Using EFTE's - Equivalent Full Time Employees

By David Lund Hospitality & Leadership Expert, The Hotel Financial Coach | November 12, 2017

If You Can't Measure It, You Can't Improve It. Management thinker Peter Drucker is often quoted as saying that "you can't manage what you can't measure." Drucker means that you can't know whether or not you are successful unless success is defined and tracked.

In the hotel business payroll is the number one cost. STR recently reported that labor made up 50% of revenues for a sample of over 4,000 hotels of all types and sizes. This should not be even a little bit of a surprise to anyone. Many hotels are well north of the 50% mark. We have all become accustomed to serious REVPAR growth year over year which has taken the bight out of wage and expense increases. But what happens when the REVPAR bubble bursts. We all know it’s not a matter of “if” it bursts it’s when will it burst. When it does burst not only will REVPAR stop growing there is a 90% chance it’s going to go backwards. Like it always has in past cycles. When it happens, it will be devastating to many owners. Overnight your ability to drive revenues will not only stop growing, it will start to shrink. So, what can you do about this inevitability?

The most impactful move you can make in your hotel is to have both hands on the “payroll” steering wheel. I know by what I read that our industry is awestruck by the potential impact of revenue management. And, rightfully so, with the right strategy, people and technology the revman in a growing market can have a huge win. Like the man said, a full tide floats all boats. But what happens when the pressure in the pipe drops and demand evaporates. What cards do we play then?

Hopefully you don’t wait for the party to end before you plan and execute your strategy. Having an efficient and reliable way to measure payroll is critical in any business. In hotels, the impact of payroll is amplified considerably and the need to have something you can measure is the key. Without these payroll tools your lost. May I introduce the secret weapon and the star of the show? EFTE’s!

Abbreviations.com defines the acronym EFTE as “Equivalent Full Time Employee”. I know from my experience that most hotels do not use EFTE’s on their daily reporting and the use of EFTE’s on their financial statements is not prevalent. The creation and use of this powerful statistic is not difficult. All the information you need, you already have, it’s all at your fingertips. You just need to organize it and let it tell you what’s going on inside your hotel. Measuring the dollars of payroll in your hotel is very important but understanding productivity is the most powerful tool you have. Getting to understand and measure productivity leads to the comparison of like data, this is where the EFTE is so powerful, it’s like a power tool! Many industries use this statistic, and therefore it’s not unique to the hotel world.

Coming up in February 2018...

Social Media: Engagement is Key

There are currently 2.3 billion active users of social media networks and savvy hotel operators have incorporated social media into their marketing mix. There are a few Goliath channels on which one must have a presence (Facebook & Twitter) but there are also several newer upstart channels (Instagram, Snapchat &WeChat, for example) that merit consideration. With its 1.86 billion users, Facebook is a dominant platform where operators can drive brand awareness, facilitate bookings, offer incentives and collect sought-after reviews. Twitter's 284 million users generate 500 million tweets per day, and operators can use its platform for lead generation, building loyalty, and guest interaction. Instagram was originally a small photo-sharing site but it has blown up into a massive photo and video channel. The site can be used to post photos of the hotel property, as well as creating Instagram Stories - personal videos that disappear from the channel after 24 hours. In this regard, Instagram and Snapchat are now in direct competition. WeChat is a Chinese company whose aim is to be the App for Everything - instant messaging, social media, shopping and payment services - all in a single platform. In addition to these channels, blogging continues to be a popular method to establish leadership, enhance reputations, and engage with customers in a direct and personal way. The key to effective use of all social media is to find out where your customers are and then, to the fullest extent possible, engage with them on a personal level. This engagement is what creates a personal connection and sustains brand loyalty. The February Hotel Business Review will explore these issues and examine how some hotels are successfully integrating social media into their operations.