Anatomy of a Hotel Audit

By Steven Klein Partner, Gerson, Preston, Klien, Lips, Eisenberg & Gelber | January 06, 2019

These are challenging times for the hotel industry. Due to skyrocketing operating costs, most U.S. hotel groups have still been unable to reach operating margins commensurate with the industry peak in 2007. Consumer preferences demand upgrades in technology and room renovations, cutting into the bottom line even as rising salaries, wages, benefits and staffing levels add to labor costs.

Historically, hotel management raised room rates in order the balance the books. But new challenges on several fronts are making that approach impractical.

Non-Traditional Competition

Airbnb, the home-sharing platform going head-to-head with hotels, continues its phenomenal growth. Through 2014, hoteliers in cities such as New York, Los Angeles and San Francisco that offer significant inventories of Airbnb options saw variable profits shrink up to 3.7 percent, according to a recent report from the National Bureau of Economic Research. The greatest losses came during peak seasons in tight markets –– think Manhattan on New Year's Eve or Cambridge, Massachusetts at graduation –– when room rates soar and hotels traditionally post their highest margins.

According to the study, as of November 2016 Airbnb reported an inventory of just over 3 million listings worldwide –– nearly three times that of industry frontrunner Marriott International. Most recently, Airbnb announced a 2,500 percent growth in bookings in 2017.

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Coming up in April 2019...

Guest Service: A Culture of YES

In a recent global consumers report, 97% of the participants said that customer service is a major factor in their loyalty to a brand, and 76% said they view customer service as the true test of how much a company values them. And since there is no industry more reliant on customer satisfaction than the hotel industry, managers must be unrelenting in their determination to hire, train and empower the very best people, and to create a culture of exceptional customer service within their organization. Of course, this begins with hiring the right people. There are people who are naturally service-oriented; people who are warm, empathetic, enthusiastic, pleasant, thoughtful and optimistic; people who take pride in their ability to solve problems for the hotel guests they are serving. Then, those same employees must be empowered to solve problems using their own judgment, without having to track down a manager to do it. This is how seamless problem solving and conflict resolution are achieved in guest service. This willingness to empower employees is part of creating a Culture of Yes within an organization.  The goal is to create an environment in which everyone is striving to say “Yes”, rather than figuring out ways to say, “No”. It is essential that this attitude be instilled in all frontline, customer-facing, employees. Finally, in order to ensure that the hotel can generate a consistent level of performance across a wide variety of situations, management must also put in place well-defined systems and standards, and then educate their employees about them. Every employee must be aware of and responsible for every standard that applies in their department. The April issue of the Hotel Business Review will document what some leading hotels are doing to cultivate and manage guest satisfaction in their operations.