Do Your Hotel Financial Statements Pass the Test? Part 2

By David Lund Hospitality & Leadership Expert, The Hotel Financial Coach | April 30, 2017

Do your hotel financial statements give you the information you need to effectively manage your hotel? Are you able to see if your profits are where they should be in an enhanced top line statement? Do your statements measure flow thru? Do you record your rooms business by proper segments and track the rooms occupied, rate and revenue in each segment? Do you record customers served in F&B and do you separate meal periods? Do you record liquor, beer, wine and mineral sales on your financials separately? Do you measure labor productivity in your financials? Do you record hours of work in your financials? Do you have payroll segmented by management and hourly classifications? Do you have a separate supplemental payroll and benefits statement? Do you track arrivals and departures?

Most statements I see do not have most of these critical elements included. They're lacking these incredibly effective items that can easily be added. Most people use the standard format as outlined in the 11th addition of the uniformed system of accounts for the lodging industry. This is great however you can produce an enhanced statement with just a little more detail added that will greatly assist you in effectively managing your hotel.

How Would These Elements add Insight and Value to your Business?

In part one we covered the Top Line Statement format, Flow Thru, Rooms Segmentation, F&B Customers and Average Checks by Meal Period. If you missed part one check out my website and blog post from February 27th, 2017, to get the article.
Measuring Productivity on Your Financial Statements.

The only truly effective way to measure labor productivity in the hotel business is by expressing the productivity in hours per room occupied in the rooms division, hours per cover served in the F&B division and EFTE's per 100 rooms available in the non-operating departments. In this article, we will concentrate on Rooms and F&B productivity. The reason why hours per is the best way to measure productivity is we divide actual hours worked by the actual volume of business, units sold. Others may say that measuring labor percentage, or dollars of labor per unit sold are effective but the fact is our managers and leaders have no control over wage rates, but they do have control over hours worked, the schedule, and this is what we want them to focus on. Being able to see the hours worked and the number of rooms or covers served in our financial statements means we need to record and book these statistics monthly in a statistical journal entry. We accomplish this by adding a "stats" department to our chart of accounts and the statistical entry and department net to a big fat zero each month.

The beauty of knowing the hours per room occupied is powerful stuff. If we were making cars we would want to know how many hours of work it takes to make a car. We would then want to innovate and find ways to reduce this. In the hotel, it's the same. We split off the rooms and F&B because they are very different. In the hotel business, we want to know how many hours it takes to service one room or one cover. We then want to innovate to see if our malmanagement practices are actually producing better or worse results and adjust accordingly. The only way to do this is with hours per calculations.

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Coming up in February 2019...

Social Media: Getting Personal

There Social media platforms have revolutionized the hotel industry. Popular sites such as Facebook, Twitter, Pinterest, Instagram, Snapchat, YouTube and Tumblr now account for 2.3 billion active users, and this phenomenon has forever transformed how businesses interact with consumers. Given that social media allows for two-way communication between businesses and consumers, the emphasis of any marketing strategy must be to positively and personally engage the customer, and there are innumerable ways to accomplish that goal. One popular strategy is to encourage hotel guests to create their own personal content - typically videos and photos -which can be shared via their personal social media networks, reaching a sizeable audience. In addition, geo-locational tags and brand hashtags can be embedded in such posts which allow them to be found via metadata searches, substantially enlarging their scope. Influencer marketing is another prevalent social media strategy. Some hotels are paying popular social media stars and bloggers to endorse their brand on social media platforms. These kinds of endorsements generally elicit a strong response because the influencers are perceived as being trustworthy by their followers, and because an influencer's followers are likely to share similar psychographic and demographic traits. Travel review sites have also become vitally important in reputation management. Travelers consistently use social media to express pleasure or frustration about their guest experiences, so it is essential that every review be attended to personally. Assuming the responsibility to address and correct customer service concerns quickly is a way to mitigate complaints and to build brand loyalty. Plus, whether reviews are favorable or unfavorable, they are a vital source of information to managers about a hotel's operational performance.  The February Hotel Business Review will document what some hotels are doing to effectively incorporate social media strategies into their businesses.