Conducting financial operations reviews - Part 1

Hands down - one of the best experiences I ever had in my career was being part of the team that reviewed the financial performance of the hotels in my region. The reason I enjoyed it so much, and have such great memories, is because I learned so much at each one, and not only did I learn about the business of hotels, I had a lesson in people.

The review team consisted of my boss, the hotel GM, the hotel Controller and me. In addition to the four of us, one by one the other executives or department heads would be in attendance or be called when it was their turn to review their area. The examination was a low-tech event. No PowerPoint’s and no presentations – just financial statements, eyes, notes and questions. We would typically visit each hotel 2 times per year to take a deep dive into what they were doing and how they were performing.

There was always a bit of pomp involved in our visit. We would typically arrive the evening before and we were always treated very well. A nice room or suites and a special dinner in the hotel or some new hot restaurant were the standard fair. No expense spared here. I almost think it was like they knew we were “going away” tomorrow, so they put on a big show just to deny one last time any guilt. They all knew that tomorrow the sheets were coming off and the truth would be revealed. You could feel the curious anticipation of the victims just like in the movies when you know the mobster knows he’s going to get whacked!

The day starts with breakfast in the private lounge where my boss and I cover some basics. He is a master at knowing what’s really going on in each of his hotels. He wants nothing but a path forward to improved financial results for the hotel and he knows all the tricks. We run through the year-to-date performance to budget and the prior year. Flow through is the pulse and blood pressure of the patient. We zero in on what it should be and the difference equals what’s been squandered. With our direction clear we head into the battleground so to speak, the meeting room. My job is mostly to listen and make notes. 

It’s funny how some people see things. You see we’re all friends so to speak. We know each other quite well. We have been working together for some time and it’s a small world we live in. We always start with the welcome. Sometimes we’re greeted by the core team for a hello and casual coffee. Often, we are welcomed by the whole department head squad like we’re visiting politicians or celebrities.

Occasionally they even line up as you would at a wedding to say hello. I remember one time we walked into the meeting room to be greeted by the core management team all sitting on one side of the table, their side of the table, like a military tribunal. Heads were down, books open, pens drawn. Serious business that day! What messages people send by their actions.

We always start at the beginning with rooms’ revenue. What’s going on in the market and how the hotel is performing relative to the competition, aka the STR comp set. Where is the RevPAR index YTD, and what is driving the results? Product, competition, new supply, sales team, corporate resources, regional economics, renovations, asset, service levels, weather, citywide performance, etc. It all gets laid out to paint the picture of where the hotel is, where it has been and, most importantly, where it’s going. A combination of the revenue management discipline, the sales strategy and the marketing plan get flushed out.

The director of sales lays out the strategy and the information. You can tell very quickly if he or she has their act together. There is a very small circle of key indicators of performance in this arena and you can easily see what’s working or what’s missing. The sole purpose of the review is to find ways to improve moving forward. What strategies from the sales and marketing plan are working and what’s not? What new ideas need testing and what old processes need to be deleted?

From the rooms’ revenue, we turn our attention to F&B – namely banquets. What has been the performance of the conference services area with conventions and meetings and what’s the social scene with catering and events? Banquets are the engine that runs F&B in any hotel with meeting space. Always an interesting aspect is a view of how the meeting space is managed. Group sales vs. catering. A good DOS knows when to release the space and when to hold on to it. Banquet performance is such that a hotel, when it’s busy is like a turbocharger on your car’s engine; you can feel it kicking in and propelling you further and faster.

Part 2 will be continued next week

David Lund – The hotel Financial Coach

Contact David at (415) 696-9593
Email: david@hotelfinancialcoach.com

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