Leaner operations not always better, hoteliers say
Leaner operations not always better, hoteliers say
13 JUNE 2019 8:25 AM

Hoteliers share strategies for achieving maximum operational efficiency without negatively affecting workplace culture and guest experience.

NEW YORK—The key to operating a hotel efficiently is right-sizing with the economy and the market, but managers need to be careful not to cut too deep, hoteliers said on a panel at the recent NYU International Hospitality Industry Investment Conference.

“The idea of leanness can be dangerous,” said Aaron Olson, SVP of hotel operations at Crestline Hotels & Resorts. “You don’t want to go too far. We’ve seen owners and talent leave other companies to join ours because of the pressure of not having enough resources, and having to do more with less.”

Ben Cary, SVP of development for North America at Meininger Hotels, said guest-facing staff rightly takes priority in weighing FTE (full-time employee) ratios. But “for things like sales and marketing, accounting and human resources, centralizing those departments at a corporate office can help to save some money,” he said.

Decisions on staffing and other operational costs are easier and more effective if companies have the right tools in place, including a labor-management system and other above-property resources, panelists said.

It’s important to have “above-property resources to be able to do audits, to look at operations at the hotel level, to ensure that best practices are being shared and the right benchmarking is in place,” said David Marriott, president of U.S. full-service managed hotels at Marriott International.

Ultimately, he added, Marriott’s role is to make sure those processes are in place and holding hotels accountable for utilizing them.

Beyond not cutting essential staff, companies also face a challenge in retaining those employees, which if done successfully leads to operational cost savings, sources said.

“It’s difficult to find associates, which makes it critical to keep the ones we have,” Olson said. “Often, if we have one room attendant leave, it may take three to four hires to get one that sticks and becomes a long-term team member.”

He said Crestline focuses a lot on associate engagement, which includes soliciting honest, open feedback from on-property staff.

The company, he said, asks: “Is the culture from the corporate office filtering down to the associate level?”

“Culture and core values really help to minimize turnover,” Marriott said.

In a tight labor market, companies may look to outsourcing as a solution for staffing, panelists said, but this should be carefully considered.

Meininger, a hotel-hostel hybrid with its greatest presence in Europe, outsources housekeeping, Cary said. That way, “we don’t have to oversee our housekeepers and have management distracted by whether housekeepers are calling in sick,” he said. “We stick to what we know best.”

Marriott said multiple strategies are needed to fulfill a hotel’s staffing needs, and it’s a matter of selecting the right one for the right situation at the right property in the right market.

“You have some markets that are challenged to get the right staffing, whether that’s housekeeping or other areas of the hotel, and you have to rely on a certain degree of outsourcing,” Marriott said. “But you have to be careful in how you use it, to augment instead of replace your business.”

Cary said it’s also important with outsourcing to make sure the third party is matching your company’s standards.

“You’re paying a vendor that is overseeing employees. It’s important to make sure laws are being followed and people are being treated properly, that there’s a layer in there of accountability,” he said.

“The other challenge when outsourcing is you’re working with a third party who needs to make a profit, so they’re eating into your profit margin in some way. You have to be aware of that.”

Benefits of scale
The scale that a company like Marriott brings also is a big advantage with operational efficiency, Marriott added.

For example, he said, brands can help to find the right partner and negotiate pricing on procurement. “We’ve seen tremendous savings in that area,” he said.

Olson said scale allowed Crestline to create a position for VP of procurement, “something we didn’t have 10 years ago.”

“Having that centralized person who owns that, monitors that, maximizes discounts and rebates to our owners,” he said, noting that in 2018 alone the company returned $1.2 million in rebates to owners of its 118 hotels related to procurement.

“Really, the P&L is the scorecard in terms of measuring. Going into the budgeting season is where benchmarking really comes into play,” Olson said. “You’re expecting your hotels to hit those targets, and if they’re not, something is going wrong operationally. … So many little things go back to just old-school hotel stuff: boots on the ground, constantly reviewing, especially when you have a young GM operation.”

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