Top 10 list for controlling labor costs
Managing labor costs is a never-ending battle in any hotel. No wonder it adds up to on average 50 percent of the total revenue in hotels around the world. To say labor cost is important is an understatement so in this piece, I will highlight the key controls and features to make sure you are on the right track with this all-important aspect of hospitality.
Use the list to come up with new action plans to tackle labor costs in your operation and bonne chance!
Number 10 – Updated Daily Occupancy Forecast
If the people in the departments inside your hotel do not have an up-to-date and accurate forecast for rooms occupied, arrivals and departures, you are missing an important feature. Even if the report they have is a “day old” you are behind and flying with one eye shut. Always make sure your team leaders have and use the latest forecast and where possible adjust the schedules daily.
Number 9 – Labor Reporting Daily and MTD
The famous economist Mr. Peter Drucker coined the phrase, “You can’t manage what you can’t measure.” Pretty simple and straightforward thinking, aka, we must measure the results if we want to get better. On top of that let’s throw the following – Monson’s Law – “When performance is measured, performance improves. When performance is measured and reported back, the rate of improvement accelerates.” – Thomas S. Monson. So, there you have it. We must include daily and month-to-date reporting on efforts to manage labor cost.
Number 8 – Quarterly Review of All Schedules
There are no new tricks, just people who practice them. An old boss of mine taught me this one. Each quarter we would have a special meeting where each manager had to present their department’s schedules to him and the rest of the leadership team. We never left that room without serious savings. The way he looked at it was simple; labor creep is everywhere and the best way to stop it is “peer review.”
Number 7 – Include It in Your Financials
Include the labor cost and fully report the payroll numbers as well as the statistics in your monthly financial statements, budgets and forecasts. Closely linked to No. 9 this pro practice is so important that I wrote two full articles on how to do this for rooms, and food and beverage.
Number 6 – Budget and Forecast It
To really bring the entire payroll piece into play in your hotel plan your entire financial picture using all the available tools in your annual budgets and monthly forecast in detail. If you leave it out or even part of it, you are not fully embracing the spirit or the importance of fully and effectively managing this beast. Don’t be a sissy and only go halfway. Fully report wages, supplemental and benefits, also be sure to include the stats for EFTEs and productivity. Once you have it all together you will wonder how you ever existed without it.
To be continued next week
David Lund – The Hotel Financial Coach Contact David at (415) 696-9593
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