs, from real-estate taxes to energy management. A few worth noting, according to sources, include:

  • Real-estate taxes: Hiring an expert who understands market valuation changes can help save hoteliers on taxes, especially if a property hasn’t been appraised for several years.
  • Partnering with a purchasing conglomerate for national pricing on things hoteliers buy every day can save between 5 percent and 20 percent right off the top.
  • Negotiating on service costs: This can include things like finding the right waste-hauling company that offers the right-size dumpster with the right number of pickups per week.
  • Furniture, fixtures and equipment: Several brands have their own packages that allow for a lower cost than custom designs due to the volume buy. If hoteliers want to have a custom design, they need to make sure that the hotel’s market can support the cost from an ADR standpoint.
  • Insurance premiums: Don’t assume this should be an automated process. Shop around and find savings that can lead to a 10-percent to 20-percent flow to the bottom line.
  • Energy management: Turning off lights when not in use can’t be understated. Hoteliers should look to putting in efficient lighting that lasts longer and requires less labor to change out in addition to saving energy. The payback on energy-management programs usually happens within a three-year period, so they are worth the investment.
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