Why financial acumen is so important to your hospitality career
It is common sense to know: With more knowledge and skills your career prospects and advancement possibilities are enhanced. In hospitality it is not quite as well understood.
There exists a counter culture to growing up, to raising one’s self out of the guest - and colleague - only world into the financial arena. I know and have met many people who camp out in hospitality for this very reason. The idea that they will not have to deal with numbers and the black and white is part of our culture. In this piece I am going to examine why this exists and what you can do to rise up!
The hotel world has changed tremendously in the past 20-30 years. I have been at it for 35-plus years and the most profound change I see is movement away from the owner/operator model to one where most hotel companies become management companies. In simple terms this means the name on the door 30 years ago was the owner of the bricks and mortar. Today the name on the door 19 times out of 20 simply means the brand has a management or franchise agreement with the hotel owner or owners. What this translates to—as far as how the hotel is run— is where we have all seen and felt the changes.
The old model had a much kinder and gentler approach to fostering a culture of inclusion, family, longevity and a strong service culture. I distinctly remember my first stint in a “managed hotel” inside my company. People had warned me that it was different and they were right. The owned hotels had a clear sense of togetherness and you knew what was important. I literally grew up with this slogan in my DNA, “Look after the guests and the money looks after itself.” Leaving the safety of the owned nest I learned a few new things.
The owner needed a certain return each quarter to meet his debt and investor obligations. Back home this was never a topic of discussion. It seemed head office was always grumpy about the results but never spoke of external obligations. These owner obligations had a profound effect on how we operated, especially the first year I was at the managed hotel.
Things were not going well
We missed the first two quarters and immediate action ensued. Staffing and expense reviews had a focus like I had never seen before on department managers being accountable for their monthly forecasts and the results. We scheduled F&B outlet days and hours using occupancy by transient and groups to determine demand. We designed and implemented a staffing guide of all scheduled positions. Each manager was accountable for his schedule based on the approved formula. No more looking after our colleagues in the low occupancy periods. This was a luxury we could not afford. We tore apart the food cost and especially the buffet offerings, and designed menus that reflected business levels. Back at the ranch there was never a focus like this.
In all, my experience with my first managed hotel was very positive. As luck would have it, business really picked up after my second quarter there and for the next two years our team enjoyed great results. Our owner’s rep (today’s version of an asset manager) was happy and more than willing to invest. This was another point of sharp contrast to the old homestead reality. At the owned hotels money came for capital on a regular train regardless of the results. In the new world we saw the intent and the desire for the investment as a clear link to our ability to generate a return.
So how does this relate to you and your financial acumen—which in my book means your hospitality financial leadership skills? Simple, you are in a business that now needs you to operate like a business person. Just like my story of going from the safety of the owned nest, your career will be greatly enhanced by getting your financial leadership game on. Perhaps you just made a move to a new position or hotel and the demands and expectations are a little different.
Don’t turn from that light, do the opposite: Run straight at it!
Maybe your new role is a little scary with a sharper focus on profit performance and not as much on guest service scores and colleague engagement results. Do not worry - that is par for the course today. Owners need to make their numbers. You job now is to deliver. Your tools are the same as mine were. Get to know your costs, zero base your expense. By the way, what this means is every line of your expense section is supported by an itemized list of what is in your budget and forecast. For your payroll you have a staffing guide and formula that works on a productivity basis.
Once these tools are in place your job is to make sure the other managers and leaders in your business all understand and use them. Now comes the sauce on this dish and it is the new understanding and your ability to grasp and articulate the owner’s business strategies and goals.
David Lund – The Hotel Financial Coach
Email: david@hotelfinancialcoach.com
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