Seven Pointers for Hotel Owners
There is a lot of discussion about a conflict between Hotel owners & Hotel operators or the General Mangers who are the face of operating company
I sincerely feel if owners focus on seven micro aspects of hotel business then the focus will shift from evaluating efficiency of operations from the conflict
► Revenue Numbers
Compare revenue numbers for accommodation as well as food business in detail with previous month/ Same month previous year /Budget to understand where the business is heading check movement of Average Room Revenue with Rev (Par) approach
► Corporate Business
Retaining corporate business is mandatory for sustenance of business hence need to check about loss in corporate accounts 60 % of C V G R business will be deemed as healthy sales mix
► Online Travel Agents
Yield & Volumes from OTA needs to be compared with competition/Budgets/Previous months / Last year same month
► Food & Beverage Business
Quick look at movement of average per cover (yield) No Of Covers (Volumes) of Budgets/Previous months / Last year same month will revel the direction in which business is moving
► Power & Fuel Consumption
No Of Units consumed per occupied room is a parameter which needs to be compared Previous months / Last year same month.
Similarly diesel consumption per operating hour of generator set & boiler comparison needs to be viewed
► Payroll & Manpower Costs
Payroll burden needs to be monitored with head count per room with relevant market conditions & business model
► Gross Operating Profit
Compare with budgeted % of sales check if any out of budget expenses have reduced the %
In Uniform System of accounts which is practiced in hotel accounting there is separate monthly profitability drawn for Rooms Division/ Food & Beverage Division & Undistributed Expenses (Administrative Expenses) are as per budgeted commitment to ensure that critical operating expenses like Food cost in F & B & Guest supplies cost in rooms is in sync with budgeted commitment
I am sure if owners give half an hour in month to review these reports there will be more focus on critical & qualitative aspect of business than anything else
Stand-alone restaurants should be based on a carefully designed viable revenue model. Lately, there has been a tendency among the investing community to get carried away with the exterior and glamour of this business and venture into it. A look into the following aspects of the business will help decision makers tailor a perfect model for the business.
► Investment Philosophy
Investment in this business is deployed only for part of its time (it's time we think like an industry and then compare it with capacity utilisation). Typically a fine dining restaurant operates for three to four hours in the noon and four to five hours in the evening. The occupancy levels are high during weekends and lean during the weekdays. Therefore there is all the more need for low cost funding as the payback period is longer.
► Capital budgeting
Right from kitchen equipments to interiors, a more pragmatic approach should be taken while finalising each and every item. A right balance of aesthetics versus viability should be drawn. There should be fair allocation of resources between food production and food service. There is a general tendency of spending irrational amounts on décor and art effects at the cost of an essential gadget in the kitchen or computing equipment.
► Revenue budgeting
Revenue budgets should be drawn on a very realistic estimation of market forces and the strengths of your own venture. A very hard and practical look should precede estimating business levels because this will lead to right sizing the venture in terms of manpower, inventory and working capital. The tendency to get emotional and overestimate revenue levels should be avoided as this will lead to downsizing later which obviously affects the motivational levels in the organisation.
► Choosing a like-minded team to execute project
Emphasis should be on a lean organisation structure.The majority of team members should consist of hands-on types. Team members should be motivated to acquire multi-tasking skills; in fact this should be indicated at the time of hiring.
► Identifying strengths while selecting cuisine, theme
This is at the core of the know-how area following the flow of investment in the fine dining market.It is the attractive concept and cuisine, which will hold the edge over competition.This is really a challenge for all professionals in the industry, as one cannot survive merely on legacy. Each venture will require separate case study and blind replication of one success formula in to other location may not succeed but run into disaster.
► Layout and facilities planning
Layout should be work friendly.It is the attractive concept and cuisine, which will hold the edge over competition. It is better to draw a flow chart of material movement and human movement before freezing the locations of kitchen equipment, sideboards, bar counters, cashier's counters, washing area and receiving area.
Manpower Planning
► Kitchen
Food production is the backbone of this business; hence a champion in culinary art should be hired. It is important to note that people hone the culinary art by practicing it for a number of years. Typically these people lack flair but are outstanding in their core skills. Generally these people help to keep organisation structure flat as they themselves are in the forefront of food production.
► Food service
There are standards which drive the manpower in the service area but logistics like location of kitchen, food service area, side boards etc should be studied before freezing on the plan.
► Back Office, ie administration, accounts, marketing
It is very peculiar that a restaurant is a small business but it attracts almost all statutory compliances of bigger hotels, hence hire a person with multi-tasking skills who can comply with the requirements of accounts, time office and administration.
► Marketing strategy
With growing competition one has to strike a balance between frequent visibility in the market place and a shoe string budget that can be realistically allocated. It is very important to identify the target market and then focus because the decision maker is constantly lured by all media to advertise. Smart bargains should be done with sponsors to reduce advertising and promotions expenses. Customer relations management is the buzzword and should be philosophically embedded among the food service staff. Help of software packages to manage customer relations will definitely give returns in the longer run.
► Materials management and cost control
Generally, annual rate contracts are preferred in order to be insulated from seasonal fluctuations. Market pulses should however be watched to take advantage of seasonal drops. Standards should be drawn and compared with actual costs. Please note that standards are broad guidelines and a practical view should be taken while analysing the variances.
► Financial management
The cash flow should be based on the estimates of revenue and the disbursements should be done after a judicious allocation of priorities. Statutory payments, electricity and water bills should be paid on due dates to avoid any penalties and punitive charges which will eat up bottom lines. Salaries should be paid on a stipulated date to keep the staff's morale high. As a matter of discipline, a profit and loss account should be prepared and reviewed within four to five days from the closure of the month and compared with the budget to check that the business is on a right path.
► Investor feedback or management information system
To keep the operations transparent, a summary of sales with number of covers, average per cover, food cost percentage etc should be drawn on a daily basis. This information also becomes valuable database to establish trends in future. It is important to note that with growing computerisation not much effort is required to collect the information but it must be the top management's concern to develop a culture of generating it on a daily basis.
There is a lot of discussion about a conflict between Hotel owners & Hotel operators or the General Mangers who are the face of operating company
I sincerely feel if owners focus on seven micro aspects of hotel business then the focus will shift from evaluating efficiency of operations from the conflict
► Revenue Numbers
Compare revenue numbers for accommodation as well as food business in detail with previous month/ Same month previous year /Budget to understand where the business is heading check movement of Average Room Revenue with Rev (Par) approach
► Corporate Business
Retaining corporate business is mandatory for sustenance of business hence need to check about loss in corporate accounts 60 % of C V G R business will be deemed as healthy sales mix
► Online Travel Agents
Yield & Volumes from OTA needs to be compared with competition/Budgets/Previous months / Last year same month
► Food & Beverage Business
Quick look at movement of average per cover (yield) No Of Covers (Volumes) of Budgets/Previous months / Last year same month will revel the direction in which business is moving
► Power & Fuel Consumption
No Of Units consumed per occupied room is a parameter which needs to be compared Previous months / Last year same month.
Similarly diesel consumption per operating hour of generator set & boiler comparison needs to be viewed
► Payroll & Manpower Costs
Payroll burden needs to be monitored with head count per room with relevant market conditions & business model
► Gross Operating Profit
Compare with budgeted % of sales check if any out of budget expenses have reduced the %
In Uniform System of accounts which is practiced in hotel accounting there is separate monthly profitability drawn for Rooms Division/ Food & Beverage Division & Undistributed Expenses (Administrative Expenses) are as per budgeted commitment to ensure that critical operating expenses like Food cost in F & B & Guest supplies cost in rooms is in sync with budgeted commitment
I am sure if owners give half an hour in month to review these reports there will be more focus on critical & qualitative aspect of business than anything else
Articles - Dynamics Of Stand-Alone Fine Dining Restaurants (Express
Hotelier & Caterer Issue Dated 24th March, 2003)
A fine dining stand-alone restaurant can be defined as a leisure dining facility
catering to a fairly niche market within its vicinity but which lacks support of
brand equity and know-how from any chain or institution.Stand-alone restaurants should be based on a carefully designed viable revenue model. Lately, there has been a tendency among the investing community to get carried away with the exterior and glamour of this business and venture into it. A look into the following aspects of the business will help decision makers tailor a perfect model for the business.
► Investment Philosophy
Investment in this business is deployed only for part of its time (it's time we think like an industry and then compare it with capacity utilisation). Typically a fine dining restaurant operates for three to four hours in the noon and four to five hours in the evening. The occupancy levels are high during weekends and lean during the weekdays. Therefore there is all the more need for low cost funding as the payback period is longer.
► Capital budgeting
Right from kitchen equipments to interiors, a more pragmatic approach should be taken while finalising each and every item. A right balance of aesthetics versus viability should be drawn. There should be fair allocation of resources between food production and food service. There is a general tendency of spending irrational amounts on décor and art effects at the cost of an essential gadget in the kitchen or computing equipment.
► Revenue budgeting
Revenue budgets should be drawn on a very realistic estimation of market forces and the strengths of your own venture. A very hard and practical look should precede estimating business levels because this will lead to right sizing the venture in terms of manpower, inventory and working capital. The tendency to get emotional and overestimate revenue levels should be avoided as this will lead to downsizing later which obviously affects the motivational levels in the organisation.
► Choosing a like-minded team to execute project
Emphasis should be on a lean organisation structure.The majority of team members should consist of hands-on types. Team members should be motivated to acquire multi-tasking skills; in fact this should be indicated at the time of hiring.
► Identifying strengths while selecting cuisine, theme
This is at the core of the know-how area following the flow of investment in the fine dining market.It is the attractive concept and cuisine, which will hold the edge over competition.This is really a challenge for all professionals in the industry, as one cannot survive merely on legacy. Each venture will require separate case study and blind replication of one success formula in to other location may not succeed but run into disaster.
► Layout and facilities planning
Layout should be work friendly.It is the attractive concept and cuisine, which will hold the edge over competition. It is better to draw a flow chart of material movement and human movement before freezing the locations of kitchen equipment, sideboards, bar counters, cashier's counters, washing area and receiving area.
Manpower Planning
► Kitchen
Food production is the backbone of this business; hence a champion in culinary art should be hired. It is important to note that people hone the culinary art by practicing it for a number of years. Typically these people lack flair but are outstanding in their core skills. Generally these people help to keep organisation structure flat as they themselves are in the forefront of food production.
► Food service
There are standards which drive the manpower in the service area but logistics like location of kitchen, food service area, side boards etc should be studied before freezing on the plan.
► Back Office, ie administration, accounts, marketing
It is very peculiar that a restaurant is a small business but it attracts almost all statutory compliances of bigger hotels, hence hire a person with multi-tasking skills who can comply with the requirements of accounts, time office and administration.
► Marketing strategy
With growing competition one has to strike a balance between frequent visibility in the market place and a shoe string budget that can be realistically allocated. It is very important to identify the target market and then focus because the decision maker is constantly lured by all media to advertise. Smart bargains should be done with sponsors to reduce advertising and promotions expenses. Customer relations management is the buzzword and should be philosophically embedded among the food service staff. Help of software packages to manage customer relations will definitely give returns in the longer run.
► Materials management and cost control
Generally, annual rate contracts are preferred in order to be insulated from seasonal fluctuations. Market pulses should however be watched to take advantage of seasonal drops. Standards should be drawn and compared with actual costs. Please note that standards are broad guidelines and a practical view should be taken while analysing the variances.
► Financial management
The cash flow should be based on the estimates of revenue and the disbursements should be done after a judicious allocation of priorities. Statutory payments, electricity and water bills should be paid on due dates to avoid any penalties and punitive charges which will eat up bottom lines. Salaries should be paid on a stipulated date to keep the staff's morale high. As a matter of discipline, a profit and loss account should be prepared and reviewed within four to five days from the closure of the month and compared with the budget to check that the business is on a right path.
► Investor feedback or management information system
To keep the operations transparent, a summary of sales with number of covers, average per cover, food cost percentage etc should be drawn on a daily basis. This information also becomes valuable database to establish trends in future. It is important to note that with growing computerisation not much effort is required to collect the information but it must be the top management's concern to develop a culture of generating it on a daily basis.
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