Best Practices in Hotel Financial Management

By Jed Heller President, The Providence Group | October 28, 2008

Sound financial management is at the core of any successful business. Of course, having a product or service in high demand, priced attractively for the target market, and delivered in an efficient, customer centric manner doesn't hurt either. But, even with all of the right market demographics, there is no guarantee of success. Rather, I believe you will find that the most successful hotels, like any other business, rely on fundamental financial management principles to enable them to manage their property profitably.

By following basic accounting principles, hotel owners and managers have the information they need to identify trends before they can have a negative impact on the business. They can reduce expenses, readily accommodate anticipated peak business times, and scale back operations during slow periods. Rather than relying on intuition and reacting to events, successful owners have the financial facts they need on a daily basis to proactively make the right decisions at the right time.

Staying on top of the hotel financials also provides an accurate measurement of management performance in every operational area and gives owners a mechanism to see where they stand against the competition.

The keys to financial success include an annual budget, detailed financial tracking model, ongoing audits, and reporting structure that keep profit and loss information at the manager's fingertips. Financial success is also driven by accountability, making employees and managers responsible for achieving financial goals in their respective functional area. Owners must have in place the personnel capable of dissecting the financial information and acting on it in a timely and proficient manner. Without this information, it is quite possible to have an area of deficient performance that goes unrecognized and creates a drain on profits.

Create an Annual Budget

The annual budget provides the complete financial picture of the property and contains the information needed to measure financial status at any time during the year. Based on past performance and goals for the current year, the budget captures projected expenses and anticipated revenue over a 12 month period. The budget covers every operational area: administration, property expenses, taxes, energy costs, capital equipment, telecommunications, maintenance, supplies, utilities, payroll and marketing. The budget also projects revenue based on expected occupancy and rates and estimates sales quotas for each sales person. Once figures are collected and documented, the budget will tell the story as to whether financial goals can be reached and where and how adjustments can be made to achieve profitability goals.

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Coming up in January 2019...

Mobile Technology: The Future is Now

Mobile Technology continues to advance at a relentless pace and the hotel industry continues to adapt. Hotel guests have shown a strong preference for mobile self-service - from checking-in/out at a hotel kiosk, to ordering room service, making dinner reservations, booking spa treatments, and managing laundry/dry cleaning services. And they also enjoy the convenience of paying for these services with smart phone mobile payments. In addition, some hotels have adopted a “concierge in your pocket” concept. Through a proprietary hotel app, guests can access useful information such as local entertainment venues, tourist attractions, event calendars, and medical facilities and services. In-room entertainment continues to be a key factor, as guests insist on the capacity to plug in their own mobile devices to customize their entertainment choices. Mobile technology also allows for greater marketing opportunities. For example, many hotels have adopted the use of “push notifications” - sending promotions, discounts and special event messages to guests based on their property location, purchase history, profiles, etc. Near field communication (NFC) technology is also being utilized to support applications such as opening room doors, earning loyalty points, renting a bike, accessing a rental car, and more. Finally, some hotels have adopted more futuristic technology. Robots are in use that have the ability to move between floors to deliver room service requests for all kinds of items - food, beverages, towels, toothbrushes, chargers and snacks. And infrared scanners are being used by housekeeping staff that can detect body heat within a room, alerting staff that the room is occupied and they should come back at a later time. The January Hotel Business Review will report on what some hotels are doing to maximize their opportunities in this exciting mobile technology space.