Benchmarking and key business indicators (Part 1)

This thing in the title of this piece, I want to say was a fad that died already. Benchmarking and KBI’s were all the rage a decade ago and now, today, you don’t hear much at all about their usefulness or how to create them. There is a good reason they have fallen out of sight in the hospitality industry – read on to find out why.

In a former corporate life, I was the author of a quarterly exposé of benchmarking for approximately 50 different measurements for about the same number of hotels. I thought the information was revealing and it created a path forward for “continuous improvement.” In this piece I am going to explain how you can gather the information and use it to improve your hotel operating results.

Let’s first define benchmarking – according to the internet site Shopify:  

Benchmarking is a process of measuring the performance of a company’s products, services, or processes against those of another business considered to be the best in the industry, aka “best in class.” The point of benchmarking is to identify internal opportunities for improvement. By studying companies with superior performance, breaking down what makes such superior performance possible, and then comparing those processes to how your business operates, you can implement changes that will yield significant improvements. 

I think this chart by Inspirage shows the process best.

When I talk about the goal for hotels, I am referring to how we can learn from each other, the hotels in our company or brand. Which hotels perform the best on certain Key Business Indicators. From the first part of the analysis which is who is best, we can move to finding out why they’re best. Once we examine why, we should be able to flush out what the best are doing and adopt those practices at the hotels that don’t perform as well. Simple, right? Well not so fast, we have a few challenges to take into consideration and overcome in the hotel industry, even inside your own company, if we’re going to be successful with our continuous improvement project. 

Here are the obstacles to be aware of before you start.

1. We’re all a little bit different. As you probably know, no two hotels are the same. Even if they look the same and they’re the same size, once you go under the hood there is a long list of things and conditions that make them different. We need to be cognizant of these differences and take them into account for our benchmarking to be more meaningful.
2. We don’t always follow the book.The Uniformed System of Accounts for the Lodging Industry is the book I’m referring to. It tells us where to record revenues, payroll, expenses, what department and what classification. The problem is not all of us follow the book. What we need to do is ensure our hotels have, and use, a common revenue, expense and payroll dictionary for financial record recording standards. Without these firmly in place the data is useless.   
3. Buy in from the team.The process of benchmarking key business indicators requires a commitment from the top to use and adopt these uniform processes and to follow the data wherever it takes us. The culture of the company needs to be one that sits squarely in the fact that data is the way forward as it relates to getting better. Far too often we have ego and bravado trumping common sense in the hotel business.  
4. Instant gratification.Don’t expect instant results. Continuous improvement in hospitality is a game of inches. Every month, every quarter, every year we need to continue to apply the process and move in the right direction. It’s not like the weather, its more like the continental divide. Slow and steady will produce results with a significant ROI but it will take time and dedication. No easy wins here. Seldom in life do the good things come easy, remember! 
5. Make the numbers as important as the guests and the colleagues. Not more important but just as important. Use the information you produce to help guide your decisions forward to make your business better and more profitable. Look at the benchmarking and key indicators like an astronaut would use his dashboard to guide his ship into new frontiers. 
6. We think because it’s hospitality and we deal with people and creating experiences, that it’s not a real and highly mechanized business.Drop this thought immediately and remember what Peter Drucker said, “You Cannot Manage What You Can’t Measure.” We produce reams of valuable production data and we can benefit from measuring it, it’s that simple.

Used properly, benchmarking and KBI’s will allow you to find ways to continually improve your business results and inspire a whole generation of leaders who want to help you. This stuff is contagious if used properly. 

To be continued

David Lund – The Hotel Financial Coach

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