HDC: Budgeting around challenges in the industry
HDC: Budgeting around challenges in the industry
19 SEPTEMBER 2016 8:49 AM

Hoteliers on the “Managing a tight budget” panel at the 2016 Hotel Data Conference talked about current issues in the industry that are affecting hoteliers’ budgets. 

NASHVILLE, Tennessee—Hoteliers are setting their budgets with property taxes, good marketing and staffing in mind, and sources said those three areas will still dominate budget concerns well into 2017.

Here are a few challenges that panelists on the “Managing a tight budget” panel at the 2016 Hotel Data Conference said hoteliers should consider when creating and maintaining a budget.

Higher property taxes
With the high transaction volume during the past three years in the industry, hoteliers should be prepared for property tax hikes from the government, according to Louis Breeding, EVP at Jones Lang LaSalle’s Hotels & Hospitality Group.

“Basically, every government (office) has to track values nationwide,” he said. “With all the sales activities we’ve had in the last three years, they’re playing catch-up, so expect more increases in property taxes in (2016 and 2017) because they’re playing catch up in the market.”

Breeding said hoteliers should look at annual property taxes and total market transactions to plan their budgets accordingly.

“If you’re growing at 10% to 12%, expect your taxes to be increasing (at that rate) as well until we start slowing down,” he said.

Creating a marketing budget for a new hotel
When it comes to creating the marketing budget for a new property, hoteliers said it’s important to prioritize photography and sales.

“Overspend on photography above all with the investment,” said Sam Trotter, corporate brand strategist at Charlestowne Hotels. “For me, photography is probably the best way to tell your story everywhere. So you have your website, and you have the audience for your website, but your photos live on so many different places … you can spend the money … to really captivate someone and get them interested, and have them come to your site, then your opportunity just grew exponentially.”

Dawn Berry, president and CEO of PHD Hospitality, said having good photography is important, but hoteliers should also be mindful of who is running their sales efforts.

“One of the areas we focus on is sales when we take over a property, because a lot of times, that’s just lacking, and selling the product (is important) and everyone is shopping with their eyes online,” she said.

Labor cost issues
Panelists said staffing is a current issue in the industry because of labor wage changes and how those changes will affect hotels in certain markets.

“The unemployment is slow, the economy is strong, it’s very difficult to find, particularly, the housekeeping staff is where we struggle, and we find ourselves having to utilize third-party providers for that, and it’s very expensive, very difficult,” said Brian Fry, president of Commonwealth Hotels.

Trotter said his company has had higher labor costs in markets where supply is higher.

“We’re having to pay more for general managers and more for housekeepers, especially in markets where there’s more supply nowadays … (Employees are) going to new hotels, (we’re) moving in someone from a different city and offering them a bigger salary,” he said, “and there’s this trend for automation, but on the independent side, we believe in the touchpoints and being very strong on Trip Advisor, and dominating those top rankings. To maintain that, you have to have those touchpoints.”

Berry said digital check-in is one way to possibly cut labor costs, but it still might not be that cost-effective since someone still has to manage the new technology and make sure it’s working properly. She said her team also faces challenges when it comes to outsourcing labor.

“You can outsource, and I think housekeeping is probably a challenge for all of us,” she said. “It’s the one department where it’s very difficult, and it’s not only the labor unemployment markets, it’s location, they can only travel certain distances … that’s the challenge that we have. There’s a certain radius you cannot recruit outside of.

“It’s getting to be hit-and-miss with the work quality. We try not to (outsource) in our hotels if we don’t have to.”

  • Want more on labor issues in the hotel industry? Check out HNN’s “Labor pains” special report. 

Fry said minimum-wage hikes are an issue for his business, because higher wages for minimum-wage workers means higher wages for salaried employees. He said his company is also struggling with the new salary-exemption laws, which will be put in place by the federal government in the next three months.

“The salary-exemption laws, I don’t know about all of you, but that’s a game-changer for us,” he said. “It really affects the way we staff our hotels, the way we manage our labor, because our management teams are going to be struggling by that.

“The change in the law is, to qualify as a (salaried) employee, you’ve got to make more than $47,000 (a year), and it goes into effect in Dec. 1. The interesting thing about that, where we’re concerned is, it’s also a developmental problem, because our GMs will be making that, but our (second positions) are not. So the gap between the GMs and the second positions is continuing to stretch.”

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