Are You Optimizing Your Repairs and Maintenance Dollars?

By S. Lakshmi Narasimhan Founder, Ignite Insight LLC | October 26, 2014

A spanking new hotel with glittering chandeliers, sparkling floors is a sight to behold. That is how a new hotel looks, possibly in the first three to five years of its existence with good upkeep. From the fifth year on and sometimes even earlier, the assets that form the foundation of the business begin to wear out. It is time to maintain the assets. Repairs and maintenance are one of most critical property operation and maintenance expenses that a hotel will have to provide for at this point. If a hotel's room or other product begins to look tired, it has a direct impact on revenues and profitability.

Maintaining Vs Increasing Life of Assets

Accounting principles dictate that when the life of an asset is maintained, the expenses relating to that will be considered expenses belonging to the Income Statement or Profit and Loss Statement. In short, this is expensed off. On the other hand, expenses, which increase the life of an asset or its productive capacity are considered expenditure that can be capitalized - meaning this can be treated as additions to Property and Equipment. Obviously if an asset is merely maintained, the resultant expenditure will hit the Income Statement - thereby reducing profits.

So, you could say that a long-term asset (called Property & Equipment or the more easily understood Fixed Asset) needs to be nurtured in its journey beginning with being a brand new asset through one that slowly undergoes wear and tear. This nurturing practice has come to be known in the hospitality industry as preventive maintenance. In other words, a conscious, focused strategy to incur expenditure preserving the life and capacity of the asset. This approach is particularly very meaningful for hotel assets like a chiller plant, boiler, water treatment, fire suppression equipment that undergo heavy usage day in day out.

The Warranty Honeymoon

When a new hotel opens with all its assets, each one of those assets (as long as they are categorized as Fixed Assets) come with a certificate commonly known as a warranty. The warranty is a certificate of guarantee issued by the Original Equipment Manufacturer (abbreviated in industry parlance as OEM) against any kind of material malfunction or breakdown. Warranty periods are varied depending upon the type of equipment, extent of use and so on. They generally range all the way from a minimum of one year to five or rarely ten years or more.

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Coming up in March 2019...

Human Resources: An Era of Transition

Traditionally, the human resource department administers five key areas within a hotel operation - compliance, compensation and benefits, organizational dynamics, selection and retention, and training and development. However, HR professionals are also presently involved in culture-building activities, as well as implementing new employee on-boarding practices and engagement initiatives. As a result, HR professionals have been elevated to senior leadership status, creating value and profit within their organization. Still, they continue to face some intractable issues, including a shrinking talent pool and the need to recruit top-notch employees who are empowered to provide outstanding customer service. In order to attract top-tier talent, one option is to take advantage of recruitment opportunities offered through colleges and universities, especially if they have a hospitality major. This pool of prospective employees is likely to be better educated and more enthusiastic than walk-in hires. Also, once hired, there could be additional training and development opportunities that stem from an association with a college or university. Continuing education courses, business conferences, seminars and online instruction - all can be a valuable source of employee development opportunities. In addition to meeting recruitment demands in the present, HR professionals must also be forward-thinking, anticipating the skills that will be needed in the future to meet guest expectations. One such skill that is becoming increasingly valued is “resilience”, the ability to “go with the flow” and not become overwhelmed by the disruptive influences  of change and reinvention. In an era of transition—new technologies, expanding markets, consolidation of brands and businesses, and modifications in people's values and lifestyles - the capacity to remain flexible, nimble and resilient is a valuable skill to possess. The March Hotel Business Review will examine some of the strategies that HR professionals are employing to ensure that their hotel operations continue to thrive.