How can I most effectively use hotel performance information?

26 October 2006
How can I most effectively use hotel performance information?
There are a lot of benchmarking vehicles out there to measure hotel performance. As an operator of a small chain, how can I most effectively use the information available to me?

James Chappell, The Bench

In order to increase market share, operators need to know what their share of the market is, at least on a midweek: weekend split. Every day is a new market and all hotels from B&Bs upwards experience a marked difference between their midweek and weekend business and need to price accordingly, something that monthly benchmarking models cannot address.

We believe the most successful way for any operator to manage this is by glancing at the future, concentrating on today and having a deep understanding of the local market and their position
within it.

To glance at the future, operators should use a forecasting or rate-shopping tool of some description, combined with their own experience of trends and booking patterns. Because these systems can show only "public" rates they can be misleading, and operators need the immediate feedback on the whole market given by daily benchmarking to highlight whether their strategy is correct or needs adjustment.

This information can also help to create appropriate models for short- and mid-term planning by mapping monthly seasonality and highlighting recurring high-demand events.

Lastly, to make sure the hotel is achieving and maintaining profitability, operators should participate in an annual profit-and-loss benchmarking survey that will allow them to compare costs against similar hotels. We recommend the following:

• Forecasting: TravelClick or Rate Tiger.

• Daily benchmarking: The Bench.

• Annual profit-and-loss benchmarking: PKF Annual Survey or TRI Hospitality's P&L.

Michael Kirk, Managing Director, HCLuk

There are many options, but not all of them may fit what's best for your business, depending on where you're trying to improve yield and profitability.

Don't settle for one source of information. Gather as much data as possible. Take time to make comparisons between different sources, whether it's an online service or monthly report.

Pick sources that talk about the top line as well as profitability. Be careful not to simply benchmark yourself against hotels in your area or star rating. Just because a hotel is not in your postcode or city doesn't mean they're not comparable. Do they have large conference and banqueting facilities or just a few syndicate rooms? Do they have an extensive health club with a large private membership or just a basement exercise room?

If you're the only five-star de luxe hotel in your city, look further afield. Don't just click on a list of hotels or read the pages in a report that talks about your star rating. Pick true competitors to benchmark against.

Don't benchmark only the biggest revenue centre, which for most hotels is bedrooms. The market is saturated with tools analysing room rates, average daily rate, revenue per available room, gross operating profit per available room and occupancy. But this isn't the whole story. If meetings and events or F&B make up, say, 15% of your total revenue, you should compare how those departments are performing against their industry counterparts.

If your hotel's main restaurant is regularly achieving £5 less food revenue per cover than your direct competitors, it's a good idea to understand why.

Mark Dickens, TRI Hospitality Consulting

There are a lot of benchmarking vehicles available, and some even promise to cure all your ailments at a stroke. They provide information or offer decision-making support in numerous areas, such as staffing, energy, menu productivity, customer satisfaction and channel management.

Some even claim to benchmark what your competitors did last night in terms of room rates and utilisation - pretty impressive stuff, but not if your immediate need is to work out that your chef has built a second business on your purchase ledger - and isn't including you in the profit share.

Your concern is straightforward - am I maximising my profit? You know your own performance intimately, but that's simply not enough. You should compare all aspects of your operation to your competitors to find the answer, not just individual components such as rooms revenue or energy costs. Identify where you underperform and where you excel. Evolve plans to improve where you're behind and take full advantage where you're ahead. Ignore those aspects that offer limited opportunity.

First, you should adopt profit-and-loss benchmarking such as TRI's HotStats. This is a technique that benchmarks all of your operated department revenues and costs and your overheads against your competitors. It's a great way to signpost your revenue or cost opportunities because it gives you the whole picture. You can then identify your biggest weaknesses and strengths and decide which other types of benchmarking will address these issues. We believe this is the soundest overall approach to maximising your profitability.

• Benefit from the latest thinking on Managing Capacity for Profit at the British Association of Hospitality Accountants Conference and Technology Exhibition on 2 and 3 November at the Radisson Edwardian Hotel, Heathrow. To book, call Jane Scott on 01202 889430

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