Budget Your Time and Be More Successful

by Kirby D. Payne, CHA , January, 1999

Kirby D. Payne, CHA is President of Minneapolis based American Hospitality Management Company, a growing hotel investment, management and consulting firm. Payne is also Secretary Elect of the American Hotel & Motel Association, and Chair of the AH&MA's International Council of Hotel-Hotel Management Companies. Additional articles can be found on the internet at www.American-Hospitality.com.

One of our company's most valuable assets is its general managers and their time. A certain amount of structure is necessary in the typical business day of a general manager.

While the circumstances of every hotel are different due to size, level of service, number of departments, etc., and therefore one daily schedule does not work everywhere, we do outline a basic schedule as a starting point for general manager to develop his/her own schedule.

We feel it is important for a general manager to make and keep lists in an organized fashion. A number of Post-it notes and numerous separated sheets of paper will not work. It must be a notebook, pad or Scan Card System.

The suggested schedule outlined below is designed to keep the general manager focused on various tasks and minimize interruptions. While this schedule will not work for everyone and certainly won't convert a disorganized scatterbrained person into a model for a time management class, it will serve as a workable, beginning structure for many. It is based on dividing the day into quarters.

First Quarter

During this period the first thing to be accomplished should be a walk around the hotel to insure the day is starting smoothly with proper staffing, morning operations are well underway and that the hotel is presentable to guests who are coming from their rooms or into the hotel for various events.

Following that walking inspection, the general manager should stop by the front office to become familiar with the previous night's occupancy, front office log and the expected departures and arrivals situation for the next day or two. Subsequently he/she should collect the various reports prepared overnight and retire to the office to complete the various daily reporting and administrative chores required.

During this period interruptions should be kept to a minimum, no appointments should be scheduled and receiving telephone calls should be avoided. They can be returned later. This is a good time for the general manager to work on any tasks that he/she does not particularly like to do. Following this schedule during the first portion of the day should result in the hotel getting of to a good start and the general manager completing most of the required administrative and mundane tasks early in the day.

Second Quarter

This period of time which runs to or through lunch should be used for inspecting and training. It is a good time to walk various parts of the hotel again to see what has been accomplished and how well it was done.

Stop and visit with supervisors and line staff in order to be familiar with them and their current challenges. It may be a good idea to set up one or more brief meetings to discuss problems / solutions or to work one-on-one training key people.

Right at noon return telephone calls which were received earlier from people whom you do not particularly want or need to talk to in your time zone.

Overall, this fourth is when the general manager gets around the hotel to do many of the hands on things it takes to successfully manage a hotel and interacts with the staff.

Third Quarter

This period typically falls in the first half of the afternoon. This time might be used as marketing time outside the hotel, longer staff and training meetings, and various other tasks. This time is less structured and can be used to make and receive telephone calls, etc.

Last Quarter

This time segment should include finishing up any projects which need to be completed and various items from the previous fourth of the day. The time should also be used to tour the hotel ad make inquiries as to its preparedness for the evening's business and the appearance of the property. This is also the time where the general manager should review notes and lists made during the day, cross off items accomplished, follow up on critical complete items and add items for the future. It may also be used to pick up the telephone and check with
subordinates about their own lists.

General Comments

We believe general managers should vary their arrival and departure times and should approach the hotel from different directions and enter through different doors. He/she should park the car in different places around the hotel's property and even on adjacent streets occasionally. The reasons will become self evident in a short time.

General managers need to help their staff manage their time in an efficient way. Over time we have found that strong time management skills have the biggest effect on a hotel's success.

The general manager should set the example on good time management and efficient work habits so that the key staff also learns to remain focused on the various tasks, projects and goals they are working on rather than jumping from one issue to another without ever competing one.

Choosing a Long Distance Carrier

by Kirby D. Payne, CHA,

Well, I finally did it! After a lifetime of using AT&T and its predecessors for long distance service I finally switched our hotels and corporate office to a competitor. Our General Managers and a few of my business associates who were well aware of my AT&T loyalty have expressed shock.

First a little background. Back when they busted up the Bell System I was responsible for buying long distance for 18 hotels. I was forced by my boss to look at over a dozen long distance carriers. Among these were little MCI and Sprint in addition to long distance companies owned by IBM and other major and minor companies. At the time most were buying in bulk from AT&T and reselling service. Set up times (the time it took operators to come on line or calls to actually start ringing at the dialed number) were horrendous because calls were being switched back and forth across the country. Because equal access was not yet the available standard, smart switches and dialers were necessary to make the process work.

Service was also unreliable from some of these companies. Some of the pricing was unbelievable. Equally unbelievable were the horror stories one heard about operator charges. Clearly in those days I painted all the non-AT&T carriers with the same brush.

Things have changed in those dozen years. MCI and Sprint are legitimate players in the long distance arena. Sprint, by way of its Sprint Hospitality, has worked hard to compete with AT&T for the hotel market. There are still hundreds of companies out there soliciting business.

For the last six years we have bought all our AT&T long distance through aggregators or the franchisors because our size was not sufficient to get satisfactory pricing on our own. We also bought our O+ (operator) service through a telephone management company where we were paid commissions from AT&T at rates equal to or better than we could have received on our own.

Last year we were called directly by a representative of AT&T who seemed to have been assigned the job of soliciting management companies. I thought this would be a great opportunity to get out from under an aggregator and start buying service directly under one umbrella at equal or better prices. The bottom line was that this AT&T representative was preaching to the choir! All that had to be done was match my current pricing and let us deal directly with AT&T.

Unfortunately this representative didn't understand management companies, couldn't quote pricing in an understandable and measurable way and didn't return calls. He also had not bothered to research our company to see what carriers we were currently using and what hotels we had, all of which is pretty public. In other words AT&T began to spoil a reasonably good relationship. About the same time we became aware of plans being offered by the franchisors for 1 + (direct dial) service which had lower pricing than we were paying. When we discussed this with our AT&T aggregator we were told that we were being switched to a lower tariff also. Then the delays and excuses started. From month to month we watched as we lost the spread between the two rates.

Looking At Options In April I attended the American Hotel & Motel Association convention in Atlanta. While touring the trade show looking for better pay-phones than those offered by the local telephone companies (LECS) I stopped at Sprint's booth to ask what they had. At the time they weren't offering anything which applied to my circumstances, but I had a nice visit with their Vice President of Marketing for Sprint Hospitality.

His sales approach was low key. When he heard I was a loyal AT&T customer he simply asked that I keep Sprint in mind if I ever considered changing carriers. I asked what chains he had exclusive or preferred relationships with. He mentioned several, one of which was TraveLodge. I then moved on to look at pay-phones at Northern Telecom's booth. They had a nice pay-phone that I was interested in but it wasn't available to our company in all locations.

As I left the exhibit hall a little frustrated about pay-phones I ran into Joseph A. McInerney, CHA, President and CEO of Forte Hotels, Inc., the parent company to TraveLodge. I stopped to chat with him a few moments about his experience with Sprint. Joe's response was very favorable. Joe may have over 470 hotels and appear too busy for getting involved with this level of decision, but he's also the kind of person that wouldn't make a long distance decision affecting both guest satisfaction and profitability lightly. His recommendation had a lot of impact on me.

After my return from Atlanta things got a little more interesting. Apparently Sprint Hospitality had retained a new representative for the Upper Midwest and she called our company.

In the course of that meeting I mentioned my discussions in Atlanta and she asked if we would provide information sufficient for Sprint to prepare a proposal for all of our long distance services. The end result was that a proposal was presented for everything except pay-phones but she gave us a referral to a St. Paul company for that.

I had also called Northern Telecom to pursue the advanced pay-phones I was interested in. Again, they couldn't meet my needs directly and asked what long distance carriers and LECs we were with.

During the conversation I mentioned we were considering using Sprint Hospitality. The gentleman paused and said he'd get back to me. Shortly he called and said that they were meeting with Sprint's new pay-phone division in a few weeks. That, of course, was the first I'd heard of that division of Sprint. Remember Sprint Hospitality was even giving out independent pay-phone providers as solutions to my desire to change and hadn't heard of it either.

About two weeks later a representative of Sprint's pay-phone group in Orlando called to discuss my needs. The man said they had to start somewhere and would be glad to meet me at our Boynton Beach Holiday Inn Express to do the necessary site survey and sign contracts for all our pay-phone needs.

By this point we had decided to go ahead on the pre-paid long distance phone cards. Before finalizing the plan we wanted to decide on the long distance issue, which by this time we were seriously considering.

There were a lot of issues to evaluate. The 1+ decision was rather straight forward. Sprint Hospitality's offer would save us 10% - 15% company wide on long distance costs even after AT&T's aggregator lowered their rate, if they ever got around to it. The real decision was O+ services and commissions.

AT&T pays a commission on O+ based on each call or message. A message is any call carried over AT&T charged to AT&T's calling cards, a LEC's card, collect or any other billing method they may accept. They don't pay on calls dialed around to other carriers. The message rate ranges from $0.15 to nearly $0.50 depending on the program you are in and the term of your contract. They won't make a deal with you if you are not using them for 1 +.

AT&T claims to have 60% to 80% of the calling cards in the country. Clearly they have the majority of the cards carried by business travelers. I understand AT&T to also say that the dial around rate when they are not the selected O+ carrier to be very high, possibly 50% plus or minus 10%. This means that if one has not designated AT&T as the O+ carrier a very significant number of calls are not commissionable. Sprint Hospitality agrees that the dial around when AT&T is not the O+ provider is higher than it would otherwise be. Sprint Hospitality's commission program is different than AT&T's in that they pay a message rate of their proprietary calling cards which is lower than AT&T's. However, in addition to that, they pay a percentage of the revenue on all other O+ calls (as opposed to a flat amount per call) except those billed to a proprietary card of a competitor.

Lack of Interest

We stopped at this point and solicited some additional information from an AT&T representative based out of Atlanta. This representative answered the question by promptly faxing us a O+ contract and graciously answering a few follow-up questions. We had clearly informed this person why we were calling. Surprisingly, when we didn't fax back a signed contract or call again, AT&T did not follow-up.

The net result is that Sprint Hospitality offered us lower commission rates on their proprietary card of which there are relatively few compared to AT&T, but they offered us more on all other calls that did not get dialed around. We were never able to figure out if the net result would be more or less commission from this source of revenue. Even if we lose half our revenue from this source it is relatively insignificant compared to the savings we expect to realize on our 1 + service.

We are most concerned about guest satisfaction. Are our guests AT&T proprietary calling card users? We don't know and have no way of finding out unless we do some kind of consumer survey or focus groups! Dial around rates are not a great indicator because, for instance, I always dialed around to AT&T even when I used my home LEC card which will work on any long distance carrier simply because I preferred AT&T and didn't want to expose myself to higher rates.

We did decide that the AT&T proprietary calling card user is probably no dummy as a regular traveler. They probably run into all the fly by night O+ pay-phones scattered across the country and are well aware of how to dial around using AT&T's 10+ATT+O (102880) and 800-321-0288. It is, after all, plastered all over the calling card itself!

Our concern then became one of insuring that our guests who wanted to use AT&T (or MCI and other carriers) could reach them easily. Sprint Hospitality offers a no cost option of their operators transferring callers to AT&T on request. We made sure that feature was written into our final contract preceded by the words, "Prompt and courteous." We are also redoing our informational tent cards adjacent to the telephones in all our guest rooms to insure that they are clear in their dial around instructions. Our Sprint Hospitality contract also clearly states that the O+ rates will not exceed AT&T's rates including time of day and other discounts. This was done to protect our guests from excessive charges.

In the end, we signed a three year Sprint Hospitality contract. We felt we would save money on our 1 + and would come out about even on the O+. We also ended up with one source for pay-phones, prepaid calling cards for our marketing efforts, and a source for ancillary services such as voice mail and others when we want to migrate to them in our guest rooms.

Both AT&T and Sprint Hospitality offer signing bonuses. AT&T offers them for the O+ service and if you sign up for their INTERLATA (local area long distance) service. Sprint Hospitality offers one based on the total volume they expect to realize from your account.

While we were doing our reference checking with hotel managers, owners and other management companies to learn more about Sprint Hospitality we learned that a major Sioux Falls operator was switching from Sprint Hospitality back to AT&T. Their general managers were saying that they were generally happy with Sprint Hospitality and had minimal guest complaints regarding the dial around issue. Based on information we received from various sources, I believe that Sioux Falls company is making the change because AT&T is giving the company even lower 1 + rates and a sizable sign up bonus, but is also pre-paying all or a part of the O+ commissions to be earned over the life of the contract rather than waiting until they are earned!

Clearly long distance service, especially the 1+ portion, has became a commodity. There are no significant service differences among the industry leaders. By tying O+ service to the 1+ service some differentiation can be done especially if one does it like Sprint Hospitality does it.

They offer a number of additional services at no cost from their operator service centers in Honolulu and Winona (information about the hotel itself, its services, etc.) which are appealing to a hotelier. In the end, for us, guest satisfaction and the overall package drove our decision.

Another factor affecting our decision was AT&T's nonchalant and indifferent attitude towards our decision making process. We've had over 20 different hotels with 50 to 400 rooms associated with our company and have been reliable customers to them since we started. Sure, in the over all scheme of things we're a relatively small client but we'll grow! AT&T never seemed to focus on us as a single customer and I suspect there are many other small to mid-size management companies out there that they are missing also.

We're looking forward to our new relationship with Sprint Hospitality and appreciate the fact that their President, Richard Kalbrener, took the time to visit with me by telephone when their local representative was not able to resolve several technical contractual issues with us. Rich, we're going to hold you and your company to all those promises!

Do You Have An Ethics Policy?

Now more than ever, “Good ethics is good business”
By Kirby D. Payne, CHA and Bill Gillette, May 2006

In my 30-plus years in this industry, I’ve occasionally seen the issue of unethical behavior rear its ugly head.

In the management-company world, the unethical behavior I’ve most frequently seen is like a form of bait and switch, where the management company says to the asset manager of the foreclosing financial institution, “Let us manage your hotel because we’re very likely to buy it eventually.”

I’ve yet to see any of these “bait-and-switch” management companies buy a hotel in such circumstances. Ethical management firms work hard to present a good proposal—and then can lose a contract when the lender believes the unethical bait-and-switcher’s pitch.

Here’s another example: Not long ago I was at a major metropolitan airport and saw the C.E.O. of a small publicly traded company being picked up by a limousine, apparently to be taken home. I’ve seen the man on TV and in the papers, along with the news that his company has lost virtually all of its contracts, its employees who haven’t been laid off face that scary prospect. If it’s to survive, this man’s company needs more money from lenders or the markets.

Was it ethical for this C.E.O. to be squandering precious dollars on a limo? Couldn’t that money have been used for one more direct-mail piece—or better yet, to keep one employee working another day or so? I wish I could have taken some action against this C.E.O.

That’s admittedly an extreme example (albeit one that bothers me a lot). There are other, more practical reasons to focus on making sure your company is an ethical one. Here’s my take on them.

If dishonesty, for instance, is part of a corporate culture, it breeds a mindset that eventually will consume the company—you need look no further than the shameful Enron case to see how true this is. Employees will think it’s acceptable behavior and, in one way or other, could start stealing from the company—and investing a lot of time keeping track of and covering up their transgressions. Also, ethical employees who become aware of the situation may well leave to find a more comfortable work environment—or, to refer to Enron again, become whistle-blowers—thereby compounding the company’s losses and hastening its demise.

Sometimes an unethical company (hotel) culture is spawned by something as seemingly simple as permitting unlicensed software to be used on a few of the company’s personal computers. Management has just signaled that cheating is OK. It may be easy to rationalize but is it right?

A few years ago, one of the trade magazines published an excellent article that focused on ethics, the author making the excellent point that “good ethics is good business.” He went on to specify ways by which leaders can minimize the extent to which unethical behavior occurs within the company:

• Install procedures and controls—and make sure there are warnings.
• Recruit experienced personnel for ethically sensitive positions; inexperienced personnel may cross the ethics line not because they’re unethical, but out of sheer ignorance (advertising hype vs. outright lying is a common example).
• Hire some people with non-technical training, so that you tap the broader view these employees so often have.
• Screen out people who have the wrong attitudes, such as extreme ambition or a record of violating the law. This may seem like a no-brainer—then again, you’d be surprised how many companies fail to take this step.

Our company has had an ethics policy for a long time. Let me share it with you as it appears in our employee handbook.

It is our company’s policy to manage its own business and those of its clients in an ethical manner. The following ‘Ethics Check’ questions may be helpful when you are faced with making a decision:

• Is it legal? Will I be violating either civil law or company policy?
• Is it balanced? Is it fair to all concerned in the short term as well as the long-term? Does it promote win-win relationships?
• How will it make me feel about myself? Will it make me proud? Would I feel good if my decision were published in the newspaper? Would I feel good if my family knew about it?

Our ethics policy is based on suggestions found in one of my favorite business books, The Power of Ethical Management by Kenneth Blanchard (co-author of The One Minute Manager) and on the writings of Norman Vincent Peale, author of The Power of Positive Thinking. These are not new ideas, but like all great ideas they’re timeless and always appropriate.

We encourage each of our general managers to buy The Power of Ethical Management and The One Minute Manager for his or her property, and we encourage them to share these books and Peale’s ideas with supervisors and key staff. I encourage you to do the same—it’s a good way to help you and your people remember the old saying, “There is no right way to do the wrong thing.”

Do Your Share, Join Your Resort or Hotel & Lodging Association

by Kirby D. Payne, CHA

I get sad and angry when I think about the number of hotels, motels, inns and resorts (all of which I'll refer to as hotels in this article), regardless of size, which are not members of the industry's associations. Let's not be confused either, it's not hotels that join and get active its people!

I am sad because I know that as a result of not joining, a lot of people, owners, management and staff are not receiving all the advantages of membership. I am angry both because I feed taken advantage of and I know how much more could be accomplished if the membership was larger and more active. I feel taken advantage of in the sense that non-members are getting some of the benefits of my fellow members' and my time and money.

In my mind there are three primary reasons for joining the industry's associations:

1. At the state level, to join voices with the owners and employees associated with the tens of thousands of hotel rooms represented to affect legislation that impacts our industry financially. B. As a member of the Minnesota Hotel and Lodging Association, a hotel is also a member of the A.H.& M.A. which also has a very aggressive lobbying program that effectively looks after the industry's interests at the national level.
2. The industry associations, through their committees, educational and certification programs, have a tremendous impact on the hotel industry. There are committees which address such bread and butter issues as development, increasing travel in the United States and quality assurance. The educational programs at the state and national level are so extensive that a person could take courses, watch training videos and attend seminars full time for years before completing them! Combined, these are things that impact levels of employment, staff quality and profitability.
3. Finally, there is members helping members. There are numerous formal programs ranging from the Minnesota Resort Association's members volunteering their expertise in 20 categories to the A.H.& M.A.'s Information Center and Referral Service. Equally, if not more, important are the relationships one develops and the resources associated with them.

At the state level the associations' lobbyist, Tom Newcome, with the active support of a grass roots effort by many members, has been able to impact a number of important legislative issues to the benefit of hotels in Minnesota. For instance, we helped draft and lobbied in support of the recent HealthRight Health Care bill which will benefit so many uninsured. Significantly, the bill does not ask business to directly shoulder the burden.

In conjunction with other businesses we were able to make in roads in Workers' Compensation reform which will result in a 16% cut in employers' costs. We were a member of a coalition that defeated a proposal to move school opening to a date prior to Labor Day. This would have seriously impacted summer vacation travel by cutting at least one week and a long weekend out of the summer. Another bill which could have impacted us all would have been one requiring us to rent rooms to anyone over 18 years old! Thankfully, it never got a hearing.

Nationally, the Governmental Affairs Department saved each of us many thousands of dollars. Here is the short list:

• removed a provision from a federal bill which would have required hoteliers to install costly telephone equipment to promote equal access, saving an estimated $15,000 per property;
• removed a harmful anti-billboard provisions from the new federal highway program, preserving the industry's ability to attract guests via outdoor advertising;
• secured an exemption for properties with three or fewer stories from costly sprinkler systems retrofitting, resulting in a conservative per room savings of $1,500;
• and finally, helped secure a phenomenal 25% increase in funding for the U.S. Travel & Tourism Administration (USTTA) during a time when most agencies have had their budgets reduced.

If a hotel isn't a member, they have benefited financially from these legislative efforts at no cost. The benefits were not exclusive to the members that paid dues and contributed time and/or money to the legislative committees. Why should I pay for the non-members' free ride? It isn't fair, but I guess I'll keep doing it so I'll keep benefiting!

The associations' committees are groups of individuals volunteering their valuable time to work towards many common goals. One of the most exciting committee accomplishments at the national level was one that resulted in getting President Bush to do a wonderful television advertisement with scenes from all over the U.S. inviting people to visit us from abroad. This advertisement was funded by contributions from member companies and is playing on television in Europe. The same coalition raised $8 million to promote travel for a six week national campaign during the Gulf War to ease fears and get travelers back on the road. In Minnesota, the associations work actively with the Department of Tourism to publish over 100,000 copies of the Explore Minnesota Travel Guides. The national equivalent is the OAG Lodging Travel Planner & Red Book which is published quarterly.

The associations' executives, committees and staff coordinate a number of other activities:

• A free annual review of laws and regulations affecting the industry.
• Negotiating volume discounts with credit card issuers which benefit smaller properties.
• Training seminars and educational programs which are done both locally and nationally. The Educational Institute in East Lansing, MI is also an integral part of the A.H.& M.A. and it produces excellent correspondence courses, videos and other programs which are available at a 25% discount to mem bers.
• In Minnesota, the associations sponsor the Upper Midwest Restaurant and Lodging Show which is free to members.
• Nationally, in addition to two excellent national meetings, there are several specialized meetings such as the Quality Assurance Conference, and the National Marketing Conference. A myriad of committee meetings occur in conjunction with the national meetings addressing more specific issues affecting the industry, its members and employees.
• One of the state's committees goes out to high schools and promotes the industry as a career alternative and addresses other issues regarding the scarcity of labor.

One of the important things to me is the issue of members helping members and the relationships that have come to me over the years. On several occasions I have picked up the phone and called Dr. Tony Marshall, the dean of Florida International University's hotel school who is a noted columnist and legal expert in the hotel industry, to ask questions. As the president of a more modest size management company, I have called the president of the biggest management company, MHM, to get advice on running my business. Based on contacts I have developed, my company gets referrals from a large number of sources and the hotels we manage are among the first to get overflow referrals from competitors. Many of these contacts have evolved into close friendships.

While I obviously feel the benefits of membership in the Minnesota Hotel and Lodging Association are innumerable, there are costs. The first and most obvious is financial. Depending on the size and level of service of the property it can be as little as $119 a year to a maximum of $7.05 per room for a full service hotel with more than 76 rooms. That amount includes membership at both the state and national level. Many hoteliers don't take the time to understand the bottom line value of participating and the utilization of the many resources of the associations more than pay for their dues investment in the first month or so of membership. The direct economic benefits easily outweigh the direct financial cost. It's a good deal!

The way to maximize the benefits of membership is to be active in those areas of interest to people at a member property. Have a problem with the Health Department? Work on the Joint Health and Safety Committee which includes Restaurant Association members and also tell your new acquaintances on the Joint Legislative Committee what you think of the law and administrative regulations. Have a problem with employee turnover and performance? Get involved with the Joint Human Resources Committee, use the educational programs that are available for you and your staff.

The hospitality industry is probably the world's second oldest profession and is one of the most diverse. It includes everyone from the all-important room attendant to the inconsequential Leona Helmsley at the human level and the smallest Mom and Pop independent motel to the Waldorf Astoria at the property level. All of us are in the same boat and generally have the same goals. We have a better chance of achieving them if we work together to improve the industry and the people that work in it.

I invite you to join with your peers in the industry and support it with your membership dues and time. We'll get more done with your help and I won't feel ripped off. If you mention this article when you join I'll take you as my guest to the Minnesota Hotel and Lodging Association's Annual Meeting and Christmas party.

Is Your Hotel a Mess ?

by Kirby D. Payne, CHA

Over the years, our company has assumed management or conducted operational reviews of hundreds of hotels. Obviously, many—but not all—of them had big problems, so we’ve had the opportunity to have an intimate look at the workings of all types of hotels, both good and bad, and we’ve noticed some commonalities we think are symptomatic—and, therefore, instructive.

In virtually all the hotels we’ve served—the good and the bad—these commonalities are almost corporate-culture issues. If we find two or three of the good (or bad) aspects, we usually will find more—again, good or bad. Don’t get confused: There are profitable hotels that have a few shortcomings, but they may be the ones to keep your eye on when things get tough. Conversely, some of the most beautifully groomed hotels that feature all the amenities and perfect guest service are, quite simply, losers—and that’s because no one in management is aggressively focused on the bottom line.

What are some of the positive commonalities—the good signs—that a hotel offers? To begin with, well-groomed, uniformed, name-tagged employees who greet guests with a smile make an excellent first impression, both on guests and new management companies. Sharp curb appeal and public-space cleanliness are usually signs of good things to come. Once you get more “into” a hotel’s behind-the-scenes areas, things become more clear: Orderly offices, storage spaces and housekeeping areas are examples of the good signs that usually follow good first impressions.

On the other hand, we always seem to find a messy front desk—not necessarily on the working surface but in drawers, cabinets and storage closets—when we take over a troubled hotel. Clutter, disorganization and years of dust and trash appear in virtually every problem property. We inevitably find old furniture, out-of-date supplies and never-to-be-used “spare maintenance parts” left in storerooms and maintenance shops. This usually happens in hotels where management claims to lack sufficient storage space—another sign of rampant disorganization.

Now, I’m not saying these shortcomings are the cause of mediocre profitability—but I am saying they’re signs of management’s poor organizational skills and lack of focus on orderliness and cleanliness. And here’s another thing: Management’s lackadaisical attitude toward keeping things organized and clean most certainly influences employees’ attitudes about their own work habits. Unkempt employee restrooms, for example, not only are a sign of management’s lack of concern for staff, but set a poor standard for what management expects of those same employees in keeping guest areas clean.

Some time ago, our company assumed management of—and subsequently closed (yes, closed)—a 160-room hotel. In the process of cleaning up the property, we filled 10 dumpsters, each of which held eight cubic yards of trash. This trash didn’t include old, unused furniture, guestroom trash or kitchen garbage—it was just stuff that had cluttered offices, housekeeping areas, the front office, storerooms and the maintenance shop. Imagine 80 cubic yards of “stuff”—talk about disorganization (maybe chaos is a better description).

Here’s another sign of a poorly run hotel: low linen pars. They’re not the result of poor profitability—they’re a cause. If we see housekeepers stripping rooms to get linen back to the laundry, washed and used again immediately, that’s a sure sign that there are more things wrong than insufficient linen supplies. For example, it means there are undoubtedly days where not all the rooms get made up—and therefore occupancy may suffer due to unavailability of rooms. As absurd as it may sound, linen wears out more than twice as fast if it is washed and used daily rather than every other day or so. Circulating linen daily by stripping beds and running it back and forth also takes more labor. In the end, minimal linen supplies turns out to be pennywise and pound foolish—keeping an adequate supply of linen, about 2.15 to 2.5 par, saves money.

Likewise, if printed and other collateral materials are poor in quality, it’s a sign that the hotel is too. In full-service hotels, menus are threadbare—good hotels get new ones, poor hotels don’t. Raggedy in-room telephone books are another example of things poorly run hotels pay no attention to—and phone books cost nothing to replace.

Finally (and perhaps most important), a hotel’s accounting methods also are reliable indicators of what’s really going on—after all, if you can’t keep score, you can’t win the game. There are really three issues involved in good accounting: gathering all data on a timely basis from all areas of the hotel (payroll, revenues, statistics and accounts payable); compiling it quickly and accurately in the form of financial statements; and interpreting and acting on the information once it’s gathered. If this isn’t being done, it’s another symptom of poor organization and lack of attention to detail. Without this information, management cannot effect changes for the better in a timely manner. Of course, management must know what the data means and what they can do to make the numbers improve—sadly, this business basic is too often missing in hotel management.

In well over half the problem hotels we’ve been retained to manage, financial statements do not conform to the Uniform System of Accounts for the Lodging Industry. This makes it difficult, if not impossible, to compare a hotel’s operating results to similar hotels. Most of the owners and managers of these properties were aware of the Uniform System but didn’t consider it worthwhile to change their accounting system—in other words, they thought had a better way of looking at their accounting data than more 80 percent of the other hoteliers in the world. Now that’s arrogance—it reminds me of the soldier who was marching to a different cadence, then had the gall to tell his sergeant, “Everybody’s out of step but me.”

If you don’t make sure every last detail of your hotel is well attended to, you’re out of step and marching rapidly toward big trouble. Make lists of what needs to be done to make your property as immaculate as can be—not only in terms of cleanliness and orderliness, but operationally as well. Maybe a good place to start is organizing and cleaning the front-desk area and working your way through the back-of-the-house areas that your guests don’t see.

Look your hotel over carefully and critically. If negative symptoms like those I’ve described exist, you need to ask yourself where your priorities really lie.

Maintenance and Repairs: Are We Ever Caught Up?

Kirby D. Payne, CHA
Maintenance is something that never ends in a hotel and just when one thinks it is under control either something expensive breaks or it is time to remodel or upgrade!

Maintenance seems to fall into four categories:

1. Preventive room maintenance
2. Preventive equipment maintenance
3. Routine repairs based on work-orders
4. Emergencies.

Each has its distinct time element, relative priority and level of interest from management and the maintenance staff.

Clearly everything stops for emergencies. A burst hot water pipe on an upper floor or a dead washer when occupancy is high will get everyone's attention. No one but a neighboring guest seems to care about squeaky hinges on guest room doors. How to keep all this balanced is a challenge to managers and owners alike.

Maintenance Saves Effort

The first thing that should be obvious is that routine repairs and, to a lesser degree, emergencies will be reduced significantly if preventive room and equipment maintenance is taking place. The problem for many managers and maintenance people is how to get out from under the ongoing repairs and emergencies in order to conceive and implement preventive maintenance programs.

The answer I always suggest is that they should look at preventive maintenance as a tax which is payable weekly in hours. No matter what, the tax must be paid. Even three hours, three days a week in an 80 to 100 room hotel is a significant start. In a smaller property its more than enough, in the long run. In a larger hotel one is dealing with a different scale, sometimes one or more persons spend full time on it, but the principal is the same. Two of those three days can be spent in guest rooms while the other can be spent on equipment and public spaces.

Guest room preventive maintenance is very straight forward and there are a multitude of check lists available. The place to start is not by being delayed coming up with the ideal checklist, but rather by coming up with a work cart for the maintenance staff. The cart can be an old maid's cart cleaned up and painted or something developed from a two wheel dolly with tool kits bolted to it and some shelves built for common spare parts. Just start with something inexpensive; one can replace it or improve it next month.

Maintenance: Just Do It

The key thing: get started. Go to the lowest numbered room in the hotel and start anywhere. Maybe the maintenance person likes to fix lamps and light fixtures so s/he starts there and checks all the fixtures in the room by tightening switches, adjusting harps, checking the security of the plugs and outlets (while down there) and making notes of any that need new shades. Next the maintenance person might cheek for dripping in the bathroom and replace or clean faucet aerators, and tighten knobs. While in the bathroom, tighten the toilet seat and shower rod. Look for grouting that needs repair and make a note so that several rooms can have their grouting and tile worked on at once.

Continue this process for an hour, then go to the next room and repeat exactly the same checks. In a small hotel, three or four rooms is a great start for the first day. Out of the effort several work orders will have been written for subsequent follow-up. The key to guest room preventive maintenance is in actually getting some things in the room fixed or adjusted, not in making big lists and certainly not in undertaking on a big project.

If just six rooms are done a week all the rooms in an 80 room motel will be done in 14 weeks. The second time around will go faster and more things will get done.

The best guest room preventive maintenance checklist for your hotel may be the one the maintenance person develops after going to 20 rooms. It can be improved on the second time around, along with the cart.

Remember, work orders and project lists are a byproduct of this effort and these are being worked on continuously. There should be plenty of time as I only suggested nine hours a week (three hours a day, three days a week).

Equipment and Public Spaces

Along with the guest room preventive maintenance tax, add in a schedule of maybe four hours, two days a week for equipment and public space preventive maintenance. The total tax at this point is only 17 hours. With the remainder of the maintenance work week, work orders and emergencies are dealt with.

Equipment and public space preventive maintenance is a little different than the guest room program. Most pieces of equipment come with maintenance instructions. These should be researched and organized on to cards or into a notebook. If the manuals have been lost, a vendor can usually help get them or at least a photocopy of very old equipment manuals.

Start with simple but important things, like keeping the machinery and equipment clean followed by servicing anything with moving parts. Get back to the machinery every two or three months or according to the manufacturers directions, if they are located. Some equipment needs more frequent servicing. A good example are older circulating pumps for domestic hot water. Some used to need their bearings oiled weekly. Modern equipment needs less and less servicing, but anything with air circulating through it needs filters and coils cleaned just as much as they ever did. Failing to do so causes them to overheat and breakdown prematurely.

Public spaces such as lobbies, halls, stairwells, restaurants and meeting rooms need continuous attention. Chairs, tables, doors, carpet and wall coverings all get heavy use and abuse. Without regular attention these items can cause a hotel to start looking shabby and unkempt. More importantly, some items become a safety hazard. By getting around to these areas weekly and inspecting them the person or persons working on maintenance can correct unsightly tears, fix loose legs and keep all the parts of the doors properly adjusted.

Work Orders and Organization

Work orders are a great tool for examining where preventive maintenance is failing by looking at the frequency, location or type of items that appear on the work orders. Except for damage caused by a guest or employee, many work orders are a result of poor preventive maintenance.

Many maintenance people do not organize their work orders. Organizing them might include batching work orders together by location, similar projects requiring the same tools and supplies, etc. It is also appropriate to put low priority work orders off until s/he is going to that location for an additional reason. Time is money and time spent walking to and from different jobs, getting supplies and tools and just checking things out is wasted money.

Work orders should be at least two part. Our company uses a 2-Part Repair Order Book (Z8V 1731 from American Hotel Register Company, page 1523 in the 1995-1996 catalog.) This leaves a permanent record of the work order for later reference. The maintenance staff simply stops by the reception desk to note completed work orders on the permanent copy. Problem work orders are discussed at staff meetings or with the appropriate department head. Most hotels use a three part slip where one comes back to the originator when the repair is completed.

Emergencies Caused by Inattention

Emergencies have been defined by someone unknown to me as, "your poor planning becoming my crisis." A lack of preventive maintenance and attention to detail lie as the root cause of many emergencies. The definition of emergency in a hotel is subject to frequent changes of interpretation. The owner coming and the front door closer that s/he has complained about for three months still not being fixed is not really an emergency, but will be treated as such. Anything that is a safety hazard, or is causing further damage, or is going to impact revenue now is truly an emergency. You might think of some others, but this covers most emergencies.

After each emergency situation is resolved take a few minutes to examine it. Was it really an emergency? What could have been done to prevent or at least mitigate it? Finally, what are we going to do to keep it from happening again?

Lower Costs in Long Run

In summary, I want to emphasize that whatever is spent on preventive maintenance is going to lower maintenance costs in the long run, enhance the guest experience (read that as increase repeat business and word-of-mouth advertising) and improve the hotel as an attractive and safe place to work.

Manage Your Laundry Carefully

By Kirby D. Payne, CHA,

I have some strong feelings about how laundries should be run in small hotels that I'd like to share with you. Some of these things apply to larger hotels, too. The key idea is that a laundry should be managed. It is not just an area of the Housekeeping Department which doesn't have much impact.

I believe that an important part of marketing a hotel is maximizing repeat business. Linen is one of the physical items with which guests come in the most contact. It should look good and be well maintained. I feel strongly that this is one item that an economy lodging property can use to set itself above its competition in perceived value relatively inexpensively. This can be done in several ways.

Size and Weight of Fabrics

The first is in the weight and size of the terry. Imported ROL (run of the loom) or seconds should never be used. Terry should be either a quality domestic or a first class import. The higher the cotton content the better. The size and weight should be similar to what a person might use at home. Nobody uses a ten inch square 12 ounce per dozen wash cloth at home. Likewise, nobody has an 18 inch wide bath towels that you can see through at home.

Our linen (sheeting and terry) standards for limited service economy lodging are as follows: All sheets are T-180 Percale and 110" long. There are 108" sheets, but hey don't tuck in as well and the guests' toes can feel the mattress! Bath towels 24" x 48" or 50" - (10.5 lbs. per dozen); Hand Towels 16"x27" - 3.0; Wash Cloths 12"x12" - 1.0 and Bath mats 20"x30" - 7.0; Shower Curtains are washable nylon.

We also have another unusual standard for this market segment: all linen is beige. This costs about 5.0% more than white but has several advantages. The first is that bleach isn't used which results in two costs savings: one doesn't have to buy bleach, and because bleach isn't used, the linen lasts much longer and wears and feels better. The cotton in white linen breaks down after many bleachings and begins to appear gray as the cotton is washed out, leaving only the synthetic backing.

The second advantage is that the beige linen just looks better and less institutional. The guest room and bathroom have a more residential feeling. A smaller advantage is that stains do not show up as readily. The disadvantage is that the terry is stolen at a slightly higher rate. On balance, we feel that, overall, beige linen provides a cost savings and a marketing advantage.

Process Laundry Carefully

Based on what I have read and heard from major quality laundry chemical vendors such as Ecolab and Diversey, here are some important things to keep in mind when processing laundry. The room attendant should note stained lined when she removes it from the guest room separate it so that it will be noticed right away when it arrives in the laundry area later. Spotting and stain removal instruction and supplies should be readily available in the laundry.

Regular soiled laundry should be separated by type, percal, terry, and others such as spreads, etc. Within those groups the heavily soiled laundry should also be separated so that all laundry is not washed with the heaviest concentrations of chemical and suffer the extra wash cycles. If more than one color of linen is used, white should be separated from other colors if bleach is to be used on the white linen.

Linen should never be placed on the floor by the room attendant or the laundry staff. The floor soils linen and contributed to wear. Unsealed concrete some other surfaces will stain or change the pH (Acidity/alkalinity) of the linen at the point of contact. Sort linen into laundry carts.

Have Good Equipment

For the sake of the people working in the laundry and your workers' compensation premiums, use spring loaded inserts in your laundry carts. They will raise the linen as the cart is emptied so your staff does not have to bend or stoop as much. Remember to clean under them regularly! High bottom carts whose sides are about even with the doors of your of washers and dryers are good for moving linen from washers to dryers.

Washers should generally be loaded fully but not with linen crammed in them. Use the minimum cycle setting to do the job. Don't waste chemicals, energy, wear and tear on the washer and linen by overdoing the wash cycles.

Your laundry supply vendor, if reputable, will help you make sure your machines and chemicals are set properly and review the operation with responsible supervisors for no extra charge. They will also test your water and inspect your machines as part of their service. If they won't do it, and help you keep a written record of it, change vendors!

When the wash is complete, move the laundry to the dryers as soon as possible. I say dryers because in a properly planned laundry there are typically two dryers for every washer. Typically it takes twice the capacity of the washer, as measured in pounds, to do the drying. With this mix of equipment, drying time will be approximately the same as washing time, linen will tumble loosely, and dry out without being beat up as much in the dryer. Be sure to use the proper cool down cycle and remove the linen as soon as possible to reduce wrinkling.

If you have an opportunity to redo your laundry area because replacement or additional equipment is needed to take advantage of this to arrange the equipment so that labor expense is minimized by lessening the necessary motions in moving things are minimized.

Fold Immediately

Linen should be folded immediately and allowed to rest overnight. Yes, rest! The rest allows linen to iron itself and become wrinkle-free. Most of our dirty linen complaints come from what the guests believe is dirty because of the wrinkles. The second biggest cause is hair, which seems to be a result of overloading washers and/or dryers. Laundry experts also tell me resting the linen helps it last longer in terms of usage.

The person folding the laundry should watch carefully as s/he folds to observe stains and excessive wear or fraying. Stains can be reworked and fraying can be trimmed sometimes. Some housekeepers I have known hem the terry as it begins to fray so they can get more use out of it. Personally, I only believe in that for bath mats.

Transport Laundry Efficiently

It costs money to move linen around in a hotel. It is a labor cost which can be controlled. In our Holiday Inn Express Hotel in Florida, we recently purchased a very large cart with shelves. The laundry staff folds laundry and immediately places it in the cart. The cart is then used to deliver clean linen to the room attendants' carts around the hotel. Room attendants' carts are also brought to the laundry each night for cleaning and stocking by an afternoon laundry person. This reduces labor cost and enables us to control the stocking and appearance of the carts.

Keep Reliable Inventory

An adequate linen inventory is essential for the efficient operation of a housekeeping department. Having to strip rooms to collect up soiled linen in order to begin washing so there will be clean linen for the rooms is very wasteful in labor expense and precludes letting the linen rest. Having at least two and a half times the linen necessary to set up all the rooms once is called having 2.5 par. This multiple does not apply to mattress pads, bed spreads, shower curtains, pillows, etc. For these items 1.2 to 1.5 par is usually sufficient.

Inventory should be taken monthly and include a count for the linen en route from your supplier. Subtract the resulting inventory from the 2.5 par and order that quantity. Most items come in dozens and packed a minimum of five dozen to the case. Round up to get full cases. Build up to three par if you have a busy season immediately ahead of you.

If you must order in less than case lots because your hotel is small, order from a reliable supplier who will maintain an inventory that meets your specifications.

Typically those storing and shipping unless that case lots still work in even dozens and their charges all include freight. In the Twin Cities area I have found Inn Room Supplies (612/645-0000) to be an excellent value and very reliable.

Finally, the laundry and housekeeping areas must be immaculate. This is not only where you demonstrate to your staff what the standard is for the entire hotel, but also the way you should treat your employees. You want them to have pride in their hotel and their work area. Just because it is out of sight of the guest doesn't mean it can be ignored. Keep the area so that it functions efficiently and you are proud for both your guests and your banker to see it.

What Time Is the 3 PM Parade?.(Should your hotel have some Mickey Mouse® in it?)

By Kirby D. Payne, CHA

Several years ago the Disney Institute held a seminar in Minneapolis. Among the co-sponsors was the Minnesota Hotel & Lodging Association. Vicki Richman from our staff attended and I have adapted her notes for this article.

There is a lot of information provided in this seminar which we have incorporated into our company culture. Our company has a culture and a vision, but it has never been refined and promoted through all levels of the company in a structured way. Every year we attempt to improve our company’s culture and that of each of our hotels. If the Walt Disney Company is any benchmark, it's clearly worth doing.
Later in this article I'll even tell you what time the 3 PM parade starts! Here are the notes with explanatory comments added where they may be helpful.

LEADERSHIP AND CREATIVITY

Disney believes that storytelling is an important part of the company's job for its guests, staff, and investors. When Frank Wells and Michael Eisner were brought on-board, they made a video for the stockholders to watch to learn about them and where they felt the company should go. Walt Disney had a short video about himself and his dreams. These videos are very effective in communicating their "story". Communication of history and vision is essential to developing a well-run company whose staff are supportive.

Traits of Disney leaders: risk taker; childlike (curiosity, creativity, wonder, etc.); iron fist in a velvet glove; visionary; motivator; and management by walking/wandering around. Apparently this was very important to Walt Disney who saw himself as a bee, going around from flower to flower pollinating other people and their efforts.

Whenever staff is overheard saying "I" or "they" to a guest that person is always immediately corrected. They must always say "we". As in a Guest Service Agent (desk clerk) saying, "I'm sorry we didn't get your room made up on time." As opposed to, "I'm sorry they (housekeeping) didn't..." If they say "we" enough, they will come to believe it.

Disney believes strongly that creativity can be enhanced with synergy, adding 1 + 1 and getting 3. Bringing diverse groups together with different perspectives to create "dynamic tension" such as in brainstorming sessions is used to develop creativity. Brainstorming sessions must always have the following: defined goal; structure; a facilitator who can control flow; diverse participants; and a scribe. It is important in brainstorming sessions that creativity be promoted.

Always say "yes, and" because it keeps discussion going while "yes, but" stops the flow of ideas. Disney's goal in planning is creating value for all of their stakeholders (guests, staff, stockholders, etc.). Both their financial objectives and strategic objectives focus on increasing value for everyone. The example given in the seminar was IllumiNations, a fireworks, light, laser and music show each evening in EPCOT. The restaurants in the pavilions were not doing well. By adding the IllumiNations show guests enjoy an additional event included in their admission and there were substantially increased food and merchandise revenue for Disney's lessees.

STAFF SELECTION, ORIENTATION, AND TRAINING

When it comes to staff selection, Disney believes they are not hiring, but are casting for a role in a show. Aren't we doing the same thing at our hotels? Each person hired needs to project the image of the company. Before they fill out an application they watch a nine minute video which projects, without being obvious, the company culture. Specifics covered are: pay availability; transportation; and appearance. This is in effect a pre-orientation and serves to screen out potential applicants who don't want to or cannot fit it for what ever reason. Men who watch and know they won't adhere to the hair length standards (above the ears) simply tend not to apply.

We have adapted this idea into a brochure which is given out to job applicants. The brochure, titled “What you can expect when you join our team and what we expect from you”, has eight panels. Three give information about the company, the hotel (about types of guests and what various departments do) and its culture. Three panels give details of our expectations of employees and our promises to the employees.

Disney uses personality profiling to determine where there is a fit. Even if the person is not selected, the process makes them feel good about the company. After all, their friends and relatives are both potential guests and cast members! Orientation is done through videos and other consistent visual aids and the central element is communicating the following in order to begin the process of getting them wrapped up in the company culture: the company's past (its traditions), the company's present (how operations work), and the company's future (the vision). New cast members get a name tag day one, and are told if the name tag is not on at all times, even backstage (back-of-the-house), they are sent home because they need to maintain the feeling and standards among employees as well.
Of course, this is true about their entire uniform (costume). Variations or missing items are never allowed. Name tags have first name only and city if they want. No last names to break down barriers with guests and other staff.

Disney gives many quizzes throughout orientation and training as to Disney facts (name the seven dwarfs) and facility facts (extensive tours of the entire property are essential). All orientation is done by line staff from different areas of the company (like the guy who loads the Space Mountain cars) who are picked to be "Tradition Assistants" for two to three days a month. This builds self-esteem, loyalty, sense of importance, and the applicants can really ask questions about working on the line.

Training is either 1-on-1 or 2-on-1. They teach job skills and people skills with equal emphasis - more on this in the service section of this article.

When it comes to caring for staff, they feel you must ensure that the physical environment is supportive. Disney's Golden Rule: treat staff as they expect staff to treat guests - this is essential to set an example.

If any supervisor notes a crabby staff member they will talk to that person and send them home, if necessary, so that negativity is not spread. Upbeat attitudes must be engendered back-of-the-house to carry to the front-of-the-house.

No Disney visuals are in break rooms or cafeteria because the staff told management they overload on it and need a real break. Many personal services are provided because staff cannot get anywhere easily once at work, such as vehicle registration, voter registration, dry cleaning, etc. In addition, Disney provides a private lake with recreational area for staff and families only.

Longevity and performance recognition through pins, awards, parties, etc. are also important aspects of caring for employees at Disney.

SERVICE

Since nothing is unique (people can alternatively go to Universal Studios), then what Disney is selling is only 10% product and 90% service. This is obviously very true of hotels, too. 65% of Disney’s guests are repeat. But more important to them than their repeat guest, is the guest who becomes their advocate. The one who goes home and says, "We won't be going back to Disney in the next few years or maybe never but it was great, you should go".

Disney recommends taking a magnifying glass to what you are doing RIGHT (rather than what you are doing WRONG), examine it, map it out so you understand and can translate those elements to what you are doing wrong.

The guest (or employee) might not always be right, but always allow them to be wrong with dignity. In order to give good service you must have these four elements:

1. Know who your guests are, what they want, and when:

• Poor service is different for everyone, so you need to treat each one individually.
• Since 65% of guests are repeat, their "wow" threshold is very high, and one needs to be raising the bar at all times. So you always need to pay attention to detail and exceed the guests' expectations.
• Disney has "guestologists" that study who their guests are and what their needs are. They do this through telephone surveys, in-person surveys, comment cards, guest letters, focus groups, and secret shoppers.
• Some facts: 38% from New England (#1 state is New York); 23% international; saved 2.5 years for Disney vacation; families of 3.3 people; and the #1 need is to see Mickey Mouse (translation: need to escape reality)
• Sometimes guests want "aggressively friendly" and others just want "warm and welcoming" and staff are trained to recognize the signs. For instance, if the family has driven to Disney (the valet should notice out-of-state plates), they are tired and anxious, so just welcome them and move them along to their Disney hotel room efficiently. However, if it's 8 am at the turnstiles into the Magic Kingdom, welcome them aggressively.
• There are no newspapers in any Disney store
• When their tickets are taken at the turnstile, it's easy to tell from the ticket if it is their first day or last day and the staff is trained to acknowledge this to the guest

2. Need to communicate the service goal to staff:

Everyone's job description whether they be in accounting or line staff on a ride has the Same first two items:

• Keep the property clean. Everyone must pick up trash - it's a big no-no if anyone is spotted walking by trash anywhere
• Create happiness.

Service Standards (in order of priority):

• Safety for guests and staff is never sacrificed.
• Courtesy, treat every guest as a VIP - all staff must offer to take the family's picture if they see one being left out - it costs nothing to create a magical moment (Cast members must always be anxious to help and be aggressively friendly.)
• The show is extremely important so they must pay attention to detail in everything - never lose the theme anywhere
• Efficiency, the system and equipment must be effective. Also, all staff learns that they are needed to show up when they are told and do what they are trained to do otherwise the whole show suffers. People need to be needed and know they are important.

All of the staff's performance appraisals rate the person using these standards. They are taught that they need to make all of their decisions based on these four goals and in this order. For instance, have they ever sacrificed courtesy for efficiency? That is a no-no. Never sacrifice courtesy for the show either.

Two Disney Tidbits: It takes 37 magic moments to recover from 1 tragic moment. A good coach has a staff that has confidence in him/her while a great coach has a staff that has confidence in themselves!

3. Set the stage:

The setting must be consistent with what you want people to feel and must always communicate your essence. The setting supports both the service theme and the service standards.

The setting includes:

• The environment:
  They have "smelletzers" which spew specific smells throughout the park. When you first walk into the Magic Kingdom onto Main Street, they have the smell of just-baked chocolate chip cookies.
• Objects within the environment:
  Size and arrangement of objects, shapes and lines, lighting, shadows, color, temperatures, and sound. Look at everything in your environment and assess its impact on the guest experience.
• Procedures that enhance the quality of the environment:
  Never allow procedures to negatively impact on guest experience, always have procedures that benefit the experience. Facts are negotiable, perceptions are not so no matter what really happens, all that matters is how your guests perceive it.

4. Deliver a quality show (service delivery):

In order to deliver service, you must have well-trained people and they must have systems that support them and enable them to provide good service. At Disney, a quality show is made up of three components: people; systems; and service recovery.

People:

Staff are taught that the front line is the bottom line. Orientation of all staff includes behavior skill training such as: importance of first impressions; posture; gestures (their staff is taught not to gesticulate when talking to guests); facial expressions; vocal image; and use of humor (everyone's view of what is funny is different so humor is to be avoided).

Cast members are also taught tips on how to be comfortable in their job, like standing for long periods of time without getting tired.

Disney tries to keep staff motivated to succeed in their jobs. It is communicated that 62% of all managers were in line positions to start, that they have a future with the company and it is a good company to have a future with. Lateral moves are celebrated and acknowledged like promotions. They teach staff that getting skills in many areas makes them more versatile, more useful for the company so line staff is cross-trained in many different areas of company.

All management staff are required to work in the park in line positions (cleaning tables, etc.) during peak times for a specific number of hours. They are all dressed in blue lab coats so other staff knows who they are. It's fun for everyone. Turnover of permanent staff is only 17.8%!

Systems:

Systems have been developed to enable line staff to provide timely, useful service. For instance, losing your car, locking keys in car, or running out of gas. Attendants in golf carts can be there within minutes to open car doors, provide two gallons of gas, cut keys (even with the computer chip), jump batteries, etc. to help the poor parking lot attendant who is facing the tired dad and his troop.

Disney believes that only 5% of top management knows what the operational problems are, only 20% of middle management knows, and 100% of line staff knows. So, Disney looks to learn the service needs of guests and what is preventing staff from fulfilling them directly from the line staff.

Service Recovery:

It's ok to apologize to the guest even if they are wrong; always ask the guest: What can I do for you? Empower line staff to fix the problem; follow up with the guest and in a timely manner, it makes them feel important; and provide feedback to staff.

Obviously you had to be at this seminar to benefit the most from it. Properly adapted and implemented, there are many things here that will help my company and yours do better. We can't all be Disney and we don't all have their resources to accomplish some things. But, concept is also important and we, too, are in a service-oriented business with guests (we don't even have to translate their language!) who want happiness in a clean property.

Oh yes, so, what time IS the 3 PM parade? First, cast members know never to laugh at the person asking this question. Apparently, it is the most frequently asked question in the Magic Kingdom. Next, they are taught to understand that what they really need to know is what time does the 3 PM parade pass by where the guest plans to be during the time of the parade. In other words, the answer is, "Where will you be?" And then, answer the question, "The 3 PM parade passes the fire house on Main Street at 3:12 PM."

Think about the orientation and training that street sweepers receive from Disney in order to ensure that everyone can provide quality service to their guests. Can you match it? We all need to try!

"The Gold Standards" of Leadership

Still from the website http://www.hvsinternational.com a great article about leadership by Gene Ference

A GHOSTLY GOLD CHRISTMAS

What is it that we can learn from Ghosts, Gold, and Christmas that can help make you a leader in your company and community? By using "The Gold Standards" of Leadership, we can see how decision-making abilities can help achieve peak performance.

By Gene Ference, December 21, 2006

A Christmas Carol in Prose, Being a Ghost Story of Christmas is the full title of the well-known novel written by Charles Dickens and published and released, December 19, 1843. It is one of the all-time classics—one of the most beloved novels ever penned. It’s about Ebenezer Scrooge, a miser, financier and money-changer who only thinks of wealth, with only contempt for all else, including friendship, love and the Christmas season. Scrooge, crafty, shrewd and cynical, of importance in his community—certainly. Scrooge, although extremely successful in business, service minded, charitable, a leader in his community?—certainly not!

And what of the other characters in this Christmas saga? Jacob Marley, dead for exactly 7 years on Christmas Eve, Scrooge’s former partner, but who visits Scrooge as a ghost who has found the error of his ways, albeit too late. Bob Cratchit, Scrooge’s employee who withstands verbal abuse and the stinginess of Scrooge as his reward while he tries to care for his family, including Tiny Tim, a cripple who needs more help than Cratchit can give.

Then, there is The Ghost of Christmas Past, who is but one of three ghosts that visits Scrooge on Christmas Eve as foretold by the ghost of Marley. This spirit leads Scrooge on a journey to remember some of the happiest times, as well as the saddest moments in his experience. These are painful memories for Scrooge, ones that he doesn’t deal with very well.

The Ghost of Christmas Present reveals the happy, yet meager existence that the Cratchits live through. It’s noted that although Tiny Tim is upbeat and of sweet nature, there is a strong possibility that he may not see yet another Christmas—unless changes are made to the present. Further, two destitute children are revealed to Scrooge, signifying want and ignorance, with the latter being especially detrimental.

The third ghost, the most frightening of all, allows Scrooge to see the Cratchit family without Tiny Tim, as well as a view of Scrooge’s own death, celebrated by many, grieved by—well, no one! However, The Ghost of Christmas Yet to Come gives Scrooge hope that as long as there is change, both Tiny Tim’s fate as well as his may be altered. In fact, in an abrupt turn-around, Scrooge does a 180 (he may have even done a few 360’s as well) and becomes polite, generous, kind-hearted and service oriented as never before. One can only assume that both business and personal lifestyles improve greatly as a result.

How then can we apply the lessons learned from this wonderful tale to both our personal and business lives? Let’s see where a Ghostly Gold Christmas leads us.

First, it seems that Scrooge’s business did well due to the fact that he had little to no competition. I’m sure that’s not true with your business however. But with fewer than 20% of organizations consistently performing above average, you have a real shot to lead your company past most all of the competition, encouraging positive approaches to change in order to achieve peak performance.

By using “The Gold Standards” of Leadership, (Scrooge would have approved if only because it involved gold) we can see how a leaders’ decision-making abilities can help achieve peak performance.

Managing Time: No one was better at managing time than the three ghosts who visited Scrooge all in one night. They not only helped show Scrooge his past, both what little he had done right as well as what he had done wrong, they followed that up with a good hard look at the present and what might happen if changes were made—or not.

How do you manage your time? Do you analyze what has been happening at your property? Look at what has gone wrong—make changes, and look at what has been right and make sure you use your time to your advantage and strengthen each positive opportunity.

Enhance Communications: Scrooge only communicated from the top down. His word was authority, and everyone that did business with him, borrowed from him or worked for him cowered under his demands. In short, that’s a lousy way to win friends and influence people.

Instead, make sure your organization communicates from the bottom up as well as from the top down. It must be a two-way street. Be sure departments communicate with each other to help coordinate events and make sure everyone is on the “same page.” And make sure individuals communicate with each other. People should not be seen and not heard. There should be feedback and ideas offered back and forth in order to strengthen the organization and allow everyone to build towards success.

Build Trust: The Ghost of Christmas Past instilled trust in a very skeptical Scrooge. In order to be able to step out of the bedroom window into the dark night air, Scrooge had to trust that he wouldn’t fall to his death. And later, when Scrooge awoke Christmas morning, he instilled trust in a child passing by, saying he would pay him handsomely if only he were to get the prize turkey from the local market to Bob Cratchit’s house.

Building trust is easy. Simply put, you do what you say you will do—every time! Building trust means that your subordinates, your peers as well as your superiors know that you will deliver with whatever you are dealing with. If you are fighting for a raise for someone who has done an outstanding job, or are recommending that an employee be terminated for continuous poor performance, everyone around you will learn to trust that you will be fair and consistent—and build trust.

Maximize Influence: Marley maximized influence when he explained to Scrooge that he was forging an even heavier chain to carry through life and beyond than Marley had made for himself. Scrooge too, would be condemned to walk the earth in penitence bearing this great weight of chain as he had shown no concern for mankind during his life.

Scrooge later learned to maximize influence when he enabled Tiny Tim to be cured. Through understanding, benevolence and caring, Scrooge influenced the outcome of Tiny Tim’s disease, enabling Tim to walk and live.

As a leader, you can certainly maximize influence by showing care and concern for all around you, whether at work or in your personal life. If you can pave the way and make some road easier to travel, why not do so? It will pay in dedication and respect. Leaders must not do only what is good for business, they must also do what is right—that for the good of mankind.

Facilitate Engagement: All three Christmas ghosts helped to facilitate engagement for Scrooge to see how his past affected his present and future. They enabled Scrooge to see and feel how the real world really was, and not just see Scrooge’s world. All three ghosts lead Scrooge to places he could never have gone by himself.

As a leader in your organization, how can you best encourage staff to make a difference in their work style and ethic? You must enable them through training and education, giving them the confidence to become fully engaged in their next opportunity. Guide them and encourage them to become totally involved. After all, there is no room in your organization for want and ignorance.

Achieving Goals: Upon becoming “reborn,” Scrooge found that he was able to lead himself and others towards goals that were unachievable in his prior life. With only the goal of monetary wealth being met, Scrooge could not even be considered a leader. However, by improving the well-being of Bob Cratchit and his family, by aiding Tiny Tim to become healthy and by showing love for his nephew Fred and his wife, Scrooge met many goals. It was said that he became as good a person as ever there was.

As a leader, you must be able to reach intended goals. Merely leading, while not achieving goals is akin to charging forward with no path to follow and no hope of reaching your goal. It is best to have both short term and long term goals in sight. When leading people towards a goal, it is good to be able to put a few short term goals “under your belt” in order to keep morale and enthusiasm up while striving to reach your long term goals.

To reach peak performance, effective leaders make decisions keeping each success point in mind. Unlike Scrooge, you won’t have help from ghosts or be able to revisit the past in order to see the present and change the future.

Instead, our approach will help by aligning action plans to strategies, tactics and time frames in order for you to know how best to stage, run and sustain change initiatives.

As Scrooge would say, trying to lead in any other way would be a, “Bah, Humbug!”

Surviving in a Sea of Unmanageable Data

By Cindy Estis Green

Hotel managers can find themselves adrift in a sea of data. What is happening in the business? What data is worth keeping? What statistics are worth tracking?

To paraphrase management guru Peter Drucker, "Data is not information; it is information's ore." In order to use data, it needs to be organized for a task and applied to a decision.

These tips will help you sharpen your business' decision making tools.

Create a wish list of the types of information you need by department.

Make a list for payroll, business development, yield management and inventory control, for example. You may want to track what you spend on staffing relative to what you receive in revenue in your restaurants, or identify which feeder cities produce revenue in your key market segments.

Decide what data is clean and available.

If guest home addresses are not captured at the time of reservation or at check - in, you will not have accurate information on what cities are producing business for you. You may need to review the processes in the department that collects the information.

Often, it is the front office and reservations that collects marketing information, although it is the sales and marketing department that uses it. Like wise, it may be food and beverage outlets that collect the payroll and revenue statistics, and the accounting department that analyzes the staffing levels.

The various departments must become partners in the data collection and analysis effort to ensure that the data is available in usable form.

Match up your wish list of information with the related data available.

Make a list of information your want, write next to each item the corresponding data sources.

Your wish list can be designed in a brainstorming session with you key management team. Then take one item at a time and be sure you have a source to generate that piece of
information.

Narrow the wish list to the top 10 pieces of information for each department.

Set priorities based on what information will help you improve revenue significantly or reduce and control expenses. Ask each department head to consider what information is known.

For inventory control, it may be essential to track usage levels for housekeeping supplies on a per occupied room basis. This information could be critical to controlling supply costs. It might be nice, but not necessary to rack price changes per month on each individual item.

Establish the data collection process by department.

Review each of the top information needs and its source data with each department head. Determine obstacles to collection clean data for each department and establish any systems and procedures that would be needed to ensure that the data is available and consistent.

For example, the reservation manager may need to establish a means for collecting pickup of new reservations for each of the next 60 days. The data may be available, but a system to store it on a regular basis may have to be created. Off the shelf spreadsheets are ideal for this purpose.

Monitor results based on information selected. Once every department is collecting the selected types of information, it is necessary to review how it is helping in revenue enhancement or cost savings. Data needs to be check for accuracy and consistency and the information needs to be checked for overall value to the property's profit goals.

Thirty Easy Ways To Support Your Industry

It's actually 29 ways.....(List provided by the Florida Hotel & Motel Association.)

by Kirby D. Payne, CHA

Kirby D. Payne, CHA is Secretary Elect of the American Hotel & Motel Association, and Chair of the AH&MA's International Council of Hotel-Hotel Management Companies.

In a recent conversation with Bill Fisher, President of the American Hotel & Motel Association (AH&MA) about membership and the value of membership, Bill made a comment which I thought was particularly noteworthy.

He said, "The industry and its trade associations can only be as strong as those in the industry let it be." The first step in supporting the industry is joining a state association affiliated with the AH&MA. The second step is being active in taking advantage of its benefits, volunteering time on its committees and being an active leader so the association addresses the issues you feel are important.

When you avidly support the AH&MA and its affiliated state associations, great things happen: You grow professionally; you advance the well-being of your industry; and, you generate renewed enthusiasm for your own job or profession.

The best news is this: You can support the work of your industry's trade associations almost any time, with modest effort on your part. Here are 30 ways to do just that. (Not all programs and benefits are available in all states.)

1. Take advantage of association programs designed to improve your bottom line, pare your expenses and extend your education.
2. Independent hotels & motels and smaller management companies can expand the benefits offered employees with the state association's insurance, retirement and other benefit programs where they are available.
3. Update your workers' compensation insurance program and risk-management policies by comparing your current carrier to the association's partner in your state.
4. Observe national and state Tourism Week (usually in May) with special recognition or "thank you" promotions for guests and employees.
5. Many state association have school-to-work programs to area high schools and their students. Support them and promote them so young people think of our industry as a possible career just as you did when you started.
6. Make a tax-deductible donation to association's educational trust fund and the AH&MA's American Hotel Foundation which supports scholarship and industry research like the Best Practices survey currently underway.
7. Drop a note to your state association's conference coordinator offering ideas for the next events. They are, after all, your events!
8. Call your state association's headquarters or the AH&MA's resource center when you need information on a topic of interest; and, say "thanks" after you receive it.
9. Keep the names of your state's association officers and staffers handy. When you meet someone who might be a prospective member, pass the names along right away.
10. Send news releases and other positive information about yourself or your business to both your state association's publications director and Phil Hayward, Editor of Lodging, the AH&MA's management and trade magazine.
11. Display your membership plaque at your place of business, along with any association awards you've received.
12. Let your employees know about continuing education and certification opportunities available in their areas of responsibility, through the Educational Institute, now located in Orlando. Consider paying for their courses (when they pass them) and giving pay increases when they complete certification programs.
13. Renew your annual membership promptly.
14. When you have occasion to meet legislators and other public officials, speak about the value of tourism to local, state and national revenue coffers ($67 Billion in taxes in 1996). Support both your state association's Political Action Committee (PAC) and the AH&MA's AHMPAC by giving any amount. It is your right and obligation to speak out and the two best ways to do that are directly to legislators in person or in writing and by donating to our PACs.
15. Volunteer to serve on one committee and there are plenty of them at the state and national level to keep an organization like our running smoothly. You will influence the issues important to you by serving on a committee!
16. When colleagues make the news, drop them congratulatory notes (if the news is good) or notes of encouragement (if the news is bad).
17. Pass along copies of relevant newspaper or periodical articles to other members.
18. Schedule lunch with a nearby member (or non-member) every once in a while.
19. Leave your association publications in your office waiting area for others to read.
20. Write a "letter to the editor" of your state association's trade journal or Phil Hayward at LODGING or any other trade publication on a topic near and dear to you about the lodging industry or what they may have recently published.
21. Encourage properties or companies related to lodging to become members in their appropriate categories. Always give Allied Members an opportunity to quote along with other vendors. They are supporting us, we should support them.
22. Offer to serve as a mentor to an association newcomer or a student considering a career in hospitality.
23. Mention your association's (industry's) deeds and principles whenever you speak in front of civic or business groups. These include our supporting over 6.8 million jobs, paying over $121.6 Billion in salary and wages and creating nearly 200,000 new jobs a year for our national economy.
24. Publicize your association affiliation when participating in media-covered events.
25. Schedule upcoming dates for association activities-chapter meetings, national conventions, committee meetings-and block out time for professional reading and study.
26. Evaluate your participation in association activities from time to time. What have you done well? Where can you improve?
27. Add association membership and certification to your biography or resume.
28. Encourage subordinates you are developing to attend industry trade events and to serve on committees, too, so they learn valuable leadership and civic skills that will serve you and them well as they grow in this industry.
29. When considering purchases of products and services, please consult the various annual Buyer's Guide for your state association and the AH&MA and encourage vendors to participate in association membership and trade shows. Recognize Master Hotel Suppliers (MHS) just as you would CHAs.

Our industry is a great industry with proud traditions. It is a profession that people look up to in every community. We are the hosts, the civic leaders and in many cases the shapers of some local opinion for both the public and our government leaders. We do this individually in our communities and as we develop skills we do it at the state and national level. Our trade associations facilitate that effort.

Our trade associations are not a club, but a commitment to profit. Your properties' memberships in their respective state associations and the AH&MA provides opportunities for generating business for all hotels on the international, national and local levels. Forty-eight million room nights per year are filled via listings in the AH&MA's directory, the OAG Business Travel Planner Hotel & Motel Redbook. AH&MA's state associations help fill millions of rooms through their effective directories which are distributed at convention and visitors bureaus and state welcome centers. And finally, our strong and unified voice helps increase national and state tourism budgets. Because growth is the key to a prosperous hospitality industry, our primary focus is to help you keep costs down and profitability up.

For information about the American Hotel & Motel Association, affiliates and the various member state associations and their programs call 202-289-3100 or go http://www.AHMA.com.

What Do Guests Want in Their Room?

by Kirby D. Payne, CHA

Kirby D. Payne, CHA is Secretary Elect of the American Hotel & Motel Association, and Chair of the AH&MA's International Council of Hotel-Hotel Management Companies.

What do guests want in their room? The answer is clearly going to be more than a bed with sheets that have been changed since the last guest checked out! For the purposes of this column I am going to assume you understand the minimum furniture and bathroom fixture requirements, cleanliness standards and a comfortable fresh residential (or at least non-commercial) feel to the room.

Recently (April 1998) Lodging Hospitality (LH) Associate Editor Carlo Wolff wrote an excellent short column on this subject. Apparently Lodging Hospitality which is part of Penton Publishing did a survey among travelers "culled from their Penton Executive Network, which includes readers of about three dozen business publications."

According to LH's findings business travelers favorite amenity was a newspaper at the door followed by basic cable television. Leisure travelers' first and second preferences were basic cable television followed by an iron and ironing board in the room. That surprised me as I expected people to care more about appearances when traveling on business. The iron and ironing board ranked sixth for business travelers.

What else, according to LH, was in the top five: in-room coffee maker; premium TV channels; and pay-per-view TV. The line up for leisure travelers was completed by: premium TV channels; in-room coffee maker; and pay-per-view TV. Pay-per-view was a distant fifth according to their findings. Surprisingly, according to Wolff, dataports in the telephones were not that highly rated by either group though, obviously, business travelers rated them higher than leisure travelers.

USA Today was the "overwhelming newspaper of choice" by travelers. The Wall Street Journal (WSJ) was second. In our hotels I've found that the demand for the WSJ is a function of average daily rate and level of service. As one might expect, higher level hotels typically attract business travelers who are more in need of the information in the WSJ unless the leisure market for a particular hotel is comprised of retirees who follow the market. Hotel chains are responding to this same type of information by making, and rightfully so, USA Today a standard amenity requirement.

How can you use this information? Act on it! If you don't have these amenities in your hotel get them now. Some are obviously good for all markets. In-room coffee makers is an example of this. The cost is so minimal but the guests appreciate them and they make a great additional feature to compete with both for new guests and return guests. Newspapers can easily be delivered to the door. In small hotels with limited staff the night auditor can do it. If USA Today is not available early enough in your area use the local paper or one from a nearby metropolitan area. Who knows it may be the home paper for a lot of your guests.

If your cash is limited, only put the iron and ironing board in the rooms you get the highest rate for. This is also true of the in-room coffee maker, though I encourage you to reach down into your pocket and get them for all rooms. If those "upgraded" rooms are about to sit empty, upgrade people to them. It will help repeat business and word-of-mouth advertising.

I mentioned earlier that these amenities are helpful in competing for new guests. Your reaction may have been to think of noting these and other amenities in advertising and that would be very important. Possibly a more important thing to do is mention them before quoting a room rate. Tell people what your price includes before quoting the price. Say something like, "Our price for that room includes a USA Today delivered to your door early in the morning, an in - room coffee maker with free coffee for you to brew fresh when you get up, and premium cable channels like CNN, ESPN and HBO. All that for only ..." and quote the room rate unapologetically. If you offer a free continental breakfast describe it in glowing but honest terms.

Sell your rooms by offering value before you offer discounts. Remember Average Daily Rate is profit.

In case you missed the Sunday May 10th Star Tribune Travel Section they had a little sidebar from Newsday quoting American Express Travel Trends Monitor. Here are some quotes on how vacationers choose their lodging: "Almost half (49%) look for a courteous staff, followed by cable TV (36%, fast check-in/checkout (33%), complimentary breakfast (32%), knowledgeable staff (18%)..." Remember the telephone inquiry and reservations call is that potential guest's only opportunity to evaluate how courteous and knowledgeable the staff is. Focus on the quality of telephone service while small hotels must keep in mind not taking attention away from people standing right there at the reception desk.

The same sidebar noted that only two percent of dissatisfied guests fill out the comment card placed in their room. Four percent never go back and 14% do nothing. That data sure doesn't give one confidence that we are totally aware of our guest's problems!

Human nature about complaining in hotels probably hasn't changed much over the years but I'm old enough to remember when direct dial in-room phones, color televisions were sought after amenities and USA Today, guest room voice mail and pay-per-view movies hadn't even been thought of.

Bluefin Bay: A Study in Resort Management

by Kirby D. Payne, CHA

You may not have heard of Rysdahl, Buntz and Associates but their biggest success has been written up in consumer publications as, "worth the drive!" I am talking about Bluefin Bay Resort, one of the most successful resorts in Minnesota and possibly the only successful resort with condominium ownership as its primary form of real estate ownership.

What do I mean by success? See if you agree with my definition. The condominium owners are happy because they are either receiving more cash flow than the original projections they were given several years ago or they have sold their units for a nice profit over their purchase price, usually after less than a month on the market. There is a waiting list of prospective buyers now. Bluefin's condominium owners are typically getting an 11% pre-tax return on their total investment or 23% after-tax cash-on-cash return. Dennis Rysdahl and Rob Buntz are happy because they are making money through management of the condominium rental units and ownership of their adjacent restaurant and bar. They also have delivered on all their promises to lenders who either get paid early or at worst on time, a rarity in the hotel business these days, condominium owners, guests of the resort and employees.

How might other resort, hotel, and motel owners and operators benefit from Dennis and Rob's success? They might see if a few of the things that Dennis and Rob believe to have been essential apply to their situation. Dennis mentioned the following items in a presentation to the Condominium Owners Association in late April as being very important:

Continued capital improvements

Dennis and Rob only require them of condominium owners and themselves if the result is either improved productivity or an enhanced guest experience at a value greater than the cost of the improvement. Dennis says, "New bedspreads are an investment, not an expense." And he is not mentioning tax benefits, this is real investment for real return.

Ongoing maintenance

This important daily function reduces operating costs, increases productivity and enhances the guest's experience. Engineers regularly go through every condominium unit with a five page list of things to check everything from shower head flow to loose doorknobs. Dennis estimates that this costs almost $100 per inspection on each condominium unit of one or more bedrooms, full kitchen and living/dining area. He states that the payback is no down-time, reduced repair costs and guests getting what they pay for every time the unit is occupied.

Guest oriented design and amenities

When Bluefin Bay was built and equipped and through subsequent upgrades there were several design and equipment items which in retrospect have proven to be very worthwhile. Among those he mentioned were a whirlpool tub unit overlooking Lake Superior, fireplace, stereo cassette player, coffee makers, microwaves and at least one VCR in every unit. High quality bedding, especially, sofa beds, and upscale furniture throughout the units are complemented by residential style accessorizing. Details such as quality kitchenware, utensils, china and flatware in all the kitchens are required. Regular Quality Control inspections help assure that all owners in the rental program keep their units up to the standards of a four star hotel. Tofte Management, a Rysdahl, Buntz and Associates affiliate which actually manages the day-to-day operations of Bluefin Bay Resort, operate design consulting and bulb furniture purchasing programs in order to make these processes as simple and inexpensive as possible for the unit owners.

Personnel management

Dennis and Rob sponsor an annual retreat for upper and middle management. They accomplish a variety of things ranging from team building exercises to business planning. They firmly believe that in addition to careful recruiting, orienting and training of line employees, that higher pay rates have been instrumental in reducing labor costs. Yes, higher pay saves money! Two years ago their average hourly pay rate was $4.50. It is now $6.50 and their goal for the beginning of 1992 is $7.00. Therefor, in a resort area with a serious labor shortage, they get both the best possible applicants to choose from when there are occasional position openings and they have very a very low employee turnover rate of less than 20%. Dennis calls it "investing in employees." Their kitchen manager is off to the Culinary Institute of America in New York at Dennis and Rob's expense this summer. The Assistant Manager for front office and Comptroller got a $45,000 property management system to tie into the bar and restaurant's new point of sale system. These systems are all first class, no cigar boxes here! Clearly they are investing in people and productivity.

Targeted and creative marketing

Rob coordinates most of the marketing for Bluefin Bay though Dennis gets a few programs going, too. The marketing effort is focused on the slow periods, which they refer to as the "quiet time" of this seasonal resort thereby turning around a negative which must be overcome into a positive to promote. Seasonal is all in the eyes of the beholder though, because Bluefin Bay achieved nearly a 70% occupancy in 1990 while achieving an Average Daily Rate of over $140 giving them a revenue increase from 1989 of about 18%. It wouldn't be fair to give you their market plan but here are a few things they are doing that make them special. They have always considered their return guests as the most important market and communicate with them several times a year with the "Bluefin Fishwrapper" newsletter which Rob publishes.

They adopted two miles of highway to clean and subsequently got radio coverage for doing it. Oh yes, they are going to get their guests to do the actual work next time! This last time the condominium unit owners did most of the work. Good citizenship, you know!

They participate in various programs including the Endangered Species Program with the DNR for which they received honors, contribute to the U. M. Department of Tourism Chair, Dennis chairs the Lutsen/Tofte Tourism Association Golf Committee, help maintain the Superior Hiking Trail, etc.

Their Kitchen Manager's recipes appear occasionally in the TASTE section of the Star Tribune.

They carefully negotiate trade outs with the print and radio media which appeal to Bluefin Bay's target markets.

In the end I believe the secrets to Dennis and Rob's success are focusing on increasing revenues and reducing costs. Nothing new, but their success at achieving these goals is the result of their strategy: working with their staff to develop results-oriented detailed plans and a constant awareness of the need for change and improvement.

Finally, they strive to send each guest home with a sense that the value received was greater than their final bill through a continuous effort to enhance the accommodations, grounds, services and every con-tact with staff members.

One condominium owner told me that his only worry about his investment was something happening to Dennis and Rob and having Rob's dog Booth take over! Booth doesn't think about details much but the guests and staff loves him.

Community Action a Good Solution Forming a Visitors & Tourism Bureau

by Kirby D. Payne, CHA,

Recently our company felt forced to get involved politically with two issues at the local level as opposed to the state and national level where we are more comfortable. At the state and national level, getting involved Can insure your opinions are known by legislators, policymakers and regulators. Depending on the issue making your opinion known can have significant impact on the outcome of very major issues. At the local level community action can have immediate and direct impact.

Issues Arise Over Tourism

The first of these local issues related to forming a Visitors & Tourism Bureau in Hinckley, Minnesota where our company operates the Best Western Gold Pine for owner. The funding for such a venture typically comes from the proceeds of collecting an occupancy tax in the community. In Minnesota, to accomplish that a city ordinance is necessary. In this column I will describe the process and the results.

The second issue relates to the planned development of a new hotel across the street from the Econo Lodge we operate near the University of Minnesota in Minneapolis for two investors. In that case we felt the new hotel would both hurt the our hotel to the point of possibly putting us out of business but was also not in the best interests of the community encompassing the area immediately around our hotel. In a future column I'll detail the events and what happened. The effort is still underway as this column is being written.

VTBFor Hinckley

The need for a Visitors & Tourism Bureau (VTB) in Hinckley was foreseen several years ago by one of our competitors. In 1992-1993 Emmett Erpelding, whose company operates the Holiday Inn Express in Hinckley, began to anticipate declining business among the hotels in Hinckley which were not affiliated with Grand Casino in one way or another. Supply would increase about 150 rooms in 1994 with the addition of the Grand Hinckley Inn and was rumored to be increasing another 300 rooms in 1995 or 1996 with the addition of another hotel immediately adjacent to Grand Casino on the reservation.

When Emmett first discussed his VTB idea with me in late 1993 1 had mixed feelings. When I discussed it with our client, who ultimately would have to live with the VTB's effects on market performance and the potential sales price of his hotel in the future, he was opposed to the idea for two principal reasons. These were the traditional don't get involved in raising taxes of any kind, ever and what if the Hinckley hotels didn't have control and other Pine County hotels and businesses in general did.

In late 1994 we began to realize that the negative impact of the opening of the Grand Hinckley Inn was going to be much greater than we anticipated. At this point Emmett and I discussed the matter again and I did a little research with the help of Tom Newcome, Esq., General Counsel and Lobbyist for the Minnesota Hotel & Lodging Association where Emmett and I serve on the Board of Directors. While I got some good technical advice about the state law regarding occupancy tax, one fact was very important to me. With one exception, counties cannot enact occupancy taxes. Only incorporated towns and cities can do it, Counties only come into play in the case of unincorporated townships. This was important to me because one of our client's principal objections was his fear of a VTB being controlled by entities outside of Hinckley who might have different goals from Hinckley's hotels. With that hurdle out of the way and business continuing to decline I got the go ahead from our client to proceed. With Emmett on an extended trip early in the year the task of getting the process started fell on me.

Letter Writing Campaign

I started by preparing a letter to each Hinckley City Councilperson asking them to enact an occupancy tax for the purpose of funding a VTB. The letter was sent to their homes and included historic information regarding the market's occupancy and reference to the applicable state law. This letter was followed up with telephone calls by several people and discussions in various interested forums including the monthly hotel marketing meetings which take place in Hinckley to coordinate activities with Grand Casino. The feedback we were getting was that the hotel operators in Hinckley had divergent opinions or were ambivalent. The Council Members had mixed feelings also but we felt the Mayor was in favor of the idea.

A second letter was sent to Council Members and about the same time the subject was placed on the Council's agenda as a discussion item. A few hoteliers appeared and commented on the idea. At the Council meeting Council Members took note of which hotels were absent and what the room count in favor and opposed seemed to be. The Council decided to have an informal meeting within a few weeks with the hotel operators in order to try to get them all in one place and hear their views.

First Council Meeting

That meeting was very similar to the Council meeting but the lines between those in favor, opposed or not taking a position were more clearly drawn. The Pine County Tourism Association which wanted a county wide program was also represented. Some of those appearing who were opposed to the idea were not as familiar with the law as they might have been and may actually have hurt their credibility in the process. For example, one person believed that a VTB could not hire paid staff and could only use its money for direct promotional purposes and as a result could only function with volunteers from Pine County Tourism Association. Clearly, most Convention and Visitors Bureaus (CVBS) and VTBs in Minnesota have staff and office space. Look at Bloomington, Burnsville, Minneapolis and Saint Paul for large examples.

Subsequent to that meeting the Council decided to hold a formal public hearing and invite any who had an interest in appearing. Between the two meetings conversation continued among hoteliers and interested community and county parties. Jim Ausmus, Hinckley's City Clerk/Administrator was asked to research the disputed points of law and operational issues with the Minnesota League of Cities and other sources. We sent follow up letters to Council Members and worked with community members to garner support for our position. We also evaluated the position of each hotelier very carefully.

Change of Feelings

Those that we felt would modify their position based on reason were visited with informally in different forums. Fortunately, their positions started to change. In one case, I wrote the President of the owning company detailing the issues. In the letter I asked that he consider directing his General Manager to change his position. That General Manager, for whatever reason, became neutral on the issue. By the time the public hearing occurred in May most hotels were in favor of the ordinance, a few were neutral and only one was opposed.

Some Opposed

The owner of the hotel which was opposed to the ordinance felt strongly that it was inappropriate to add more taxes and that other than 1-35 traffic and Grand Casino there was not much more that could be done to attract additional business to Hinckley. He felt particularly strongly that the average price increase of $1 to $2 in taxes would hurt business in Hinckley and cause people to go elsewhere. That, of course, begged the question that with over eighty communities in Minnesota charging an occupancy tax where would someone go. His more valid argument as a native of Hinckley, which he stated very tactfully, was that he didn't want more business going through the community and didn't feel outsiders should be trying to run the town. My job, of course, is to look out for my client's financial interests even if I agreed with that particular thought.

At the public hearing the Pine County Tourism Association took the position that the tax would be divisive between the county and Hinckley. The proposed solution was for Hinckley to collect the tax and turn it over to the Pine County Tourism Association to be managed. That idea didn't go far but the proponents of the occupancy tax may have had a moment of concern when I jumped up and accused the representative of the Pine County Association of trying to hijack our tax revenues!

Ordinance on Agenda

A few days after the public hearing the Mayor placed the ordinance on the Council's agenda. That was a good sign because for all practical purposes he could have killed the idea by not doing that just as he could have by not having the hearings. During the period between the public hearing and the Council vote, anyone with an interest in the subject was discussing it and lobbying the Council Members and each other in one fashion or another. I was fairly confident that we would prevail and get the ordinance.

Not only did that happen a few weeks later, but both Emmett and I were honored to be appointed by the Mayor along with Jim Ausmus to form the entity and develop the Bylaws. We met about ten days later and discussed the issues relating to the Bylaws. These were drafted in about two weeks and circulated to the hotel operators for comment. After a few adjustments to the Bylaws they were signed the week of July 10th and circulated so that Directors could be appointed appropriately in time for the first meeting of the Board of Directors on July 18th-

The Bylaws are somewhat unique in that the VTB will not have members but rather any one can participate at no cost other than for any services they may buy such as advertising. The VTB will not be competing with Hinckley's Chamber of Commerce for membership dollars. Another unique factor is that in addition to each hotel appointing a Director, three constituencies were identified as having a right to participate and have representation on the Board of

The three constituencies are: the Chamber of Commerce with two Directors representing the other business interests in Hinckley and the surrounding area; the City Council will appoint two Directors to represent the City of Hinckley; and, to insure that Pine County's tourist attractions are considered, the Pine County Tourism Association may appoint one Director.

This was my first time being involved in seeing an idea taken through the entire process at the community level, I learned a lot from it and enjoyed it. It was great to be a part of executing Emmett's idea and it will be rewarding to be active in the Hinckley Visitors and Tourism Bureau and seeing all of the city's hotels reap its benefits.

Get Involved in the Legislative Process

by Kirby D. Payne, CHA , February 2007

The Minnesota Lodging Association, in conjunction with the Minnesota Restaurant Association, like many other state associations across the United States hosts an annual event called Hospitality Day at the Capitol. The American Hotel & Lodging Association (AH&LA) has a similar event in Washington, DC called the Legislative Action Summit (LAS). (To learn when the next LAS is visit AHLA.com.) The recent mid-term elections prompted me to reflect back about how my interest in being more active in the political process evolved. Some people define "active in the political process" as voting in major elections while others define it as being a politician or a lobbyist.

A majority of the people I know fall in the first category every four years and occasionally every two years, if they are really dedicated. Really interested voters may even read the headlines and first paragraph of news articles about the current big issues like minimum wage, congressional ethics, the fallout from the recent election, not to mention the war on terror around the world. Not enough people in our industry, particularly at the hotel operations level, fall into a third category: those that are aware of the issues and make the effort to express their opinions to their representatives or give guidance to sympathetic lobbyists by being involved with industry associations.

Influence of the Individual

The most influential group among us may be individual citizens who simply contact their elected representatives at any level of government.

It doesn't take much effort to vote occasionally and the result is that you and many others have elevated someone to the highest office and responsibility they have ever had. The question arises as to whom is going to keep this elected person's feet grounded in reality? They have to hear from us.

This leads me back to Hospitality Day at the Capitol and the Legislative Action Summit. Several years ago I was asked to speak about sharing my views with legislators. I realized many years ago that writing my state and national representatives about my opinions was not only acceptable but my responsibility. I encourage everyone to do at least that. If you can participate in a more active and personal way, that would have even more of an impact. Believe me, they want to hear from us. They certainly aren’t experts on all issues and they are keenly aware of their need for guidance from knowledgeable people.

Legislators really appreciate hearing from hoteliers and others that provide insights and assistance that helps them determine public policy. They understand that each hotelier employs several of their constituents. They know that by working with you, they are also communicating with many others that they represent.

Most people don’t write to their elected representatives. This is what makes those letters they do receive so important – legislators realize that each letter represents hundreds of their constituents’ views. Another powerful tool is to write letters to the editor of your local paper. Elected representatives read papers just like you and I. However, they tend to read the letters to the editor of their local paper before anything else because they understand that it is their constituents’ opinions that are written there and that each letter reaches their entire district and may represent thousands of people.

Help from the Associations

If you are not sure what to say, simply write a draft letter and send it the Government Affairs department for your association at the state or national level as appropriate. They will be glad to comment on your letter, help you with accuracy and generally make sure you don't put your writing “foot” in your mouth. Even if you don't need their input, it is important that you send them a copy of your letter. This helps the government affairs department staff know what the various members of our industry feel and what comments the various legislators are receiving so they can follow up on them.

For me, the next step was calling legislators on the phone and visiting with them in person. I procrastinated for years out of fear that I was not going to present myself and my industry properly. For those who know me, it may be difficult to picture me afraid to talk to someone. Frankly, I had even visited several prominent national politicians, hosted them in my hotels and visited with former President Reagan and his wife alone over dessert many years ago. Trust me, it's not the same as letting your own representative know face-to-face what you believe and want.

My election to the position of treasurer of the Minnesota Hotel & Lodging Association many years ago prompted me to contact my legislators in person. I realized that if I was going to represent my peers in forums and legislative committees I had to learn to talk to legislators without being awed by their elected position. This served me well when I was elected as an officer of the AH&LA.

Visits a Natural Step

I convinced myself that visiting with a legislator was a natural step after writing to one. With encouragement from Tom Day and Tom Newcome, lobbyists for the Minnesota associations, I started writing to my state senators and representatives advising them that I would be calling to make appointments and to discuss issues. Note that I wrote them to tell them that I'd be calling. Writing first made the steps easier and it set an agenda for the subsequent meeting. I also made sure that Tom Day's schedule allowed him to accompany me so he could go on my first appointment with me. I was, to say the least, apprehensive.

I started with my local legislators but eventually needed to deal with a number of state legislators. Obviously there is a senator and a representative associated with the district where I live, where my office is, and where my hotels are. While the legislators representing one's district of residence are most interested in your views, those representing your business districts are also concerned about the impact of legislation on the business and its employees. Each of us usually has at least two senators and representatives that we should contact.

Before visiting with a legislator, at any level, be sure to know a little about the person and what issues they tend to be interested in pursuing and what side of you issues they may already have taken a position on. Also be familiar with how an issue affects your business and the others in the area. Both state and national elected officials value being updated about what is going on locally.

In addition to you making appointments to visit them, legislators appreciate your inviting them to visit you. Legislators often hold town hall meetings where they hear from their constituents in an open forum. Hotels with large meeting rooms are ideal locations for these events. In offering space for these, hoteliers develop a personal relationship with the legislators and their staffs. Tours of your hotels also provide a great opportunity to educate and develop a close relationship with your representatives. Most people, including legislators, only see the lobby and guestrooms of hotels. They do not understand what it takes to make a hotel run. A simple tour of your property can provide insights to the complexities of running your business, from tax depreciation issues affecting your equipment to immigration issues that allow you to provide the service they expect. Before long, they will be calling you for advice.

Hidden Issues

Issues before our legislators are both big and newsworthy or small, quiet and expensive. Sure, we're all aware of the minimum wage and various tax rates. But were you aware of the elevator inspection issue? Or how about the changing breakfast buffet sanitary requirements and fees or some similar national or state issue that will cost our industry money?

I happened to be sitting on a subcommittee hearing where a union associated with the electricians had their business manager, a unionized electrical contractor and lobbyist testify that elevators are never inspected after they are installed in Minnesota and that any one can work on them. Obviously, they felt that only licensed, union electricians who had gone through the traditional apprentice, journeyman, and master program should be allowed to work on elevators. No one mentioned that electricians don’t know about hydraulics, emergency breaks and the mechanical safety devices on the doors! The legislators need to have this pointed out to them.

For that particular issue, no daily paper or television station reported this minor amendment. They only covered minimum wage, worker's compensation and the local utility’s nuclear waste. Had I not attended the hearing, I would never have known about this important and potentially costly issue being decided by the representatives. If some minor amendments make it through the entire legislative process, costs and hassles will increase at many hotels without an offsetting benefit.

Certainly, I am not recommending that we all start attending legislative sub-committee meetings. At the national level and in most states we are lucky to have an excellent paid staff to monitor legislative and regulatory issues and a politically active membership. Through their Government Affairs and Legislative Committees, Grass Roots Network and Political Action Committees (PACs), the associations' positions on issues are brought to the attention of legislators throughout the various states and in Washington.

Association web sites are a good source of information on issues of interest to our industry. All branches of government and virtually every elected official have a web site as well.

PACs

PACs raise and disperse funds within the guidelines of law for use in funding some of our industry’s efforts to bring our views to Congress and our legislatures. PAC fundraising functions at the state and national levels are also excellent opportunities to get together with your industry peers.

PAC is not a four letter word and contributing to a PAC is not a bad thing only done by the corporate titans and lobbyists. Contributing to the PAC of your choice in any amount, no matter how small, is simply exercising your right to free speech. It is another way to exercise your constitutional right to petition your government. One should seriously consider contributing to our industry’s state PAC in your state and national PACs such as HotelPAC (AH&LA) or that of your company, if it sponsors one.

Grass Roots Networks

Many state lodging associations have a Grass Roots Network. The Grass Roots Network consists of a core group of volunteers from the association. These people serve as the base of a statewide telephone or email network (calling tree). The state is divided into zones made up of several legislative districts. In each of these there are volunteer zone captains who contact about five area managers who, in turn, contact at least five members who have volunteered to participate by contacting their legislators. This system generates hundreds of calls or emails to legislators throughout the state.

The Legislative Action Summit and Hospitality Day at the Capitol are a series of events while Congress or the state legislature is in session. Owners, management, staff and families from the industry come to Washington, DC or the state capitol. The sessions usually consist of legislative updates and an orientation to the current issues before the legislators which affect our industry. Usually several political leaders and consultants will speak to the group.

Before people head over to the legislative or congressional offices, the government affairs staff will refresh everyone's memory on proper etiquette for expressing one's views to a legislator. We're reminded not to threaten them with withholding our vote next election, not to exaggerate, and not to be awed by them.

After the meeting with their representatives people return to meet with their Grass Roots Network members from their zone to discuss their legislators’ responses and to share their own positions on various items of legislation. Usually in the late afternoon or early evening the legislators and/or their staff members join the members for cocktails and hors d'oeuvres.

These events are a tremendously motivating civics class where members of the hospitality industry can participate in government in an encouraging and reassuring environment.

Everyone Benefits

Clearly everyone benefits from the AH&LA’s and our various state associations' efforts in the legislative arena. Those who don't belong to the associations and as a result are not participating at any level in the governance of their state and our country shouldn't complain about what results from the legislative sessions because they did not volunteer to contribute to the process.

Those that participate at any level and especially those that volunteer to serve on the Government Affairs Committees or Grass Roots Network or even just contribute to a PAC have a right to complain because they went a few steps beyond voting. I invite you to become a legitimate, licensed complainer by at least taking that first step of writing a letter.

Hotel Turnarounds - Sometimes You Get Lucky

by Kirby D. Payne, CHA

Usually hotel companies like ours assume the management of hotels which have been run into the ground by the previous owners prior to foreclosure by the lender. With a typical lender's short outlook on their ownership of a property, immediate results are appreciated but usually not easily achievable.

Recently we were fortunate to encounter an exception. The hotel in question is a full service 150-room hotel with a moderate average daily rate with a well known franchise in the capitol of a western state. The hotel's location is about ten blocks from the capitol complex in the opposite direction from the central business district in an area generally known to be on a comeback from its drug and crime problems. The hotel has been in the lender's REO portfolio for about two years and was managed by a moderate sized hotel company which had originally intended to buy it because of its proximity to major hospital complexes.

The original management fee was eight percent of gross revenues but was reduced to five percent in January 1991. The hotel had received a default notice from the franchisor due to failed inspections, primarily in the cleanliness and maintenance areas. We had been in discussions with the lender since early in the year due to the lender's feeling that the approximately $200,000 dollars they had put into the hotel to cover operating losses was excessive and that the operating results were unacceptable. Our assuming management was delayed until August 1st because the lender didn't want to make a change of management when they anticipated selling the hotel in the very near future. The hotel was actually under contract numerous times and the lender's reluctance to change management was reasonable under the circumstances but their frustration increased as losses continued. A closing finally occurred on December 15th, 1991 and as a result we only managed the hotel for 135 days.

We knew about the anticipated sale when we walked on to the property but took the attitude that it might fall through and we would be there for an indefinite period of time. Upon assuming management, we immediately addressed three issues: passing the franchise inspection which was due in six days, cutting expenses and increasing revenues. We addressed these priorities in that order.

Passing the franchise inspection was relatively easy to plan but took a lot of work hours. The previous failures were primarily for guest room cleanliness, failure to paint guest room doors and maid carts, as well as some maintenance and operational issues. All of these items were prioritized based on their point value and corrected. Additional effort went into enhancing things that impact a guest's perception of the property when they enter as these also impact an inspector. Among the enhancements made was planting $350 worth of evergreen bushes in the unkept planters at the entrance of the hotel. For the inspection, twenty-five rooms were selected for their high maintenance level and deep-cleaned as well as possible. Painting was completed (we missed two maid's carts which the inspector found). The change in management companies sufficed on the operational issues. The inspection was passed based on the hard work of a few department heads and the line staff.

Cost reductions were the next point we addressed with the same degree of urgency. The first area of reduction was benefits. As a company that primarily manages for lenders on short term contracts it is impractical for us to offer health insurance, retirement benefits and complex vacation and sick pay accrual programs. As a result, when the employees were terminated by the former management company they lost all these benefits while the lender quit incurring their costs. This was a sizeable amount but no employees were lost in the process.

The preparation for the inspection gave us a tremendous opportunity to see who the competent team players were among the department heads. Based on this information the General Manager, Front Office Manager and Maintenance Supervisor were terminated. The first two positions were replaced with internal promotions of very fine staff members and at less expense. A new Engineer was recruited externally who was technically more able at a slightly higher salary. The Food and Beverage Manager was promoted to General Manager and was not replaced due to the low food volume.

Extraordinary expenses were addressed next. Housekeeping was in the habit of maintaining a low staff and using contract labor during peak periods at the rate of over $10 per hour. Not only do these inexperienced contract laborers cost more to do unsatisfactory work (remember the franchise inspections), but they are not sensitive to the guests privacy and property. By working with the Executive Housekeeper and promoting one of the utility men to Assistant Housekeeper, productivity and staffing in this department improved and contract labor was eliminated.

Other major expenses were eliminated. These included a computerized front office system which was on lease for $500 plus over $400 for maintenance monthly. A used electronic register was obtained for $2,500 and installed within six weeks. The previous company retained a management consultant at the rate of about $500 a month and this was discontinued. Local telephone lines previously on a metered rate were converted to flat rates for a savings of up to $800 per month. Long distance that was previously on AT&T's standard rates were converted to AT&T's SDN rates resulting in a net savings of about 25%. The armored courier service for deposits was discontinued at a savings of over $200. Front office overtime was reduced. All purchases are now reviewed by the new General Manager. Energy expense is now a priority with HVAC units and lights being monitored to insure that they are off when not in use.

As a final expense reduction the lounge was closed rather than investing the time and resources into trying to turn it around. Its location inside the hotel, without street access and signage, handicapped it. We decided the resources necessary to correct the lounge would be better utilized by adding them to the resources necessary to increase the potentially more profitable room revenues. Currently, the hotel's coffee shop is open for three meals a day seven days per week. A majority of the breakfasts served were free limited hot ones included in the room rate. We were analyzing the impact of not serving breakfast on weekdays and simply offering a complimentary continental break fast in the lobby. As an interim step we discontinued the free breakfast for most market segments.

Increasing revenues during the last quarter of the year is an important priority as the hotel's season usually ends in mid- September. We wanted to avoid asking the owner for funds if at all possible. While revenues have increased compared to previous periods this year the trend of the increase is not sufficient to carry the hotel through the winter. The Director of Sales had previously only done limited outside personal sales calls and had relied heavily on direct mail to tour operators.

A new street fighting mini-marketing plan was developed. The first thing we did was modify the name of the hotel by deleting part of the neighborhood reference and adding the word "Downtown". We felt this would distance us from some of the area's negative image without losing our identity while also moving us closer to the central business district. Outside sales calls of area office buildings, government agencies, hospitals and association offices were made a priority. Travel agency commission requests for the past six months found in the former Front Office Manager's office were paid. These agents along with those ordering brochures from the hotel's fulfillment service were added to our company's data base. These agencies known to have an interest in the destination and hotel will be solicited by direct mail.

A direct mail campaign offering an outstanding value was mailed to all high schools in the state and paid for itself within two weeks. Two advertisements were developed and placed in the newspapers of six area military bases offering packages with exceptional values. These are being paid for partly by trade-outs and were coded so we could analyze the results. The ads alternated for six weeks. One feature of the military packages is ten minutes of free long distance which costs us less than two dollars with our new AT&T rates.

The hotel's room rates were modified from a flat rate to a range of rates based on location, amenities and room condition. To appeal to commercial guests, local calls were free. We placed the hotel's middle room rate and the mention of free local calls on the hotel's reader board. This resulted in 15 to 30 additional walk-ins per night. The staff at the front desk offered upgrades to guests arriving with reservations. Nearly 25% of the time they are successful in getting at least another $2.00 from those guests for a nicer room. To attract more attention to the hotel, as sign visibility is poor, we placed small white outdoor lights on all the trees along the main avenue in front of the hotel.

While the full results of our efforts will never be known to us because the hotel has been sold, we did manage to generate nearly $60,000 profit during our brief tenure. In the hotel's three year prior history, it had only had two or three profitable months and, in fact, lost several hundreds of thousands of dollars in one year. Remember the title of this story, "Sometimes You Get Lucky"!

Miscellaneous Ramblings

BY Kirby D. Payne, CHA

I chose this month's title because I am sure I'll do this again someday. Why should every column I do have some point or theme? Why not just pick up some assorted thoughts or items not large enough for an entire column and put them into miscellaneous ramblings?

This column is being written while I am in Orlando for the Choice Hotels International 40th Annual Convention. I am actually sitting in the guest room immediately above the one I was in when I wrote a column over a year and a half ago titled "Little Things Mean a Lot".

Past Reviews, Changes

That column commented on some of the small mistakes made in a first-class full-service hotel managed by an old college friend of mine, Pat, After seeing the column he asked me to speak to his Department Heads and Executive Committee about my observations. It must have been constructive because he let me come back and I see some changes!

The way faxes were handled last time included losing some pages or at least not noting that they had not all been received according to the cover page. This time the Saturday morning FedEx was handled perfectly. The little wooden valet clothes hanger in the room didn't fall apart as it did last time.

On the other side of the ledger, even though there are two people in the room there is still only one bathrobe and the huge bath towels we found in our room the first two days haven't been replaced since! My friend got even with me about my comments last time about no cork screw by simply not having any wine sent to the room. That is one way to avoid repeating a mistake but it certainly did test the staff.

Success Stories

Recently, my wife and I had an opportunity to spend several hours with Jim and Rose Sadler. As many of you know, the Sadlers founded Rochester Economy Lodging Group (REL), originally Sadler Properties. What a success story, from a duplex to nearly 20 hotels!

I got a little insight into how good REL is at what they do when I listened to their Director of Operations, George Rownd, give a presentation at the Small Properties Workshop sponsored by the Minnesota Hotel & Lodging Association last week. George's excellent presentation included discussions of such items as proper use of cleaning chemicals, coding room keys and employee motivation.

The workshop was put together by a committee chaired by Doug Brutger, owner/operator of the Sunwood Inn, Morris and Sandy Lien, the Associations Director of Education. The program, which was presented in several locations around the state by a panel of small property operators, was excellent. If you missed it, call Sandy and see if she'll sell you a set of the handouts from the series. You will find that they alone will be very helpful. They cover marketing, as presented by Allen Faulk (Super 8, Zumbrota) and Bill Foussard (Best Western Americana, Saint Cloud), George's presentation and material presented by Doug and Dave Brott (Country Inn, Bloomington). If you offer Sandy (612-223-7401) $20 for a set of handouts, you'll get your money's worth and then some. You'll also get a chance to see some of the excellent benefits of attending the Association's programs. PS: Unless Sandy reads this column she won't know about this $20 idea!

Thanks to George I finally figured out why the bathroom floors in one of our hotels are sticky. The staff at this particular hotel had suggested to me that it was the deodorant the room attendants were using in the smoking rooms. George pointed out that we may be using too heavy a concentration of tub and tile cleaner and more importantly we probably aren't thoroughly rinsing our bathroom floors periodically. This would, of course, allow the cleaner to build up over time.

Lead by Example

Have you been to Un Deux Trois, the restaurant in Foshay Tower, downtown Minneapolis? Michael Morris who owns and operates this establishment has done a great job of what all hoteliers should be doing.

No, I'm not talking about his excellent service and even better price value for great, down-to-earth, French food, I'm talking about his management style. He personally works the door greeting and seating his patrons. He recognizes his regulars and visits with them appropriately and makes new patrons feel comfortable and welcome. All this, while keeping his staff motivated. Sitting at Un Deux Trois' bar and watching Michael at work being both a gracious host and good owner/operator is truly motivating, The drinks aren't bad either!

Tidbits

At a seminar presented by Jim Cooper, CHA, Director of Education and Training for Choice Hotels International the following sample help wanted classified for a General Manager. I thought both owners and managers would get a chuckle from this:

We are looking for a self starter, motivated, dedicated, experienced manager who will accept full responsibility without the authority. Must be willing to work 70 to 80 hours a week including 40 hours of shift work. We offer no training, low pay, no benefits, no incentives and no vacation. Ideal candidate should be able to squeeze as much money as possible out of a property with 150% turnover, no vacation or benefits for the employees and very little working capital. If you meet these qualifications, are not sensitive to constant criticism or susceptible to burnout, we want you on our team."

At another seminar a panelist fro Metromedia Steak Houses (Ponderosa, Bonanza and Rising Star Grill) shared the mission statement of one of their chains: Together we will do whatever it takes to ensure every guest comes back to (restaurant) again and again."

While I personally feel there should be some reference to profit in the mission statement I think it is a wonderful attitudinal start. Does your hotel have a mission statement? Did your key staff participate in developing it and fully buy into achieving it?

More worthwhile tidbits from Choice Hotels' Jim Cooper: Training tells your staff that you want them to grow, learn and get better, It tells them that you care. If you do not train them, is the opposite true? And finally, does this sound familiar: "The only thing I hear from my (owner) (manager) is when s/he has a problem or needs something." Both "sides" have something to gain from being positive and supportive in their dealings with each other.

Repositioning: It's not Just Renovation

Kirby D. Payne, CHA

Faced with over built markets, ever-changing market demands, and deteriorating physical plants, hotel owners are seeking to stave off decreasing, and often disappearing, profits. Lenders, too, are eager to reduce the possibility of adding the hotel to their REO portfolios. These players have turned to market repositioning as a way to improve operational and financial performance in order to survive.

Unfortunately, however, many so-called repositioning projects are no more than directionless rehabilitation projects or haphazard reflagging (upscale or downscale). Both of these tactics no only fail to reposition the hotel but also worsen its deteriorating financial condition.

These and other undesirable outcomes can be prevented. Here are some tips that are crucial to know for a successful repositioning program:

Learn from manufacturers and apply the principles of consumer product development. A hotel essentially sells many products and services. As such, repositioning a hotel must incorporate the same steps as developing and introducing a consumer good. These include: market research, identification of demand and its needs, test marketing, cost-benefit analysis, design and packaging, distribution channels, public relations and promotion, direct sales, customer service, etc. If any one step is skipped or poorly planned, an otherwise well-conceived program could fail.

Develop a cohesive, all-encompassing repositioning plan. Create a business plan which addresses every step, component, and issue of the repositioning process. As with most business plans, though, not everything can be anticipated and the plan must be flexible and adjusted to circumstances as they arise.

In addition, you must designate one point person to coordinate the various and often distant persons involved to ensure constant and effective communication when implementing this plan.

Create a discernibly different hotel. You do not have to be come a fantasy hotel to accomplish this but you must change the product and particularly the services in order to change the hotel's market position. And repositioning does not always mean going up a notch or two in quality. The condition of the industry is such that often the most financially beneficial goal is to reposition down a notch or two.

Do not hesitate to retain third-party professionals. An effective repositioning program requires dollars, time, and personnel. It is unlikely that in-house personnel possess all the necessary skills. Some professionals to consider include engineers, architects, market research firms, food and beverage consultants, personnel trainers, among others.

There is no substitute for experience and expertise and the risk is too great to do otherwise.

Before you retain them, however, be sure to see their completed and in-progress projects if possible, interview clients, and ask to review a comparable report (if applicable) in their office.

Do not fall into the trap of concentrating on physical renovation at the expense of other components of the program. A hotel's image, quality, and market position are not determined solely by its furniture, fixtures, and equipment. Although physical renovation is important, regardless of whether you are upscaling or down scaling, its visibility frequently distorts it into being the primary focus. Equally as essential to repositioning is the modification of all functional and operational areas through redesigning procedures, marketing, servicing, etc.

Interview and consult with our current guests and patrons during the market research phase. First, this will provide you with a wealth of insight into your hotel. Second, this will also instill in them a feeling of ownership of the changes through their participation. It is essential to minimize the loss of currently loyal guests and patrons during this process.

Interview and consult with your line employees, both back and front-of-the-house, during the market research and planning stages. Just as with your current customers, your employees experience the hotel more intimately than most managers. In addition, this involvement will create a sense of ownership in the new product and services and enable the staff to genuinely and enthusiastically promote the improvements to the guests and patrons.

Perform a thorough and unbiased cost-benefit analysis in order to make an informed "go-no-go" decision. Do not go forward just because significant costs have already been invested in the research and planning process. The potential loss can be many times larger than the investment in studies, etc.

In your analysis, remember to include all marginal costs attributable to the project since the beginning and throughout implementation (you should isolate items such as additional long distance telephone expense to get a true picture of the cost.)

If the projected increase in profit is insufficient to recoup the entire cost of the project in a reasonable period of time, don't do it. Any increase in the hotel's market value should come from the profit projections so don't count it twice.

Make your guests, patrons, and employees aware of the plans and excited by the prospect of a "new and improved" hotel. Interest and support is vital to the success of this always disruptive process. Forewarn everyone of upcoming inconveniences, whether they be physical or operational. Tell your customers and employees how certain changes-in-progress will negatively affect them in the short term (for instance, conversion to a new computerized guest history) and, of course, sell them on the ultimate benefit to them, in the long run.

Retrain the entire hotel staff from guest contact areas to back-of-the-house. Poor, inadequate, or incomplete training will undermine all other repositioning efforts. As stated previously, service and procedures are part of the new product created and must "match" the sought-after new market position. Absolutely crucial to achieving the new position is proper, thorough, and appropriate training of all hotel staff to deliver this new product and provide the attendant services. Considerable money, time, and other resources will have been lost if this crucial step is bypassed or only partially executed.

Take a critical and fresh eye to your Marketing Plan. Although the very prospect of creating this document generally evokes groans, a redesigned and reconceived Marketing Plan is an essential component of the repositioning program. The Marketing Plan should focus on the target market segments in all revenue areas and detail the method of capturing the demand.

Although always important, it is especially critical for all managers and assistant managers to be involved in the development of the Marketing Plan when implementing a repositioning program in order to ensure complete coordination.

Create methods of quickly and regularly measuring the property's advancement toward its stated goals. The very existence of a repositioning program means that the property is experiencing financial and/or market difficulties. Therefore, management cannot afford to wait six months or a year to review the program's effectiveness. Results must be measured and reported continuously. Modifications to strategies, procedures, etc. should be implemented quickly so as not to lose momentum, enthusiasm, and good will.

Secure the full support of owner, lender, and management. This means commitment to the hotel over at least the "near long term" which means through the planning and implementation of the program and at least until some improvements have become manifest.

Often a repositioning program is undertaken by the owner and supported by the lender to increase the hotel's market value for an as-soon-as-possible sale.

With that perspective, there is a tendency to focus exclusively on immediately visible changes. Although often effective for those goals, this will not reposition the hotel or increase its medium-or long-term financial, operational, or market strength.

Repositioning: It's not Just Renovation

Kirby D. Payne, CHA

Faced with over built markets, ever-changing market demands, and deteriorating physical plants, hotel owners are seeking to stave off decreasing, and often disappearing, profits. Lenders, too, are eager to reduce the possibility of adding the hotel to their REO portfolios. These players have turned to market repositioning as a way to improve operational and financial performance in order to survive.

Unfortunately, however, many so-called repositioning projects are no more than directionless rehabilitation projects or haphazard reflagging (upscale or downscale). Both of these tactics no only fail to reposition the hotel but also worsen its deteriorating financial condition.

These and other undesirable outcomes can be prevented. Here are some tips that are crucial to know for a successful repositioning program:

Learn from manufacturers and apply the principles of consumer product development. A hotel essentially sells many products and services. As such, repositioning a hotel must incorporate the same steps as developing and introducing a consumer good. These include: market research, identification of demand and its needs, test marketing, cost-benefit analysis, design and packaging, distribution channels, public relations and promotion, direct sales, customer service, etc. If any one step is skipped or poorly planned, an otherwise well-conceived program could fail.

Develop a cohesive, all-encompassing repositioning plan. Create a business plan which addresses every step, component, and issue of the repositioning process. As with most business plans, though, not everything can be anticipated and the plan must be flexible and adjusted to circumstances as they arise.

In addition, you must designate one point person to coordinate the various and often distant persons involved to ensure constant and effective communication when implementing this plan.

Create a discernibly different hotel. You do not have to be come a fantasy hotel to accomplish this but you must change the product and particularly the services in order to change the hotel's market position. And repositioning does not always mean going up a notch or two in quality. The condition of the industry is such that often the most financially beneficial goal is to reposition down a notch or two.

Do not hesitate to retain third-party professionals. An effective repositioning program requires dollars, time, and personnel. It is unlikely that in-house personnel possess all the necessary skills. Some professionals to consider include engineers, architects, market research firms, food and beverage consultants, personnel trainers, among others.

There is no substitute for experience and expertise and the risk is too great to do otherwise.

Before you retain them, however, be sure to see their completed and in-progress projects if possible, interview clients, and ask to review a comparable report (if applicable) in their office.

Do not fall into the trap of concentrating on physical renovation at the expense of other components of the program. A hotel's image, quality, and market position are not determined solely by its furniture, fixtures, and equipment. Although physical renovation is important, regardless of whether you are upscaling or down scaling, its visibility frequently distorts it into being the primary focus. Equally as essential to repositioning is the modification of all functional and operational areas through redesigning procedures, marketing, servicing, etc.

Interview and consult with our current guests and patrons during the market research phase. First, this will provide you with a wealth of insight into your hotel. Second, this will also instill in them a feeling of ownership of the changes through their participation. It is essential to minimize the loss of currently loyal guests and patrons during this process.

Interview and consult with your line employees, both back and front-of-the-house, during the market research and planning stages. Just as with your current customers, your employees experience the hotel more intimately than most managers. In addition, this involvement will create a sense of ownership in the new product and services and enable the staff to genuinely and enthusiastically promote the improvements to the guests and patrons.

Perform a thorough and unbiased cost-benefit analysis in order to make an informed "go-no-go" decision. Do not go forward just because significant costs have already been invested in the research and planning process. The potential loss can be many times larger than the investment in studies, etc.

In your analysis, remember to include all marginal costs attributable to the project since the beginning and throughout implementation (you should isolate items such as additional long distance telephone expense to get a true picture of the cost.)

If the projected increase in profit is insufficient to recoup the entire cost of the project in a reasonable period of time, don't do it. Any increase in the hotel's market value should come from the profit projections so don't count it twice.

Make your guests, patrons, and employees aware of the plans and excited by the prospect of a "new and improved" hotel. Interest and support is vital to the success of this always disruptive process. Forewarn everyone of upcoming inconveniences, whether they be physical or operational. Tell your customers and employees how certain changes-in-progress will negatively affect them in the short term (for instance, conversion to a new computerized guest history) and, of course, sell them on the ultimate benefit to them, in the long run.

Retrain the entire hotel staff from guest contact areas to back-of-the-house. Poor, inadequate, or incomplete training will undermine all other repositioning efforts. As stated previously, service and procedures are part of the new product created and must "match" the sought-after new market position. Absolutely crucial to achieving the new position is proper, thorough, and appropriate training of all hotel staff to deliver this new product and provide the attendant services. Considerable money, time, and other resources will have been lost if this crucial step is bypassed or only partially executed.

Take a critical and fresh eye to your Marketing Plan. Although the very prospect of creating this document generally evokes groans, a redesigned and reconceived Marketing Plan is an essential component of the repositioning program. The Marketing Plan should focus on the target market segments in all revenue areas and detail the method of capturing the demand.

Although always important, it is especially critical for all managers and assistant managers to be involved in the development of the Marketing Plan when implementing a repositioning program in order to ensure complete coordination.

Create methods of quickly and regularly measuring the property's advancement toward its stated goals. The very existence of a repositioning program means that the property is experiencing financial and/or market difficulties. Therefore, management cannot afford to wait six months or a year to review the program's effectiveness. Results must be measured and reported continuously. Modifications to strategies, procedures, etc. should be implemented quickly so as not to lose momentum, enthusiasm, and good will.

Secure the full support of owner, lender, and management. This means commitment to the hotel over at least the "near long term" which means through the planning and implementation of the program and at least until some improvements have become manifest.

Often a repositioning program is undertaken by the owner and supported by the lender to increase the hotel's market value for an as-soon-as-possible sale.

With that perspective, there is a tendency to focus exclusively on immediately visible changes. Although often effective for those goals, this will not reposition the hotel or increase its medium-or long-term financial, operational, or market strength.

So You Want to Buy a Hotel

by Kirby D. Payne, CHA

Maybe you've been working in the hotel industry for five to fifteen years for either a small group of investors or a major hotel company. At some point you may have thought to yourself, "If I only had my own place." Well, it may be about time but where do you start and how do you go about it? In the following paragraphs, I'll give you a simple and short course on how to go about it.

An important step is finding something to buy. Clearly you want to buy something that you are capable of putting the money together to purchase, fix up and carry until it is profitable. It may not take as much as you might think. For the purpose of this article lets assume you can scrape together at least $100,000 cash. This might include savings, IRA (yes, there are penalties), family, a couple of close friends, home equity loan and a personal line of credit for $5,000 to $25,000. This money will be used for the down payment/equity portion of your purchase, closing costs, legal advice and working capital. Once you believe you have your equity pulled together you can start establishing purchasing parameters.

These parameters are driven by your equity resources, hotel experience, geographic and personal preferences and the mortgage loans you might get. Clearly your equity resources in this example preclude you from buying the Minneapolis Marriott City Center! In fact, if you figure that you'll have to pay 10% to 20% down on a purchase using 75% of your $100,000 you'll only be able to afford a hotel costing between $375,000 and $750,000. That is quite a range and it assumes it doesn't need any fixing up and will immediately carry the mortgage payments. More importantly, it assumes you'll be considered a qualified buyer by brokers, sellers and lenders. However, you can see, minimizing the down payment will significantly assist in leveraging the purchase of a larger hotel. In fact, many sellers today are taking a little as 5% cash with seller financing. With $100,000 equity, the purchase price potential is now $1.5 million.

Before you start telling everyone you want to buy a hotel, set some criteria for yourself. A good one might be that you will only consider a hotel which is immediately self-sufficient and has seller or assumable financing. This can be accomplished in two ways: don't even look at hotels that will not be able to carry the proposed mortgage or negotiate a mortgage with lower payments during an initial period of six months or a year.

Another criterion might be geographic in that you can get to it easily or that you may have to live there! Limit your search to markets you really know the dynamics of as it relates to supply and demand. Swear to yourself that you will not consider hotels just because they are esthetically appealing. Remember this is an investment for a profit!

One way to get on with your goal is to let a number of real estate brokers specializing in hotels know about your interest in a purchase and what your resources are. Focus on brokers dealing in the type of hotel you can afford. Stay tuned to the rumor mill as to what might be for sale in the geographic areas you are interested in by getting to know area hoteliers. There is nothing wrong with driving around and looking for properties that appear to fit your criteria. Are they in bad condition, poorly run, etc.? It might be just right for you! Note the address, go to the county seat and find the office with the real estate records. With a little digging around you can find out who the real owner is, the lender, some of the terms of the original purchase and related loans and whether the owner is current on the loan, bills and real estate taxes. This is all useful information on a prospective purchase when you are bottom fishing.

After all, that is what your doing at this price range! Now it may start occurring to you that if you did start putting a deal together the hotel might need some remodeling. Simply tell yourself up front that the cost of that is either going to have to be a deduction from the purchase price in order to free up some of your equity or that you will have to finance the remodeling. You could get the seller to help you finance it, get some secondary financing, talk to the community's development agency and examine if the cash flow of the hotel might help pay for it.

When you start getting offers to sell (referred to as packages) take a quick look at the location, description and asking price to see if the hotel appears to meet your basic criteria. If it does, go through the package to see if it has sufficient detailed information. This would include financial statements for the most recent two or three years, information about the hotel's physical facilities, market demand, surrounding area, competition and seller financing. If these things aren't there or if the hotel doesn't fit your criteria call the person who sent you the package. Ask for the items you need without letting them draw you into your likes and dislikes about the hotel. If the hotel didn't meet your criteria tell them why.

Once you have the necessary information, do your own estimate as to what the hotel's operating results will be for the next three to five years. Use the seller's insurance and real estate taxes for your estimates for the time being. Watch for expenses that are unusually low or high and find out what is impacting them. Do your own staffing schedule based on your operating style, the hotel's level of service and local wage rates plus whatever premium you might pay to have better employees. Take great care with maintenance and energy expenses. Your estimate should go all the way to the cash available for debt service.

Now take the asking price and subtract what you will pay in the equity down payment. Consider if your offer will include a request that the seller finance some improvements. You might be able to negotiate this up to an amount equal to your down payment as the money will be going directly back into the hotel. The net result is the value of the asset is enhanced for the seller and they have your attention because you have at least $75,000 invested in the hotel. You are both happy, as long as the seller didn't need the cash to pay previous obligations like real estate taxes and past due mortgage payments.

Once you have established what the approximate amount of your mortgage will be, you must examine various amortization scenarios. You might start with 20 years at 8.5% and then examine the effect on the payments if you lower the interest rate a few tenths of a point or increase the amortization period to 25 years. The resulting calculation will need to come out to an amount equal to about 80% of your cash available for debt service. This is the point where you can really tell if you can afford this purchase at an offering price somewhat below the asking price.

One concept to be aware of is the "call" or "bullet". This is when you have a long amortization period for the purpose of calculating the payments but that rather than amortizing (paying off) the loan over the full period you must pay the balance at the end of a shorter period such as five years.

If you are having difficulty making the numbers work for you, look at alternative ways to structure the acquisition. Do not revise your operating estimates without good foundation. Doing that is like trying to print counterfeit money! You might examine Small Business Administration (SBA) loans. A key concept in these is that a subordinated second mortgage from the seller or another source can be considered equity in addition to your cash. While this increases your leverage, it will call for higher debt service as second mortgage loans which are riskier than firsts typically have higher interest rates and shorter amortization periods. This alternative should really only be used if you are short of cash for both the down payment and necessary remodeling and the cash available for debt service is more than adequate.

Once you understand the various scenarios that work for you, make an offer that is most advantageous to you. Don't worry, while it is a big step, you won't have to live with it if you are wrong in some of your estimates. Your offer should be just a short letter and should mention some contingencies. These must include a reasonable time to inspect the property and get detailed estimates for repairs and remodeling, the right to examine the records (revenues and their supporting documents, utility bills and tax records) and subject to a mutually agreeable purchase agreement. The seller will probably counter with a higher price or changes in the terms of financing. Compare them to your previously worked out scenarios to see if they work for you.

When the seller and you have a tentative agreement, have the seller start writing a purchase agreement while you find a good real estate lawyer, preferably one with experience with hotels. Remember it is more expensive to write the contract than it is to review it although the seller will have greater control because it is harder to remove or change wording already in the documents. But an experienced lawyer will help insure that the purchase agreement works to your advantage while you reexamine the investment in great detail from every perspective. Your lawyer can also draw the process out while you raise a little more money or look at another package that may have come to you recently. A properly phrased purchase agreement will still be something you can get out of up until closing with little expense other than legal fees.

Once you decide to finalize the purchase use the period before closing to get all of the things in your business plan in place so that little or no time is lost getting things done to maximize your revenues and minimize your expenses.

Good luck!

Take Care of Allied Members: An Open Letter to Hotel and Motel Operators

Kirby D. Payne, CHA

I want to take a few moments of your time to ask you to help take better care of the Allied Members of the Minnesota Hotel & Lodging Association (MH&LA) and the American Hotel & Motel Association (AH&MA). It is an effort which, if not done, will cost us money, both as hoteliers and as an association.

Allied Members choose to join the MH&LA and/or the AH&MA for a variety of reasons. The three principal ones are probably enhanced marketing potential, to support our causes (as we go, so do our vendors) and because they may even have developed some personal relationships among our members. When they pay their dues and subsequently support us by exhibiting at our trade shows, donating to our PAC and paying to attend our functions, they expect something for their money. They expect us to pay a little attention to them and their efforts. In other words, a higher degree of access than non-allied members.

No, we don't have to commit to buying only from Allied Members or to give them preference in any way other than access. We certainly aren't going to buy from an Allied Member who does not offer and subsequently deliver the best quality, price and service we can obtain in the market place. We should, however, try to do two things:

1. Get quotes from Allied Members and let them know that is why we are getting the quote, whenever we're buying a product they sell.

2. Make our current vendors who are not Allied Members aware of the opportunity they are missing and the responsibility they have as a company deriving revenues from our industry.

Marketing as an Allied Member lets us know that a vendor is serious about serving our industry, that they want to understand it and participate in it. Allied Members get support from the MH&LA/AH&MA in the form of member lists, preferred opportunities on sponsorships and participation in events. In the case of AH&MA Allied Members their is a monthly Construction and Modernization Report and a presence on the new AH&MA internet home page. The Construction and Modernization Report is a tremendous lead list.

In some cases, member hotels and motels are franchised or chain managed and have access to tremendous buying power which smaller Allied Members cannot match. When we make them aware of those circumstances, they understand and they'll appreciate your taking the time to let them know. It is a great way to let a Allied Member know you appreciate their support and that you'll refer them to those who can't make the same deal you can.

On the other hand, you may have an opportunity to do everyone a favor by introducing an Allied Member to your national purchasing organization. Save your company and affiliates money while helping a worthy Allied Member. There is also a special group of individuals, Master Hotel Suppliers (MHS). These individuals have gone to the extra effort to take hotel courses and be tested by the Educational Institute (El) of the AH&MA to receive this designation. A person who has the MHS designation has a deeper understanding of our business than other vendors. This designation, like the Certified Hotel Administrator (CHA) and other EI designations, demonstrates the individual's commitment to our industry and their own professionalism.

In summary, encourage vendors who are not Allied Members to become one and then give Allied Members access to you in a manner appropriate for your business and its needs.

I'm going to work harder to take care of Allied Members, won't you?

Taking Over a Hotel: Checklists and Routines

by Kirby D. Payne, CHA

Our company has managed about 25 different limited and full service hotels during the last six and a half years. That averages out to assuming the management of a new hotel every three months.

This year alone, we have already assumed the management of a limited service motel in Wisconsin (already sold), opened a closed hotel in North Dakota and will be going into one in Pennsylvania.

We believe we are relatively efficient at the process and have had good results retaining staff and maintaining regular accounts.

I thought I might share our checklists for these circumstances. While there are some very extensive manuals with hundreds of pages of detailed checklists for this purpose, we fell that a short check list for the immediate things we have to do on short notice should be a starting point. We use two lists: one relating to things which need to be done prior to assuming management and those things which need to be done the day we assume management.

With these two lists, a supply of necessary forms and foreknowledge as to what front office system, if any, a particular hotel has, we can usually assume management efficiently with two people in a limited service hotel.

One person leaves within two or three days while the other remains until the General Manager and staff are oriented to our procedures or a new General Manager during the first three months in about 20% of the takeovers.

The two single areas where there seems to be the potential for immediate impact on the financial results of a new management situation are increased Average daily Rate (ADR) and reduced Room Attendant and Laundry time.

A key part of successfully assuming the management of a new hotel is the orientation and training of the General Manager and supervisors. It is key that they completely understand our expectations, policies and procedures or we will be unable to meet our commitments to the owner.

Things to Accomplish Prior to Closing/Management Change
1.1 Is owner registered in that state?

1.2 Is operator registered in that state?

2.1. Depository bank account opened, funds transfer arranged?

2.2 Concentrating account coordinated?

2.3 Credit card accounts arranged for?

2.4 T&E card accounts arranged for?

2.5 Checks ordered

3.1 City/county licenses/permits?

3.2 State sales tax arrangements?

4.1 Electricity, special reading and application?

4.2 Gas, special reading and application?

4.3 Water/sewer, special reading and application?

4.4 Garbage/refuse collection continued?

4.5 Telephone service (local) reading and application?

4.6 Telephone service (L.D.) cutoff and application?

4.7 Telephone service (pay and PL's, if any)

4.8 Telephone service releases from prior owner/operator.

5. Personnel Issues

5.1 Obtain payroll listing (w.titles) from seller.

5.2 Discussion w/ GMas to his status/plans.

5.3 Explain to GMchanges in operating/acct. philosophy.

5.4 Explain to GMimpact of sale/purchase on employees.

5.5 ADPforms and new employee packets ready?

6. Inventories

6.1 F.F&E.

6.2 Big Four (China, Glass, Silver and Linen)

6.3 Forms and Stationary

6.4 Supplies

7.1 Advise GMto note folios balances at closing.

8.1 Location of equipment manuals?

8.2 Equipment warranties?

9. Ongoing contracts and leases?

9.1 Billboards9.2 Cable TV

9.3 Others? (List)

10.1 Personal contact with franchisor.

10.2 Franchisor contractual requirements.

11. Insurance Issues

11.1 Building and contents?

11.2 Liability?

11.3 Innkeepers?

11.4 Employee bonds?

11.5 Unemployment?

11.6 Worker's compensation?

11.7 All necessary additional insured (owner and operator)?

11.8 Other?

12. Accounting Issues

12.1 Service Bureau Notified?

12.2 ADPnotified?

12.3 Accounting orientation for GM?

12.4 Interim accounting kit ready?

13. Marketing Issues

13.1 Press releases ready?

13.2 Upcoming Group bookings?

13.3 Upcoming important local events (sports, concerts, etc.)

14. Closing items

14.1 Closing date?

14.2 Attorney handling closing?

14.3 Purchase agreement last reviewed?

Things to Accomplish Day of Closing/Management Change

2. Ascertain cash drawer and petty cash requirements.

2.1 Verify depository bank to ensure funds arrived. Pick up cash.

2.3 Verify new credit card accounts to use.

2.4 Verify new T&E card accounts to use.

4.1 Electricity, special reading.

4.2 Gas, special reading.

5. Personnel Issues

5.1 Verify payroll listing (w/titles)

5.2 Face to face discussion w/GM as to his/her status or plans.

5.3 Explain (again) changes in operating/acct. philosophy.

5.4 Employee meeting to explain impact of sale/purchase.

5.5 Complete ADP forms and new employee packets.

5.6 Orient employees about owners and operator.

5.7 Discuss uniform/shoe/name tag policies.

5.8 Discuss overtime/exemption policy.

5.9 Discuss scheduling policies.

5.10 Discuss hiring/raise/termination policy.

5.11 Discuss harassment policy and have employees sign notice.

5.12 Review personnel files for completeness.

5.13 Insure work time recording system is adequate.

6. Verify Inventories

6.1 F.F.&E.

6.2 Big Four

6.3 Forms and stationary

6.4 Supplies

7.1 Verify that GM notes folios balances at closing.

8.1 Look at equipment manuals.

8.2 Verify equipment warranties.

9. Decide on continuing contracts and leases.

9.1 Billboards

9.2 Cable TV

10. Franchisor Issues

10.1 Personally notify franchisor at closing.

10.2 Franchisor contractual requirements completed?

11. Insurance issues?

11.1 Employee bonds?

11.2 Claims forms and emergency instructions?

11.3 Training on emergency procedures?

11.4 Arrange insurance safety inspection.

12. Accounting issues:

12.2 Payroll training for GM.

12.3 Accounting training for GM?

12.4 Budgeting orientation conducted?

12.5 Budgeting process started?

12.6 Purchasing policies discussed?

12.7 Inventory and storage control discussed?

12.8 Cash management system explained?

12.9 Reporting procedures discussed?

13. Marketing issues

13.1 Press release issued?

13.2 Group booking reviewed?

13.3 Upcoming important local events

13.4 Marketing philosophy discussed?

13.5 Market planning orientation conducted?

13.6 Market planning process started?

13.7 Room and rate management discussed?

14. Maintenance issues

14.1 Room key coding system established, and tags removed?

14.2 Review key/master control policies

14.3 Discuss preventive maintenance (rooms/equipment)

14.4 Exterior/grounds maintenance crew

14.6 Get pest inspection certificate if required by sale.

20 Tips for Success from Kemmons Wilson

by Kirby D. Payne, CHA

An opportunity in my life which I enjoy is chairing the International Council of Hotel-Motel Management Companies. Because of it I have had an opportunity this year to help host a number of functions around the country for my competitors and peers.

This Tuesday I had dinner with Ray Schultz, President of Promus Company (Embassy Suites, Hampton Inns and Hawthorne Suites). He got into the hotel industry while working for IBM where he was responsible for getting Holiday Inns started on their first computerized reservation system. Who says there is no opportunity to move ahead in this country?

Wednesday, while visiting with George Glover, CHA, President of Wilson Hotel Management, I had the opportunity to meet briefly with Kemmons Wilson, founder of Holiday Inns. If you're in the hotel industry you know he's as big a part of our industry's history as Conrad Hilton. Mr. Wilson is an alert man in his early eighties who goes to work everyday. As we were leaving his offices, Mr. Wilson walked out to his car to get a sample restaurant chair he had in his trunk. Imagine, with his position and age still being involved to that detail. An no, he wouldn't let anyone carry the chair for him! Thank you, George, for inviting Mr. Wilson to join us.

In the reception area of The Wilson Companies there was a flier with Kemmons Wilson's Twenty Tips for Success which I picked up. When I met him I asked if I could use his tips in my column. Here they are:

1. Work only a half a day; it makes no difference which half-it can be either the first 12 hours or the last 12 hours.

2. Work is the master key that opens the door to all opportunities.

3. Mental attitude plays a far more important role in a person's success or failure than mental capacity.

4. Remember that we all climb the ladder of success one step at a time.

5. There are two ways to get to the top of the oak tree. One way is to sit on a acorn and wait; the other is to climb it.

6. Do not be afraid of taking a chance. Remember that a broken watch is exactly right at least twice every 24 hours,

7. The secret of happiness is not doing what one likes, but in liking what one does.

8. Eliminate from your vocabulary the words, "I don't think I can" and substitute "I know I can".

9. In evaluating a career, put opportunity ahead of security.

10. Remember that success requires half luck and half brains.

11. A person has to take risks to achieve.

12. People who taker pains never to do more than they get paid for, never get paid for anything more than they do.

13. No job is too hard as long as you are smart enough to find someone else to do it for you.

14. Opportunity comes often. It knocks as often as you have an ear trained to heat it, an eye trained to see it, a hand trained to grasp it, and a head trained to use it.

15. You cannot procrastinate-in two days, tomorrow will be yesterday.

16. Sell your wristwatch and buy an alarm clock.

17. A successful person realizes his personal responsibility for self-motivation. He starts himself because he possesses the key to his own ignition switch.

18. Do not worry. You can't change the past, but you sure can ruin the present by worrying aver the future. Remember that half the things we worry about never happen, and the other half are going to happen anyway. So, why worry?

19. It is not how much you have but how much you enjoy that makes happiness.

20. Believe in God and obey the Ten Commandments.

Hotels That Cater to Women Travelers

Hotels That Cater to Women Travelers
From 24-hour yoga channels to emergency fashion kits, take a look at the innovative perks hotels are offering to women business travelers.

As often, from a North American perspective - thata can always open your eyes to some of the needs of today's women travelers....

By: Julie Moline | 10/2/2007 from the website WomenEntrepreneur.Com

Twenty-five years ago, when hotels catered to female business travelers, it meant putting skirt hangers in the closet. Now that women make up nearly half of all business travelers, many hotels, from mid-range to six-star, are offering all sorts of women-friendly elements in everything from room design to room service.

That means full-length mirrors and magnifying two-sided mirrors, as well as better lighting in the bathroom, so you don't have to put on makeup to the creepy glow of fluorescent bulbs, and in the shower, so you don't have to shave your legs in the dark. There are not only skirt hangers but also padded hangers and an iron and ironing board. Also, hair dryers aren't attached to the wall and may have diffusers, and you can finally get some decent bathroom amenities, often from trusted upscale brands like Aveda, Bulgari and The Body Shop.

Catering to women also means paying attention to food. Many hotel companies, including Fairmont, Hyatt, Hilton, Marriott and Starwood, offer menu items that appeal to the nutrition- or calorie-conscious. Room service menus, which used to have a limited list of options, all in the hamburger, club sandwich, french fries vein, now also offer healthier fare: salads, grilled chicken and fish, and fresh fruit.

Even the minibar has been reconsidered with women in mind. The James Chicago Hotel, for example, stocks its minibars with health bars and vitamin supplements. At W Hotels' minibars, next to the designer comestibles, is the woman's "emergency survival kit," a boxed set of tubes of three different colors of lip gloss, mascara and perfume; the "emergency fashion kit" includes a classic Diane von Furstenberg black wrap dress with a matching thong, packaged together in a garment bag. At Boston's XV Beacon, a luxury boutique hotel, there are two minibars in each room: one for premium beverages, like wine and vodka; the other for stress relievers and energy boosters, like aromatherapy oils, an eye pillow, energy bars, ginseng, vitamins, a high-protein drink and caffeinated peppermints.

If you're a jogger, Hotel Teatro in Denver offers a daily escorted guided run on Cherry Creek Trail followed by refreshments--nutrition bars, fresh fruit and mineral waters. And although men are welcome to join the running group, it was designed for women who don't want to run in a city they don't know well.

To soothe travel stress, Kimpton Hotels allow guests to have spa services, such as a manicure, pedicure or massage, performed in the privacy of their room. There are attractive workout facilities in the hotels, but if you want to work out alone, you can call the front desk for a complimentary yoga basket, with mat, block and strap, and practice to a 24-hour yoga channel. Kimpton also has a Forgot It, We've Got It service, so if you need hair styling products, you can get some--from Sebastian, no less--along with sunscreen, Static Guard, hand-held steamers, spray wrinkle remover and, for road warrior aches and pains, heating pads. The Hotel Palomar in San Francisco has a special amenity program that stocks items most often left at home by women travelers: nylons, tweezers, lint brushes, hair styling products, nail polish remover and earring backs.

Traveling internationally? Many of the hotels in the Sol Melia group have a female physician on call.

And then there are some hotels that offer women-only floors. The Lady's First Hotel in Zurich was founded in 1994 by eight professional women who wanted to create a property with a lovely ambience that could also provide jobs and training for unemployed women. The small, 28-room hotel is in an elegant, totally renovated 19th century mansion. The top floors, including a spa, rooftop terrace and workout room, are for women only. In the U.S., the Crowne Plaza Hotel in Bloomington, Minnesota has an all-female floor with makeup mirrors, fresh flowers and premium chocolates. It costs about $30 extra a night, like many club floors.

One of the more interesting women-only floors is at Don Shula's Hotel & Golf Club in Miami Lakes, Florida. The 18 rooms on the Patrician Floor, named for the developer's wife, offer magazines targeted toward women, cards with breast exam instructions hanging on the shower head, upscale toiletries, a guest-preference program, so returning travelers have the reading material and snacks they like in their room when they check in, and complimentary breakfast. Rooms on the Patrician floor run $20 to $30 more per night than standard rooms, but that cost is roughly the same as a room-service breakfast.

Concierges go extra mile in Internet age

Concierges go extra mile in Internet age

An interesting article written in a wide audience newspaper about hotel trends - as often, very specific to the North American market, but worth to think about.

02 October 2007 By Gary Stoller, USA TODAY

Adjusting to a new wave of Internet-age travelers in search of unique and authentic travel experiences, hotels are revolutionizing their information desks.

High-end brands are upgrading concierge operations and training staffs to improve their neighborhood knowledge. Other brands are looking for better ways to share information with guests electronically about local restaurants, events and attractions.

Marriott's (MAR) TownePlace Suites, for example, has put large maps on lobby walls marked with recommended restaurants and attractions. Management makes recommendations with input from guests who have been to the places. Courtyard by Marriott later this year will roll out at Fairfax, Va., its first "Go Board," a flat-panel HDTV with local information, including restaurant recommendations, for guests.

At Loews, the 18-hotel luxury chain, the new "In The Know" program calls on concierges each week to come up with a list of local tips. They share them with front-desk staff and porters, who then pass along the tips to guests. Porters are supposed to provide the tips when delivering bags for guests after check-in.

"Every brand is working on ways to deliver local knowledge," says Marriott's John Wolf. "Hotels must not only figure out how to get local knowledge in the hands of employees and train them to deliver it, but also how to provide local knowledge that is relevant to guests' needs."

Hotel experts say guests have become more knowledgeable about their destinations because of the Internet and the growing number of information sources. They want to escape from the harsher post-9/11 world and better connect with the places they're visiting and the people who live there. They want experiences that provide lasting memories and give them something to brag about at cocktail parties.

"Guests are looking for whatever it is that makes Detroit Detroit," says Michelle Lapierre, Marriott's senior director of customer relationship marketing. "There's a desire to say, 'I caught a little slice of that.' "

Roberta Nedry, president of Hospitality Excellence, which provides concierge and guest service training for hotels and other clients, says hotel guests want "meaningful and memorable experiences" that allow them to forget terrorism, airport hassles and the Iraq War. "They're taking shorter trips, so those two to three days away better be special," she says.

Origins in luxury

Concierge service began in the late 1970s, when luxury hotels in the USA copied their European counterparts. Many other hotels not in the luxury category — particularly those in big cities and resort areas — have since established information desks. They've become invaluable to frequent travelers such as Robin Kruk, 47, of Racine, Wis.

She travels frequently with her husband, John, and says their "primary reason for travel is to see and experience things we do not have at home. We are not interested in just the typical tourist experience with generic results. We want something different and memorable."

Before flying to a destination, Kruk contacts the hotel concierge to get recommendations. "As a result, we have had wonderful, customized trips."

The concierge staff at the Sheraton (HOT) in Rio de Janeiro directed her to a local samba club and to "delicious" barbecue restaurants where no one spoke English. In Austin, the Hyatt concierge "recommended some wonderful driving trips, including a visit to historical towns like Smithville."

Jodie McMahon, 52, of Lenexa, Kan., says staff at the Comfort Suites (CHH) in Carlisle, Pa., directed her to a fabulous restaurant that served Civil War-era foods when she told them she was headed to Gettysburg.

"Pickled watermelon rinds sounded awful but were amazing," she says.

Kelly Nelson, a concierge at the New York Marriott Marquis, says a guest this year asked for assistance in creating a special night because he planned to propose to his girlfriend later that day. She spread rose petals in their room, delivered champagne and recommended a romantic restaurant in a carriage house formerly owned by Aaron Burr. It worked. The girlfriend said yes.

Michael Fox, a concierge at Loews Santa Monica Beach Hotel, says guests frequently request a restaurant where they can dine next to Hollywood stars. A few weeks ago, he sent a couple to a trendy Beverly Hills restaurant where Michael Bolton and Nicollette Sheridan were dining, and they said it was the highlight of their stay.

Meanwhile, hotels are awakening to the business power of their concierges and information desks. They say that inside tips about unique restaurants, shops, attractions and events create memorable "experiences" that can instill brand loyalty, making guests want to return to the hotel or recommend it to others.

Concierges can influence guests' spending decisions, directing them to spas, restaurants or other services within a hotel, says Sara Kearney, Hyatt's vice president of sales and marketing. Concierges can also collect information about guest preferences and spending patterns, and share it with other staff for marketing strategies. "Concierges can make or break your visit," Kearney says, "and they've been an underestimated source of revenue in the past."

Some hotels — particularly luxury ones — are adding concierge staff or supplying them with better computer hardware, software or Internet databases. Some are increasing the training of concierges and front-desk personnel, contracting companies to provide local information or requiring staff to regularly come up with new, local recommendations.

Many non-luxury hotels now realize their guests are not getting top-quality local information and are trying to raise their standards, says Maurice Dancer, president of Les Clefs d'Or USA, the only national organization of hotel lobby concierges. "They're fighting to be the best information provider. It's a delight for the guest."

Trying to steer guests to such local finds, a growing number of hotels are setting up virtual concierge systems — online services that give guests 24-hour access to information normally provided by a concierge. Many have been installed in hotels that haven't had a human concierge or an information desk, says Bjorn Hanson, an industry analyst at PricewaterhouseCoopers.

Internet vs. job security

Whether sophisticated information technology could ultimately lead to the demise of the traditional concierge position is a matter of some disagreement in the hospitality industry. Neither the government nor the industry tracks employment numbers.

Joan Cronson, a spokeswoman for Carlson Hotels Worldwide, which has the Radisson brand, says the number of concierge positions appears to be decreasing because of the "power of the Internet" and the rise of "self-sufficient" travelers who know how to use the Internet and are knowledgeable about their destinations.

About one-fifth of the 200-plus Radisson hotels in North and South America have concierges. Carlson partnered with travel advice provider 10Best.com, and began posting on its hotels' websites five years ago the best local restaurants and attractions. The hotels also feature staff picks based on employees' knowledge of the area.

Except at upscale hotels, the concierge "is going the way of the elevator operator," says Chekitan Dev, a Cornell University hotel school professor. "Owners and operators of midmarket and down-market hotels can no longer justify offering the service of a concierge," he says, because plenty of information is available on the Internet, and "good concierges are hard to find, hard to keep and expensive."

David Cranage, a professor at Penn State's hospitality management school, suggests that hotels' new moves to deliver information without a concierge staff may be akin to banks, a quarter-century ago, adding ATMs and, in some cases, discouraging the use of tellers by charging fees.

Customers initially were unhappy with less personal communication, and banks reversed their policies, he says. But people became more accustomed to using ATMs, and they have become the preferred way of banking. Similarly, hotel guests may use a concierge less as they become more accustomed to using the Internet and other online services for their information.

But Nedry, the guest-service trainer, and Dancer, the concierge association president, say hotels' moves to provide better local information are increasing the number of concierges. Guests at four- and five-star hotels feel that concierges are an integral part of what they are paying for, says Dancer, a concierge at The Pierre in New York. Many guests do Internet research, then ask him whether they made the right restaurant or entertainment decision.

Dancer predicts that, within the next five years, many big-city luxury hotels will have concierges on duty 24 hours per day.

Hotel executive Elizabeth Pizzinato, whose Four Seasons chain has had around-the-clock concierges for years, says the Internet age has done nothing to diminish the importance of concierges.

Hotel guests "are looking for the new, the unusual and the unexpected," she says. "Everybody is short of time, and the concierge is more important than ever."

Eau de Hotel

An article from the New York Times about the now very organized trend of making all senses work inside an hotel

September 11, 2007
Eau de Hotel
By SUSAN STELLIN

The next time you walk into a hotel, close your eyes, listen and inhale. There may even be a water fountain you can run your fingers through or a treat you can taste.

That is because the latest trend in hotel design is to appeal to all five of a guest’s senses, offering what may be described as a “sensory stay.”

From infusing the lobby with a light fragrance to playing a customized soundtrack that changes throughout the day, the goal is to create a memorable experience that guests can smell, hear and feel — not just bombard them with visual stimulation.

“The future of hotel branding is when there are no logos, no advertisements blasting, but I can just feel I’m there,” said Martin Lindstrom, author of “Brand Sense,” which explores the notion of sensory branding.

Retailers were among the first to use music and scent to influence customer behavior — diffusing a chocolate smell, for instance, to entice customers to buy candy — but the hospitality industry is pursuing a more subtle agenda.

“They want to create a point of difference,” Mr. Lindstrom said, explaining that a well-chosen playlist or fragrance not only creates a pleasant experience at the hotel, but can also evoke positive memories through CDs or scented shampoos guests take away.

“If you had that shampoo at home,” he said, “it would release the whole emotional feeling you had during your journey.” (As for whether a work trip involves happy emotions, Mr. Lindstrom says a pampering hotel stay is often considered one of the benefits of business travel and sometimes inspires a return visit on vacation.)

Some of the hotel chains that have created signature scents are Westin Hotels and Resorts, whose white tea aroma spawned a line of retail products and appeared in fragrance strips as part of an advertising campaign; Omni Hotels, which infuses its lobbies with a lemongrass and green tea scent; and the Morgans Hotel Group, owner of boutique hotels, like the Royalton in New York City, each with a unique fragrance.

These scents can be delivered through heating and cooling systems or toaster-size devices provided by companies like ScentAir, which works with a number of hotels. A fan blows air over a cartridge holding custom-scented oil. Most hotels are careful not to overpower guests.

“The scent is subtle, so it’s not like people walk in and say, ‘Wow, that lemongrass and green tea really smells great,’ ” said Caryn Kboudi, a spokeswoman for Omni Hotels. “They might notice the lobby smells great or it smells fresh.”

Hotels have also taken pains to avoid fragrances that may provoke an allergic reaction, which is why Westin stayed away from florals or citrus, said Sue Brush, senior vice president for the brand. Ms. Brush said that guests had not reported any problems, emphasizing that the scent was dispersed only in public areas.

Omni has taken its sensory branding initiative beyond the lobby, adding blueberry-scented stickers to newspapers distributed to guests and outfitting some hotels with in-room “sensation bars” stocked with items like eucalyptus bath salts.

Like many hotels, Omni is also paying more attention to the music played in public spaces, developing playlists that are customized for each property, as well as the time of day.

“We realized that when business travelers are getting out the door in the morning, we need to be putting a little bit of beat in their step,” Ms. Kboudi said, explaining that this has led to a move away from classical music or jazz during the morning shift. “At night, then we go into something that’s a little bit softer and slower, a little more mellow.”

Allen Klevens, chief executive of Prescriptive Music, a consulting business that helps clients develop these types of soundtracks, said hotels are looking to distinguish themselves by shunning the ubiquitous sound of smooth jazz and even playing tunes guests do not necessarily recognize.

“If you hear music such as Sheryl Crow or Dave Matthews, that’s a familiar sound to most people,” Mr. Klevens said. “But to really create a vibe or that feeling of being different, you’re not going to know that artist, you’re not going to know that sound, but you’re going to say, ‘Wow, where can I get that CD?’ ”

In fact, guests can sometimes buy a CD or download the songs online. Marriott sells its Revive Spa Collection at shopmarriott.com , while various Westin playlists are available for download at westinmusic.com.

But with all this emphasis on appealing to guests’ five senses, there is a risk of inducing sensory overload.

“The sound needs to add value to the customer experience,” said Julian Treasure, author of the book “Sound Business” and head of the Sound Agency, a consulting business based in London. “I have visited a number of boutique hotels where you feel there is a little bit of self-indulgence going on.”

Mr. Treasure said companies should examine the entire “soundscape” of their hotels — not just the music playing in the background, but also the noise reverberating around rooms built with hard materials like wood and granite. And when it comes to sound design, he said he did not think guest rooms should be off limits.

“At the moment, the only way you can change the soundscape is to turn on the television, which isn’t everyone’s cup of tea,” he said.

In fact, some hotels do offer in-room audio channels that play soothing sounds like ocean waves as well as music, and more are giving guests ways to listen to their own tunes.

Hotel Chains Grapple With Meaning of Green

Taken from the Wall Street Journal, an article coming right on time and showing the difficulties being faced with operators to develop a real "green" product.

Hotel Chains Grapple With Meaning of Green

Marriott, Starwood Face Confusing Products, Standards In Bids to Make Lodging Environmentally Friendly

By TAMARA AUDI
September 11, 2007; Page B1

As director of Element, a brand of environmentally conscious hotels being developed by Starwood Hotels & Resorts World Wide Inc., Nicholas Lakas picks his way across a landscape of so-called green products each time he steps into his office.

Among the items: salt and pepper shakers billed as 100% recyclable; piles of towels and sheets made with organically grown fibers; boxes of organic snacks; and a countertop slab made from recycled materials.

"We get so many products, so many phone calls," Mr. Lakas says. "I have nowhere to put it, and we are always looking at it and evaluating it." He is shopping for environmentally friendly products -- from plates and light bulbs to heating and air-conditioning systems -- to be used in the first hotel in the planned chain of 90. Starwood announced the brand a year ago, pitching it as an environmentally and socially conscious hotel room at a reasonable price.

The Hilton Portland & Executive Tower in Oregon meets the Green Seal standard; cards issued by the "Green" Hotels Association; a hotel chair by Furnature, billed as organic and chemical-free.

As more hotels try to become more environmentally friendly, in part to satisfy customers they say are increasingly demanding it, they find themselves in unfamiliar territory cluttered with "green" products and hype -- but without many reliable guideposts for what's effective.

Major corporations including Marriott International Inc. and Hilton Hotels Corp. are studying options as they make decisions on far-reaching environmental initiatives intended to appeal to consumers with a conscience -- and at the same time save on water, energy and waste, without downgrading the quality of service.

"We're currently in what you might call a discovery phase," says Kendra Walker, vice president of brand communications for Hilton. "We're looking at best practices. We're looking at energy-saving light bulbs, water-saving features."

One problem is that there isn't any single standard in the U.S. for what makes a hotel green. Nevertheless, a myriad of products, organizations and consultants are offering their services or stamps of approval to hotels.

"This is uncharted territory for us," says Steve Samson, vice president of rooms operations for Marriott International. "You go on the Web and you see hotels are selling green hotel rooms. But what does that really mean? What is it? That's what we're trying to figure out."

Marriott, which this year established an internal "green council" led by two executives, is examining its suppliers and supply chain -- looking at everything from the kind of toilet paper they buy to how far towels travel from cotton field to factory to hotel, which determines how much of a carbon footprint they leave. Marriott is also asking its suppliers to demonstrate how they save energy, or use recycled products -- in essence, to prove they are green. Vendors are scrambling to make their case to Marriott or risk being dropped.

But confirming the alleged benefits of green products and methods is tricky, Mr. Samson says. "It seems like once you make a decision about something, someone comes back to you and says, 'Yeah, it's okay on that end but it's not so great in this other way,'" he says, adding that Marriott is considering hiring a third-party consultant with environmental expertise.

Sensing strong interest and much confusion from the hotel sector, the Hotel Developers Conference, a professional organization that hosts an annual industry meeting, plans a conference on environmentally friendly hotels in March.

Some hotels have turned to established programs in their efforts to go green. Marriott, for example, in 2001 joined the U.S. Environmental Protection Agency's Energy Star program, which has given it public recognition for using lower-energy flourescent lighting and reducing greenhouse-gas emissions. Marriott touts its accomplishments on its Web site under the heading "Green Marriott."

A handful of hotels have gotten certification from the U.S. Green Building Council, a non-profit group in Washington that grades commercial buildings on areas such as water efficiency, energy use, building materials and indoor air quality. Among them are a Hilton in Vancouver, Wash., and a Marriott at the University of Maryland. But the standards aren't designed specifically for hotels, and retrofitting older hotels to qualify can be prohibitively expensive.

Among other options, Starwood is considering getting certification for its first Element hotel, scheduled to open next July in Lexington, Mass. Depending on what's decided, green measures could add 2% to 4% to the planned $16 millon budget for the hotel, Mr. Lakas estimates.

Green Seal, another non-profit organization in Washington, has an extensive certification program for hotels and motels. The evaluation takes up to three months and costs from $1,950 to $3,000 annually, depending on the size of the hotel. Only 43 hotels nationwide have the certification. The group says interest is picking up, and it is hoping to have another 20 hotels in Chicago certified by this fall.

The "Green" Hotels Association, a Houston-based professional group that charges hotels $100-$750 a year to join, offers a list of approved vendors for products including water-saving toilets and chlorine alternatives. But they aren't vetted beyond a requirement that they send company literature explaining how the product is green. "We take their word for it," says Patty Griffin, president and founder of the association, which has also since 1993 sold a cards to hotels that nudge guests to reuse towels.

But many lodging operators in the group report mixed results in their efforts to go green, even though customers like it.

"There are so many companies promoting 'green products,' the challenge is doing enough research to identify which products are truly green," says Dean Crane, vice president of engineering for Aramark Harrison Lodging, with properties in settings from Lake Powell in Arizona to Glacier Bay National Park in Alaska. "There are many cleaning products that just don't hold up or achieve what they are marketed for."

Travel 2.0

An article taken from the on-line "Hotel Magazine" about the changes in the way internet business works in the hospitality industry

As the Internet evolves, latest tactics and new rules change the way hotel marketers reach customers.

By Karyn Strauss, Senior Editor

Is it a Web of challenges or Web of opportunities? So in lies the question in the complex world of generation Internet “2.0,” where the rules of customer engagement are changing more so now than since the advent of the World Wide Web. In the midst of this paradigm shift in how and why customers access the Web, hotel e-marketing strategists have been given a whole new arsenal of tools to fight the commoditization of the hotel industry. Yet part of this shift is a change in power, as mediums like consumer-generated media put customers in the driver’s seat. No longer can hotel companies expect just talk to customers; today they must facilitate—and influence—conversations.

Getting From Web 1.0 To 2.0
“Make no mistake about it, price drove online adoption,” said Philip Wolf, president and CEO of travel and hospitality research firm PhoCusWright Inc., in addressing an audience of hotel marketers at a recent conference of the Hospitality Sales & Marketing Association International. “Today price is one component of an Internet strategy, but not the entire game. It’s the evolution from customers seeking to find the lowest price to finding the perfect trip.” Wolf went on to discuss how the first adoption of Internet, such as the hotel companies’ “lowest price guarantee,” was all about “better sameness,” a 1.0 strategy. Today, he says, it is about going from considering the Web as just the lowest cost distribution channel to a tool for communicating value-added services that foster loyalty.

“Five years ago it was all about the transaction and helping someone make a reservation, but with the evolution of the Web, and more and more people going online, the opportunity has become much greater,” adds Chris Holdren, vice president of global Web services for Starwood Hotels and Resorts Worldwide. “Price is still very important to all guests—it’s still a critical element—but the evolution has been able to show what kind of experience you get for the price.”

Selling the experience of travel: With nextgeneration Web sites, no longer does the booking engine have to go on the homepage, as seen here with Travelocity.

Indeed, over the last few years hotel companies have gotten smarter about leveraging the power of the Internet to drive room sales. As a result, this year more than one-third of all hotel bookings in North America will be generated from the Internet, making it the No. 1 distribution channel. And by now seasoned hoteliers are well aware of the need for a completely integrated electronic marketing strategy. They have made the online travel agencies their partners rather than their enemies; they have measured click-through rates and done their due diligence in learning about Web site optimization, algorithms and paid versus organic search. Web site content as been modified as such, paying attention to keywords and meta-tags. And e-marketers have learned through trial and error the best ways to send out effective e-mail campaigns or launch online promotions. The industry has come a long way; 2.0, however, takes the whole game to the next level by assuming that the basic tenants of Web surfing have become easier— sites are easy to navigate, information is readily accessible and transparent and the speed at which that information is transmitted is faster.

In the 2.0 world, hotel marketers now are using technology to engage customers in more meaningful ways and in new places—even beyond the browser. And via user-generated content like blogs, discussion forums and social networking sites, in essence giving those customers more power in how their property or brand is perceived, and therefore how they hope future bookings will grow.

From Transactional To Experiential
Before getting bogged down in whether or not to have a blog, a good way to start adopting 2.0 principles is to make the most of your Web site. Hotel companies can sell the dream of travel by creating more engaging visuals and better content. While hotel Web sites of the past made the often cumbersome and not very attractive booking engine the most prominent part of their homepage, only to be accompanied by a jarring headline of some great discount deal, today using tools like streaming video and advanced satellite mapping is a much more engaging way to get customers to experience all your property has to offer. “It’s about leveraging things like video, adding destination content, making it more about the trip customers are about to take,” Holdren says.

A standout example of this new evolution in Web sites is the MGM Grand, Las Vegas. Capitalizing on its locale in the heart of The Strip, the marketing team wanted to use its site to give customers a taste of what the experience at their property could be like. Last summer it introduced a revamped Web site with a “ MaximumVegas” feature—a polished, highly stylized 75-second video that moves seamlessly from accommodations (the property’s upmarket Skylofts) to dining to nightlife to amenities to entertainment by following one guest through each aspect of the hotel’s offerings. “We wanted to create an experiential site. Our previous Web site was simply organized, retail focused and easy to navigate with a big price on homepage—a deal grabber, and in that regard it did very well,” explains Michael Perhaes, assistant vice president of advertising for the property. “But it was missing a couple components. With Vegas heating up again we wanted to differentiate ourselves. And the site was not optimized for search. It was hard to find us.”

So the team set out to accomplish an idealized experience available at the property while promoting “stickiness”— a retail strategy to engage users to stick around longer on a Web site, with the thinking being that the longer they stay, the more likely they are to book. “So you come online, and you are immediately grabbed. The movie is the hook. It is idealized to showcase the very best of everything the hotel has to offer,” Perhaes says. At any time users can “jump off” the movie to explore the different sections. And because it was created as singular flash movie with source code behind it, it is more easily searchable. “That’s what helps your rankings, also outbound links, which we have via our strong affiliate programs, which helps with your ranking [in organic search] too,” Perhaes adds.

In addition to the movie, the site also features a well thought-out mapping feature for meeting planners, who can virtually deconstruct the meeting facilities and build their own floor plans. And now Perhaes says the company is looking into adding more audio for download, be it music featured in the property’s clubs or a soundbite from a comedian featured in one of its entertainment venues.

“When the site first launched, people were falling down. It was far and away most compelling within the [MGM Mirage] organization. But people were a bit skeptical—is this really going to help sell rooms?” Perhaes says, adding that the biggest challenge with this project was convincing executives that it was OK to build a site that was for a more technologically advanced audience. “Time has showed that it has [helped sell rooms]. We’ve seen significant increase on time spent on the site and online bookings have increased month over month.”

Looking to add an expanded sensory experience, Starwood’s Westin brand is engaging users online with rich audio and video content that better reflects its renewal messaging. Its interactive site promotes health and wellness. For example, users can create their dream travel experience or take a virtual fiveminute vacation from their computers—all thanks to enticing graphics, content about relaxation techniques and calming music. Users also can download music playlists from Westin’s resident “eMusicologist,” to continue that sensory experience offline. “We’re leveraging new technologies to build engagement and keep them engaged,” Holdren says. “The type of compelling experiences we can deliver online today can bridge the gap between online and the experiences guests can have in our hotels.”

Beyond The Web Site
In addition to creating more engaging Web sites, items like RSS feeds—which allow users to receive updates about your property on their own Web browser—and software that can be downloaded to a desktop, PDA or MP3 player to communicate special offers and features of a hotel are other 2.0 ways to better connect customers with your property or brand. More and more hotels, including Starwood’s brands and MGM Grand, are adding RSS capabilities to eliminate the need to send customers e-mails about special promotions or happenings at their properties. It benefits customers by not clogging up their inboxes and allows them to better control what messages they are interested in learning more about.

Westin extends experiential reach beyond the Web by offering music downloads that support its renewal brand positioning.

Another way to help customers stay on top of the latest deals and special happenings is branded desktop applications. In the travel industry, Expedia.com was one of the first to offer such capability with its fare alert application. Southwest Airlines also introduced “Ding,” a live update communication tool about new low fares and specials. More recently, the first hotel company to introduce this model is Best Western International’s “KnockKnock” tool. Customers can easily download the application from the Best Western Web site. The feature allows consumers to reserve hotel rooms, retrieve information on the brand’s loyalty program, receive special offers, even check the weather. “From our perspective, the Web is our No 1. distribution channel, so we’re always looking to innovate. With KnockKnock, we want customers to have more engagement with our brand,” explains Dorothy Dowling, senior vice president of marketing and sales. “It provides the opportunity for us to communicate specials and will be very rich with promotions.” Such a tool is a retention strategy, she says, adding that it is just one of several new tactics the brand is exploring to foster loyalty. For example, this summer Best Western will launch a family-friendly micro-site with partner Nickelodeon that will include streaming video advertisements as well as travel tips for parents. “Today the Web is about more than just reservations,” Dowling says. “We want to add interactive elements, including some gaming applications where customers can win prizes. All these enhancements take the Web to the next level.” Looking ahead, the brand also is looking at more ways to leverage the Internet for PR opportunities. For instance, the company is planning to award a prize to the “best vacation at a Best Western property” uploaded onto the popular video sharing site YouTube.

Another growing 2.0 application is podcasting. Hotel companies now can engage customers wherever they are with rich audio and video content that can communicate hotel and destination information. Users can listen in direct from their computers or download the content to their computers or mobile MP3 devices. Companies such as Kimpton Hotels & Restaurants and Jumeirah are among those exploring this communication tool. Jumeirah launched its JCast video podcast series last year with content geared toward its “Stay Different” brand positioning. “We launched JCast because we recognized both the growing popularity of iPods in use by our guests and the broader trend for information lust and rich video content,” says Kristie Goshow, Jumeirah’s group director of e-commerce and consumer development. “The JCast presented a natural extension to our existing marketing communications platform. We want the consumer to ‘choose Jumeirah’ rather than us solely selling to them, and we wanted to continue our commitment to making the brand a personal experience. JCast was the perfect medium.” Further, she explains, the company was attracted to the concept because of its viral marketing capabilities to further grow brand awareness among travelers. The latest JCast features information about H2O, the men’s spa at the Jumeirah Emirates in Dubai. Other JCasts explore individual properties and amenities. New “episodes” are produced every two weeks.

Power Of The People
“Guess who is winning the battle of the star ratings? Is it AAA that is rating 10,000 U.S. hotels, or Expedia or TripAdvisor, whose users are rating 60,000 or 70,000 hotels across the globe?” facetiously asks Max Starkov, chief e-business strategist for Hospitality eBusiness Strategies, an Internet marketing consulting firm for the hospitality industry, in citing the power of usergenerated content. “In the past it worked to have a nice brochure and some nice print ads about a hotel. And people bought our message because there was nothing else. With the Internet and especially with consumer generated media, the power structure has changed. We’re seeing a shift in the credibility of official content to peer sources.”

Best Western International recently rolled out KnockKnock, a new desktop application tool highlighting special offers.

User-generated content is probably the biggest buzz-worthy component of the 2.0 landscape because of this power shift. That is evidenced by the surge in popularity of sites like TripAdvisor.com, which offers unbiased, travel-related reviews in a social networking setting. While TripAdvisor is the best known, it is only one of a growing number of such sites. And the credibility of peer content over “corporate speak” on these sites is changing the way people plan and book travel. “People are digging other people more than ever before,” Wolf says, adding that as a result hoteliers need to adopt a posture that all messaging cannot come from the public relations people because customers will be cynical if that’s the only voice they hear. “It only gives a company story and that will be off-putting,” Wolf says.

Looking to counter that fear, Starwood’s Sheraton Hotels & Resorts brand last year became the first in the hotel industry to feature user-generated content on its Web site. Accessible from its homepage is a social network application where visitors share stories, photos and advice about a particular destination. “The most exciting thing in social content is that it has such a natural synergy to the travel industry. People love to talk about travel experiences and share tips about how to make it special,” Holdren says. “We always start any new initiative asking what the core needs of our online guests are, and how we can better serve that. And it’s wrapped up in the unique attributes of our brands. Our Sheraton brand is all about connections and belonging.” The site marries that message of connecting with an online application similar to those popularized by Web sites like MySpace.com or Flickr.com (where people can share photos). “It’s all about engagement—bringing the brands to life,” Holdren says. “And it starts with us online. From a loyalty perspective, we’re building that engagement.”

MGM Grand Las Vegas entices would-be guests to its property with an engaging 75-second video showcasing “Maximum Vegas,” a tour through the property.

Another approach Starwood is taking toward user-generated content is TheLobby.com, which features blogs about travel destinations as well as happenings within the Starwood brands by a team of writers. Rich with travel tips, reviews and gadgets, it is Starwood’s own travel portal and reads like an online magazine.

As Starwood facilitates its own travel content via Sheraton’s Web site and TheLobby, New York-based boutique operator Affinia Hotels decided to link with category leader TripAdvisor. Reviews of its hotels are now available directly on its own homepage. “Users are influential. Anyone who is a custodian of a brand needs to respect and appreciate that. That’s the gist of the Affinia story,” Wolf contends. According to John Moser, chief marketing officer for Affinia, the idea to link up with the review site was a natural progression of a corporate mandate that said all general managers must monitor these sites on a daily basis. “When TripAdvisor came along, we started monitoring it. Our GMs look at it every day, and what’s great about it (in addition to the mostly very positive reviews) is that they are helping with our product development by telling us what we should be doing next or doing better.” Moser likens the effect to focus groups, but says it is even more useful because of the free-flowing nature of the discussion where the public isn’t asked to respond to certain questions. “The customer is not only king in the hotel, but when talking about something on these forums he or she becomes part of the development plan,” Moser says. “In my mind I want our GMs and operations people to really look at the consumer to better run our hotels. That’s the direct impact of the customer.”

Monitoring peer review sites has helped Affinia develop new programs and amenities, from its pet-friendly policy and pampered pet package to adding rooftop garden lounges to more of its hotels. In terms of any negative comments, Moser says GMs “know how to address any problems quickly and leave the customer satisfied. It’s standard operating procedure for them to post a response and ask the reviewer to contact them. And they respond equally to positive comments, too,” he says.

Jumeirah has introduced video podcasts (its JCasts) to showcase its properties’ and destinations’ special features and amenities.

Such careful monitoring of these sites is what Starkov calls a necessary defensive strategy for approaching usergenerated content. “Monitoring TripAdvisor and Frommer’s peer reviews or HotelChatter makes sense. You have to monitor, and then you have to react. The sooner you react, the better,” he says. “People know things go wrong all the time, that’s life. The same thing can happen at a hotel, but if you can react to a negative posting, identify the issue, discuss how you corrected the issue, the smart hotelier can turn negative into positive.”

And the beauty of the Web is that unlike the comment cards of the past, changes a hotel makes can be communicated immediately. But therein too is a note of caution: “Today if something happens in the lobby of your hotel, it will be on TripAdvisor within half an hour—that’s the power of consumer-generated media; the instant content delivery and the instant effect it has on a would-be customer is a very important implication,” Starkov says.

As a result, sites like TripAdvisor also can level the playing field in the hotel business more than ever before. The Internet has been a great tool for the small operators to get their names out to the public in a more cost-effective way; Travel 2.0 takes that idea to the next level. With Forrester Research finding that only 6% of consumers today trust marketers’ ad claims and people turning to peer review sites, even the smallest hotel can make the most impact. “Never before has the power of your reputation been able to combat the size of somebody else’s marketing budget,” says Wolf, emphatically. “That’s probably the biggest takeaway from this 2.0 era.”
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THE GIST

• From Bill Marriott’s personal blog, to the growing number of travelers who have uploaded their vacation photos onto Disney’s Photopass Web site, to Starwood’s development team trying out its new aloft brand in the virtual universe of Second Life, Travel 2.0 is changing the rules of customer engagement
• 2.0 strategies assume the basics are covered: Web sites are user-friendly, easy to navigate and searchable; information is both transparent and generated faster
• No longer is the Web just a low-cost distribution channel; today it is all about experiences that add value, community and foster loyalty; no more sameness
• Power of the little guy: 2.0 embraces the power of a hotelier’s reputation over his/her marketing budget
• As PhoCusWright’s Philip Wolf says “People are digging each other more than ever before.” As such, understanding both the importance and implications of online social networks is a fundamental principle of 2.0.
• 2.0 also is about creating niches—selling less of more; era of greater personalization

Economy Lodging - Always in Transition

by Kirby D. Payne, CHA

Since its inception, the economy segment of the lodging industry has undergone a continual process of transition. Although most owners, operators and lenders take a “stick to the basics” approach to economy lodging, a problem arises when one attempts to define just what “the basics” are.

There are essentially two schools of thought when it comes to defining the basics. In the first, they revolve around price/value, guest satisfaction and market position; in the second, they focus on minimum amenities, minimum services and Spartan physical facilities. Although profitability is the goal of both approaches and both tend to focus on occupancy, the former group additionally recognizes that average daily rate (ADR) plays a role in the room-revenue formula.

These two approaches create a dynamic tension in the economy segment. This tension contributes to the excellent price/value that economy-hotel guests enjoy. The entry barriers to the economy segment are relatively low: Less than $2 million, with minimal equity requirements, will develop a very nice 40- to 50-room economy property.

Don’t scoff at that size, by the way: In many markets, it’s just about right. Yes, the hotel will be fairly Spartan and yes, the owner will likely be a neophyte to the hotel industry (though not necessarily to the development game). But that neophyte will learn in a few years what the old-time hotelier already knows: The mouse trap must be improved regularly if it’s going to continue to work well.

Enhancing guests' perception of value vs. cost

As amenities and services are added, room rates must rise—but not beyond perceived value nor out of balance with the competitive market. Here is where the tension tightens: As soon as a new developer perceives an opening in the market and can obtain a secondary or tertiary site in a decent location, a new budget hotel appears on the scene. In response, management of the moderately priced hotel nearby moves to reposition it as an economy property by lowering rates. These two events create a market situation that’s viewed as either highly competitive or overbuilt.

New amenities and services added to economy/limited-service properties to make them more competitive usually are inspired by their full-service big brothers. The constraints to adding new amenities are cost, staff and available land (or its marginal cost). As a result, pools, hot tubs, and well-equipped exercise rooms have become almost commonplace in economy properties. Complimentary continental breakfasts, rather than just coffee and a doughnut, were adopted years ago from the all-suite model. Executive centers have appeared, complete with Internet access, fax machines, and copiers. Lobbies featuring couches, coffee tables and side chairs have replaced utilitarian entryways. When economy-hotel guests enter their room today, they expect to find Internet access, hair dryers, easy chairs, desks with large work surfaces, and remote-control cable TV with free movie channels. Even pay-per-view-movie firms, once reluctant to market their expensive installations to economy hotels, have discovered big profits in the segment’s guestrooms.

More profitability from investors’ perspective

Clearly, a significant number of investors believe that economy/limited-service hotels are more profitable than their full-service counterparts. All the statistics I’ve seen over the years support this premise as it relates to profit before income taxes as a percentage of sales. This is because the rooms department of any hotel, which is its very reason for existing, has the highest profit margin. Not only do the other revenue departments in full-service hotels have lower margins, but they also add undistributed expenses disproportional to their departmental margins. The question then becomes one of whether they add significantly to occupancy and ADR (which is, after all, the reason extra facilities and amenities are included in a full-service hotel). It stands to reason, then, that operational profits as measured in cash flow are higher in full-service hotels, while the percentages are higher in economy/limited-service lodging properties.

However, this leads to another question: Is return on investment (ROI), another measure of profitability, greater in economy/limited-service hotels than in full-service hotels? In researching this question, I was unable to find any objective comparisons of return on assets or equity. Comparing ROI, by any definition, between the average full-service hotel and the average economy/limited-service hotel is difficult because of the criteria one would have to establish. However, I feel safe in saying that some investors are likely to accept lower returns on economy/limited-service lodging investments compared with full-service hotels because the risk is significantly lower. The primary reason for this is that the capital required to build one medium-size, mid-price, full-service hotel could build three or four economy/limited-service properties in various locations: Thus, the risk is spread over more markets. The higher profit margins on sales would seem to imply that the economy/limited-service lodging hotel would have a higher degree of resiliency in down markets and quicker recovery as demand returns. The minimum staffing levels and other semi-fixed expenses necessary to maintain these hotels' service levels clearly set a very low floor on how much expense-cutting an operator can achieve once the variable expenses and value-added amenities have been cut in a depressed market. Because of the limited cash circulating through these properties, managers tend to be very conservative in their decisions regarding discretionary expense items, particularly in marketing and employee benefits.

Speaking of employees, labor costs in economy/limited-service lodging properties appear, on the surface, to be very low. I believe the opposite is true and that the actual cost is obscured by the high number of hours the manager and others work. With few exceptions, employee turnover is very high and is always blamed on local market conditions. The fact is that the typical manager has not been trained to check references, interview properly and effectively orient and train new employees. Often, the environment is such that the manager hires a “warm body” in hopes that the new employee will work out and the manager’s own work load be reduced. The cycle, however, goes on as the new employee often becomes disenchanted and leaves. The hidden costs in poor efficiency and quality of work resulting from this system are obvious to all but the most unsophisticated — and could be corrected by more emphasis being placed on proper recruiting, interviewing, hiring and training procedures.

As for marketing, economy/limited-service hotels tend to focus on room rate and location. Due to the low payroll budgets, sales representatives are virtually unheard of in the segment — managers are expected to shoulder the burden of the direct-sales effort. Unfortunately, the typical economy-hotel manager defines “management” as getting reports done, hosting, and holding payroll to a minimum by working at the front desk for an inordinate amount of time. Competent training of staff, inspecting, civic involvement and quality sales calls are not commonly found in these properties.

A major factor counteracting this tendency is the substantial support offered to operators by most franchisors in the economy segment. The top franchisors are getting more and more sophisticated in their marketing efforts. TV ads are becoming increasingly more effective, target marketing is implemented in very sophisticated ways, and any chain worth its salt has developed sophisticated Internet marketing and sales programs.

Keeping the ‘Big Picture’ in sight

In my opinion, the key factor in being a successful developer or operator of an economy hotel is simply this: Pay careful attention to every detail of development and day-to-day management without losing sight of the big picture. But just what is “the big picture”? I see it as a continuing, evolving collage that includes ever-changing guest preferences, shifts in the local competitive environment, and the dynamics of the local area’s economy and how it impacts demand for hotel rooms. This last piece of the big picture is probably where the least amount of support is available to the manager from either the owner or the franchisor. As a result, the economy/limited-service lodging operator typically reacts to, rather than plans for, change.

But perhaps the most important piece of the economy-segment big picture is this: It will always be a people business, whether the people are guests or employees. And whatever your definition of “sticking to the basics” might be, in the economy segment it should always start with taking care of people.

Slides, Slime and Suites: Marriott, Nickelodeon Team to Create Water Park Resorts

A very recent article from the Washingtoin Post that we believe reflects today's trends
By Michael S. Rosenwald
Washington Post Staff Writer
Friday, June 1, 2007; Page D01

NEW YORK, May 31 -- Marriott International announced Thursday that it is joining with Nickelodeon, the children's TV network, to create a chain of upscale water park resorts aimed at catapulting the hotel chain known primarily for business travel into the family-themed vacation business.

By 2020, Marriott plans to open 20 such resorts, which will feature state-of-the-art pools and towering water slides for children (and adventurous parents), as well as interactive attractions featuring Nickelodeon's cartoon characters Dora the Explorer and SpongeBob SquarePants.

Bill Marriott, the Bethesda company's 75-year-old chairman and chief executive, demonstrated his enthusiasm for the new business opportunity by standing on a stage next to Mr. SquarePants as Nickelodeon's trademark green slime was dumped over his head. Marriott's cheek took on a green finish, as did much of his suit -- albeit an old one, as he had previously consented to the sliming

Entering the family-themed vacation business with Nickelodeon helps Marriott further tap into travel dollars being spent by Generation X -- people now in their 30s and early 40s, many with families. The company has been trying to deepen its appeal to that demographic with new technology in rooms and upgrading its bar scene. GenXers came of age with the Nickelodeon brand, which traces its origins to 1979. A Nickelodeon generation is well heeled and traveling.

"They've grown up with these characters and with this Nickelodeon programming," Bill Marriott said in interview after a brief disappearance to change suits. "They have the kind of respect for it that we had for Disney when we were growing up. So there's a lot of allegiance here."

Cyma Zarghami, Nickelodeon's president, said some parents take their children to Disney theme parks out of nostalgia for family vacations of their youth. However, she said her company is seeing a new trend, with children persuading parents to share experiences that are important to them.

That phenomenon lets Nickelodeon deploy a new strategy by extending its brand through the lodging business while not necessarily competing with behemoth theme park operators, she said.

The deal, which was announced in a news conference at the Marriott Marquis in Times Square, also enters Marriott into the fast-growing water theme park business. Attractions such as Great Wolf Lodge, which has a location in Virginia, Water World in Colorado, Schlitterbahn Waterpark in Texas and Disney's Blizzard Beach in Orlando have become popular vacation spots.

But Marriott and Nickelodeon say they have come up with something different. For starters, their resorts have a connection to a popular children's network. Also, Marriott has an extensive customer-rewards program, which borders on obsession for some business travelers, and the hotel chain hopes those travelers will turn to the Nickelodeon resorts when the family takes a road trip.

Also, Marriott is making the resorts as much a playground for adults as for kids, offering the latest in-room technology; flat-panel, high-definition TVs; ultra-modern furnishings; spa facilities; and sprawling meeting spaces for companies that want to host work and play events for their employees and families.

"We want them when they are traveling on business, and we want them when they are traveling with their families," said Richard S. Hoffman, an executive vice president in Marriott's development group.

Instead of capturing business travelers on the road, this gives Marriott a chance to catch them when they're on the road with young children in tow, Hoffman said. "We don't have a product that's directed to this kind of traveler," he said.

The company does have an extensive network of high-end vacation ownership resorts.

The first family-oriented resort is scheduled to open in early 2010, in San Diego's Liberty Station area. Designed by the Gensler architectural firm, the property is to feature 650 rooms, most of them large suites including character themes for children, and a 100,000-square-foot water park and activity deck. There will also be an adults-only lap pool and poolside cabanas.

Marriott is considering other locations around the country -- even in cool climates, where pool facilities would be indoors -- as well as in the Caribbean, Mexico, Europe, Asia, Australia and the Middle East. The hotels would each cost $200 million to $300 million to build.

Nickelodeon has a pilot resort in Orlando in partnership with Holiday Inn. That deal will end in 2009. As part of the new deal, the network, which is owned by Viacom, will be paid an undisclosed licensing fee. Miller Global Properties, a developer in Denver, is to develop and own the resorts, paying Marriott management fees to run the properties.

Marriott stock closed at $46.05, up 1.6 percent.

Feasibility Studies Are Really Market Studies(And Where Are The Negative Ones?)

Kirby D. Payne, CHA

Hotel development is on the upswing and the lenders, in many cases, are asking for "feasibility studies". An independent analysis of a proposed hotel Development is supposed to lend an objective eye to 'what is being contemplated and augment the lender's hotel analysis experience.

Really Market Demand Studies

The studies commonly referred to as "feasibility studies" simply are not that. They are market demand studies with estimated operating results. Feasibility analyses are only undertaken by the consulting firms on a very, rare occasion and usually only on an informal consulting basis with no written report.

A feasibility analysis takes the information from the estimated operating results and applies it to the development cost information, the debt and equity scenarios and other information to see if there is a likelihood of achieving an adequate return on equity. Competent developers can and do complete this analysis on their own. It is fundamental to their calling!

Negative Studies Don't Pay

I've prepared a lot of market demand studies but I've never written a negative one! Consultants often hear about the paucity of negative hotel studies as a challenge to their credibility. Why haven't I written a negative study? Because I never had the audacity to think I could collect the fees for one. The fact is that negative studies are stopped before they become studies at all. Many potentially negative studies are eliminated simply by not accepting the assignment when it is obvious the site or market will not work for the hotel development contemplated.

The second, and largest, group of potential negative studies are eliminated shortly after the site and market analysis are undertaken and it becomes obvious that the proposed project is not viable. The consultant simply stops working and advises the client of the preliminary conclusions verbally. If the consultant, as a result of the conversation, agrees s/he missed or didn't consider something, the work resumes. Otherwise a client would usually ask for a brief letter outlining what was stated on the phone. No self-respecting developer would forward that letter on to anyone to further promote the fact they had a bad idea and had dropped thousands, if not tens of thousands, of dollars on that idea!

Some people feel market demand studies have a cookie cutter look and standard sections. That fact helps everyone: the consultants, to insure they covered subjects in an orderly and logical fashion; the reviewers, so in the quality control process they can insure the analysis and report are well thought out and complete; the users of more than one report, so they could find -things and not spend their time with each report looking for where the different types of cookies are hidden; and simply because the order of presentation made sense from a thought process perspective.

Shortcomings of Studies

There are a few alleged shortcomings in market demand studies:

1 . "Every year the occupancy and average daily rate go up." This pattern probably is accurate during the first three to five years of a new hotel's life cycle, unless it opens into the Olympics! And anyone who tries to project more than five years is just kidding you.

2. "Food-and-beverage outlets are not well analyzed," That is right, F&B Departments generally don't get great analysis. Part of the reason was that regardless how much thought went into concept development, etc., there. wouldn't be a significant difference on the bottom line unless the hotel project was a convention hotel or had significant or unique F & B designed into it.

Remember we're discussing hotel studies not restaurant studies. The time spent on the F & B portion of a market analysis was probably commensurate with the relative importance of the rooms department's profit contribution relative to the F & B department's profit potential!

In most hotels, for which these studies are prepared, the F & B Department is in existence to generate room revenues. Even if you reallocated expenses to show a F&B operating loss that would not lead you to either eliminate F & B or not develop the hotel. The bottom line of the whole hotel is the only thing that really matters.

3. Some feel the "feasibility study" should analyze the alternatives of managing, leasing or franchising the F & B operation. This doesn't seem like an integral part of a hotel market analysis, but if a client wanted the analysis, I'm sure someone would include it for an additional fee. Other than reducing a competent General Manager's workload, I'm not sure there is a bottom line impact of leasing F & B operations. All the same incomes and expenses are present regardless of who runs the F & B outlets except for one - the tenant's profit margin which the hotel owner foregoes!

Franchising the F & B operation is, of course, a marketing decision which is equally applicable to an operated or leased operation. While a decision to franchise a particular outlet would impact income and expense for that outlet, I believe my comment regarding the time spent on F & B analysis applies here also.

The space I have allocated here to F & B relative to any other is disproportionate to the relative profit contribution. Simply stated, F & B, whether it is a full department or a complimentary continental breakfast, exists first and foremost to help sell more rooms at higher rates!

4. Should a feasibility study analyze the "cost/benefit relationship of the franchise system"? It would be inappropriate for the consultant to promote a particular franchise within a particular class over another so long as the franchises under consideration are appropriate for the facility and the market where that facility will be.

The individual or firm undertaking the study should not complete and issue a report for a proposed project with features clearly unsupportable by the estimated ADR and occupancy or one with a high ADR which does not have the necessary features to attract the clientele who will pay that rate. It almost goes without saying, that one should not issue a study with an ADR for which there is insufficient demand to generate the occupancy necessary to support the proposed development.

Studies Are Important

Market demand studies play an important role in the development process. Many are done internally by credible and experienced developers such as Tharaldson Enterprises which develops nearly 30 hotels a year. As previously stated, in some cases the simple refusal to accept an assignment is, in effect the negative study. Others are so easy they simply affirm the developer's ideas and provide third party unbiased confirmation.

Others play a significant role in the planning process and serve to help refine the developer's plan. In all cases only the most experienced developers should forego them when one is not required by the lender.

International Hotel, Motel & Restaurant Show

by Kirby D. Payne, CHA

At noon on Friday, Northwest Airlines calls to tell us our 2:30 flight has been canceled and we have a choice of 1:15 or 6:30. Knowing we had an engagement that evening, that set the tone for my entire trip to New York for The International Hotel/Motel & Restaurant Show until I sat down for a cheeseburger at the McDonald's on the Gold Concourse at MSP International Monday night at 9:00.

The International Hotel/Motel & Restaurant Show and the Fall Conference of the American Hotel & Motel Association are held together each year in New York. The Fall Conference of the A.H.& M.A.includes the A.H.& M.A.'s Board of Directors meeting, other committee meetings, the Inaugural Reception & Dinner where the A.H.& M.A.'s new officers are installed for the coming year.

The International Hotel/Motel & Restaurant Show is big. There were 1,422 exhibitors scattered over 250,000 square feet of exhibit space. To compare, the UPS Show sponsored by Upper Midwest Hospitality here in Minneapolis has about 500 exhibitors in 75,000 square feet.

Over 30,000 buyers will go through the New York show and that doesn't include college and technical students, dealers, distributors, etc. Bill Sharp of The Whitecliff Group, here in Minneapolis, who also attended, said he thought total attendance of all types approached 80,000 people.

Getting Settled In

Our hotel was at 55th and Broadway. It was a great location close to Central Park, Times Square and the Theatre District. Our room was so recently remodeled that the bathroom didn't have towel bars, toilet paper hanger, curtain rods, etc. Of course, if those things are missing there isn't much likelihood that the room attendant would leave towels! Maintenance came and installed temporary curtains to block the view into our room from the office building and apartments across the street. Due to some installation problem we also received all the SpectraVision pay per view movies for free!

Friday evening we joined some friends who live in New York for cocktails before going out to dinner. To give you an idea of living cost in New York, the nice one bedroom apartment in a good area of Manhattan rented for $2,100 per month. The same apartment in Minneapolis would have been $650 to $850, without the doorman, but with parking. In other words, if you had a car in New York City, and most people don't, it would cost you an additional $300 or so per month to park it, not to mention insurance! It is cheaper to rent a car when you need one for a weekend getaway to a place you can't fly or take the train to.

The Show Starts

Saturday we went over to Javits Center where the show was and started working our way through the exhibits. One can get to the show by taxi or from any of the area's larger hotels which have room blocks for the Show/Conference. Buses circulate through Manhattan just for this show on about five routes every ten minutes and they are generally full. There are a lot of people attending this show and each one goes for several days. There are tens of thousands of people in the aisles.

I was specifically looking for guest room energy management systems including electronic start fluorescent guest room lighting. Other than that I simply wanted to see what new products were available and touch base with regular vendors and business acquaintances.

Many people take time out to attend seminars put on by the Educational Institute (E.I.) of the A.H.& M.A. Seminars and panels included: Supervisory Skills, Improving Employee Performance Through Leadership; Taking Charge of Your Career; Hilariously Healthy: Learning to Laugh and Play in a Diverse World; Motivation and Team Building; How Color Affects your Bottom Line (Yes, color's impact on consumer preferences!); How to Write a Winning Resume; Customer Driven Quality, Is It Really Here To Stay, plus another 20 more or so! Presenters and panelists included very prominent educators and senior executives of major companies.

At 1:30 Saturday afternoon I went as a guest to my first meeting of the E.I.I. Certification Commission, which I will be joining next year for a three year term as a Commissioner. This is the body within the hotel industry that oversees all the certification programs such as Certified Hotel Administrator, Certified Food & Beverage Executive (and every other hotel department), Certified Hospitality Educator, Master Hotel Supplier, etc.

The Commission's goal, like the E.l.'s, is to improve professionalism among those working in our industry. If you want to know more about being certified in any number of positions in our industry call 1-800-752-4567.

The New York Dining Scene

After the Commission meeting ended at 5:00 pm I wandered around the exhibit floor for a while before meeting Vicki and some friends of ours for dinner. We went to a restaurant in the Soho. This is a good point to mention restaurants in New York City. You may think high finance, fashion, jewelry, bad government and whatever else comes to mind is the city's principal industry. It is not any of those. It is eating and dining and there is a difference.

In Manhattan alone, over 150 new restaurants opened last year and only 64 closed. Sure there are hotel restaurants, McDonald's and Olive Gardens but that is not the important thing. There are innumerable delis, bagel shops, and small ethnic restaurants. There is fine dining in New York-very fine dining-hip restaurants, world renown restaurants, new trendy ones.

Sunday we brunched at the Marriot Marquis (1,850 rooms) with the Internship Coordinator for Ohio State University's hotel administration program. He is putting together a Spring conference to showcase their program. After brunch we went over to Javits Center to finish seeing the exhibits before our afternoon meetings.

Local Names and Faces

During our several trips through the exhibits we ran into a number of people from Minnesota: Dennis Breamer with our own state associations; Dick and Lorene Carlson of R. J. Carlson Company. Over at the Carlson Companies booth I saw Jim Olsen of Radisson Hotels Corporation and Nancy Johnson of Country Inns by Carlson.

Vast Array of Products

It is difficult to categorize the exhibitors. Any product or service you might imagine to be necessary or unnecessary to operate a hotel or restaurant is available for inspection or discussion at this trade show. From real estate and mortgage brokers on through designers to demitasse sugar stirrers, not to mention more espresso machines than one can count. It is all there.

The exhibit booths range from the simple ones to combinations of up to 20 with forests and discotheque light shows. There were only two companies selling pool enclosures to about 50 selling chairs. Did you know there were at least 40 oven companies broken down into: ovens; ovens-baking & roasting; ovens-brick, wood burning; ovens-convection & combination; ovens conveyor; ovens-infrared, ranges, broilers; and ovens-microwaves!

The category listings took 47 full magazine pages less a few ad spaces. The fact is, one could make arrangements to build a hotel, equip it, franchise it and supply it with consumables-without leaving the exhibit floor. The only service not being exhibited, that I found missing from the list, was management companies. Both the largest and the more modest sized management companies were attendees, however.

Sunday evening we attended the Florida International University cocktail party before dinner. The party was hosted by Dr. Tony Marshall, Esq. CHA, who visited Minnesota not too many months ago to give his tremendous class on Hotel Security, the class where everyone is harassed and, "Reasonable Care" enters one's vocabulary.

The real brains behind the F.l.U. academic program is Associate Dean Rocco Angelo who was also in attendance. Small world; Rocco was my dad's boss in Puerto Rico over 30 years ago.

At the cocktail party we made some new acquaintances and renewed some old ones. The high point for me was encountering W. Kirk Smith, CHA of Southern Host Hotels, who was one of my mentors for many years. Another surprise was that Kirk's son Russ and his beautiful wife were there. Russ is a brilliant hotelier (Cornell graduate) who is one of New York's best General Managers.

Dinner Sunday night was with Jim and Margaret Carro and their friends Pamela and Lee. We had a delightful time talking about many things including a great day of sailing Jim took Doug Brutger (Sunwood Inn, Morris) on several months ago on Chesapeake Bay. For those of you who belong to the Minnesota Hotel & Lodging Association, Margaret enters your office every month. She is Managing Editor of the A.H.& M.A.'s magazine Lodging.

MFIA Committee

While waiting for our Monday lunch appointment in the lobby of the Waldorf Astoria another Minnesota couple passed by: Brian and Deb Thuringer of Madden's Resort on Gull Lake. After "dining" at lunch time with a client at the Peacock Alley in the Waldorf Astoria we attended a meeting of the Market, Financial and Investment Analysis Committee.

I have been on this committee for over 12 years and Vicki has been for seven. Its purpose is to give hotel financial analysts a vehicle for exchanging ideas on improving the analysis of hotel investments. Members include consultants from major CPA firms such as KPMG Peat Marwick, development and operations executives from major hotel and cruise ship companies such as Cunard-Crown, Holiday Inn Worldwide, Hyatt, lender/owner representatives from Prudential, deal makers like Kidder Peabody and Landauer and so forth. I always learn something from these meetings and was sorry to have to leave for forty-five minutes or so to speak before another committee meeting. I returned in time to hear an informative presentation from a representative of Hilton Grand Vacations about marketing interval vacations (a.k.a. Time Sharing).

Time Sharing Changes

It was interesting to learn that time sharing isn't time sharing any more. One buys that same thing from one of the three or four big companies in the business, such as Hilton, Marriott or Disney. The units are exchangeable, not just for other time sharing times and places but also for stays at hotels affiliated with those companies. One can buy a time sharing unit in Florida and use it in exchange for a unit in Hawaii or a stay at the Waldorf Astoria while shopping in New York.

When the meetings ended at five I caught a taxi to Laguardia while Vicki stayed in New York to visit with friends and attend meetings for a few more days.

I got to the airport early and ran into Rose and Jimmy Sadier, CHAs of Rochester. They were on an earlier flight than mine by about thirty minutes so I had myself changed. I got on the plane and got settled in to my seat and began to get acquainted with the person next to me.

We had lots of time because the engines wouldn't start! My seat mate turned out to be J. Owen Boarman, AIA of Boarman Kroos Pfister Rudi & Associates. Owen's firm is well known in the Twin Cities and elsewhere for their architectural and master project designs including some important hotel projects. In the row in front of us was Tripp Snyder, owner of the Madison hotel in Moorhead.

After waiting a half hour or so we were all told to get off the plane and move to the departing flight which I was originally booked on! We all moved over to that plane and got settled in. A gentleman kept my coat from failing out of the overhead compartment. Anyone would have recognized him from the most recent cover of Lodging or from just keeping their eyes open in Minnesota as Juergen Bartels, head of the Hospitality Division of Carlson Companies! I thanked him and we visited for a few minutes before we settled into our seats.

Is Segmentation in the Hotel Industry New? Is it Even Segmentation?

by Kirby D. Payne, CHA

For the past five to seven years segmentation has become the buzzword of the hotel industry. How long has segmentation been around and is it truly anything new?

I first noticed all-suite hotels in 1979 and 1980 in Houston when I saw my first Guest Quarters. Then I saw my first Granada Royale Hometel shortly after that. These concepts seemed logical to me based on what they were: a limited-service hotel with each guest receiving a parlor and complimentary breakfast and cocktails. These amenities were provided instead of a full-service hotel's typical public space. The guest could get all that private space, value, and ambiance for about the same price as a standard room in a full-service hotel.

However, did these all-suite properties serve a different segment of the traveling public than the full-service commercial hotels in its market? It was obvious that the all-suite hotel's target market was the same commercial traveler; generally these guests, the mainstay of the hotel industry, had no use for a hotel's function space. Further, the average size of some of these properties was over 200 suites. They never struck me as a significant development because they just seemed like they were merely the suite portion of a larger hotel moved to the suburbs or, at a minimum, a moderate size commercial hotel with parlors instead of lobbies and meeting rooms!

Developers, however, perceived the all-suite hotel to be a more financially viable project by eliminating the disproportionately expensive public and function space and adding facilities and amenities which could purportedly increase occupancy and average daily rate (ADR). An additional benefit from a developer's perspective was that a standard apartment building could be converted to this use for a reasonable cost if there was market support for commercial rooms at full-service hotel's ADR. Of course, if you look at an all-suite hotel today the meeting rooms, restaurants and bars are back! Aren't they now just full-service hotels in which all the guestrooms happen to be suites? Therefore, the financial "edge" for the all-suite developer/owner is significantly lessened if not eliminated and it would stand to reason that this "loss" at some point is passed onto the guest.

Of course, even before the advent of the all-suite hotel we were all familiar with the upgraded Ma and Pop tourist court. I do not recall them being called economy lodging/limited-service in those days. They were motels with names like, among others, 8 Days Inn, Econolodge, Regal 8, Rodeway Inn and, oh yes, the ones with the restaurants: Holiday Inn and Ramada Inn!

So where do I think segmentation really started? Since commerce between communities began thousands of years before the birth of Christ there were two kinds of lodging establishments. Inns in town and at trail side! In some cases they may only have been attachments to eating establishments or temples and encampments near water supplies along the trail. As economic power became disproportionately distributed these establishments started offering a choice of accommodations. Various rooms and dormitories were offered inside while others of lesser means were accommodated with the animals. During peak demand periods over-bookings were apparently accommodated here, also!

Trailside inns evolved concurrently with available technology and demand. They have not changed from what they basically were then as compared to today's Ma and Pop or even a family-owned and operated property with a franchise affiliation. Construction changed from hides or clay to studs with sheet rock or brickfacia. The "down and out" room, always popular with the weary traveler, so he could be near his, not her, horse has only changed to the extent that women can now own property (cars)!

As communities evolved into towns and cities and land costs rose, the so-called downtown lodging facilities evolved into larger properties with more complex infrastructures. The style continued to be three or four floors of rooms and dormitories with shared bathrooms down the hall. Usually there was an attendant on each floor to let people into their sleeping area and to maintain order.

Soon, cities like New York started getting what might be described as the modern hotel. The big ones had elevators (thank you Mr. Otis), a bath in every room (thank you Mr. Statler and others), and two restaurants, one of which was usually a very sterile, white coffee shop and soda fountain. The other was, of course, the more upscale restaurant for business meetings and entertaining. Just as these old time hoteliers knew they needed two types of restaurants they realized, probably based on considerable experience, that some guests (potentates) were willing to pay more for nicer accommodations. The private bath which had previously been associated with being located only in the several fine suites each hotel had, were already popular and expected to be included in new hotels as they were built. The typical guest room in these hotels were small rooms with one or two twin beds and were so small that one's knees touched the small dresser when sitting on the bed. The nicer tub/shower combinations consisted of tubs about twelve inches deep and two feet square!

At some point, somebody, probably a developer or investor new to the industry not looking at it through a hotelier's paradigm (few truly new hotel ideas have come from mainstream hoteliers, which is also true in other industries) noticed that even bigger rooms with nicer decorations would be popular among some travelers. These guests might include commercial men sharing a room to save money, as in the old days when there were dorms, women or couples coming to the city for shopping and the theater. Hilton's original Lady Hilton rooms were the precursor to the upgraded decor schemes used today in all their rooms!

Previously, any variety in room size had been a result of structural happenstance driven by the desire to use space around stair wells, add or conserve storage space, or create exterior architectural features. Suddenly the idea of attracting more guests of different types became a conscious decision as hotels got larger and larger and the public space grew. Hotels and inns historically have been the commercial and social centers of communities and often have spurred economic development. Additionally, hotels also have followed other types of real estate development.

As John Kahler recently reminded me, Bloomington, Minnesota's hotel strip evolved partly because the trains went out of favor and the airport became important.

Consider a hotel typical of its time even though it was the largest in the world, Chicago's Stevens Hotel, subsequently known as the Conrad Hilton and now the Chicago Hilton and Towers. The Stevens Hotel's approximately 2,400 rooms were of many different types, ranging from the previously described knee-knocking mini-singles to opulent suites. The hotel catered to a wide range of market segments. Whether one defined segments in terms of purpose of travel (commercial travelers, convention attendee, casual tourists, etc) or quality of accommodation desired (mini-single, standard rooms of various sizes and types, or elaborate suites) the Stevens could accommodate any market segment in large quantities.

Let's not forget that the bell staff, as well as the rest of the hotel's staff, were well aware of the disparity in the various guests as it related to their ability to tip! It would follow that the guests in suites got service while those in mini-singles got worse than what we refer to today as Limited Service/Economy Lodging!

Does segmentation simply mean that some of the mini-singles at the Stevens have been sliced off and moved down the street? If so that is not really new, after all specialized hotels, usually upscale, have been well-known for years. It wasn't called segmentation when they were full-service upscale hotels or road-side suburban motor inns. It only became segmentation when the franchising industry reached over twenty years of age. At that point the original franchises started to expire and the geographic pattern of economic growth had changed travel routes into outlying areas which are today's suburbs.

The big franchisors had brand names that were getting too stereotyped and tired facilities that diluted the various brand names' reach for quality as a means of competing. Service, price creep and new roads created an opening for new economy lodging/limited service properties for hotel companies that no longer had products with that reputation. In addition, a continual increase in services, facilities, and amenities throughout the hotel industry resulted in a perceived need for hotel companies to create more upscale brand identification as well as downscale.

Hence the addition of "Royale", "Plaza", among others, to existing brand names in an attempt to create new products and further differentiate themselves in the increasingly crowded and competitive market. The franchisors also had non-compete clauses whereby they could not franchise new properties that impacted existing ones. The result was a marketing strategy to sell new hotel franchises which ostensibly would not impact existing ones. The only way they could do that was to have hotel products that appeared to appeal to different guests or segments of the market.

However, in my opinion, only the hotel company executives truly understand the definition and target markets of each of their brands. The traveling public has gotten only more confused over time and understandably frustrated. Rightfully, they bemoan that it seemed all so simple before. It appears that all the hotel industry has accomplished is the alientation of its customers by "introducing" something (segmentation) which has always existed.

Further, the hotel companies have alienated their franchisees (their direct customers) by heightening competition between each other.

These thoughts lead me to ask: isn't segmentation the same old thing in a pretty new wrapper? and, who, if anyone, has benefited substantively from its evolution?

Low Rates, Location and Billboards Aren't Enough in Limited Service/Economy Lodging

by Kirby D. Payne, CHA

The fundamentals of marketing the services of a Limited Service/Economy Lodging property always seems to include relatively low rates and a few billboards, most of which are directional or sell rates. Location, which was one of the first marketing decisions made regarding a property, is usually chosen based on proximity to more upscale hotels and low land price. However, there is considerably more to marketing this type of property. In fact, other than the limited dollars available for marketing, there should be little difference in approach between marketing the features of a Limited Service/Economy Lodging property and those of the more upscale properties.

Notice the key word, features! A Limited Service/Economy Lodging hotel must have features which satisfy the needs of the various types of travelers who come to the area and to whom the particular hotel's physical structure and location are designed to appeal. There are many service and amenity features offered by these properties which can be incorporated into a Limited Service/Economy Lodging property at minimal expense. The full service hotels in the competitive market area should be toured to determine what is appropriate and suitable.

Service and amenity features offered by Limited Service/Economy Lodging hotels

• Improve the bathroom linen presentation to make it appear more upscale.
• Offer an ounce and a half bar of soap for bathing.
  Improve bathroom lighting.
• Remove outside sales materials, such as restaurant menus, from rooms.
• Try to keep rooms from looking institutional.
• Be meticulous about guest room cleaning.
• Keep televisions in good repair.
• Offer cable TV, movie rentals or both.
• Have a well lighted desk area for guests to work.
• Have good lighting for guests to read by.
• Minimize the use of automated wake up calls, use the guest's name and give the current weather.
• If the property has no king beds add them gradually as beds are replaced. Put them in rooms connecting to dbl/dbl's if possible.
• Offer free local calls if there is unrealized potential commercial business.
• Keep a large basket of fruit on the desk and OFFER it to each guest at check in and check out.
• Don't clutter the lobby with unorganized sales materials, decals and souvenirs.
• At least offer coffee in the morning, but a full continental breakfast with fruit, yogurt, juices and a variety of breads and rolls is best.
• A uniform program or at least a employee dress code is important.

Source: American Hospitality Management Company, Minneapolis.

Another area of marketing which is not always considered thoroughly is the issue of maintenance and redecorating. Good taste and quality maintenance often take the back seat to short-sighted cost-consciousness to the determent of the hotel. Using the services of an interior designer knowledgeable in Limited Service/Economy Lodging properties will always result in a quality look at possibly a lower budget. Frayed, worn and graying bed and bath linen have a strong negative impact on guest perceptions. Band-Aid repairs, unprofessional work and inconsistent appearance all combine to erode the guest's perception of his experience. Things a manager doesn't notice, because they have always been that way, often stand out to a guest.

This interior presentation along with a good exterior appearance, combine to create a total image. The cliche, "you never have a second chance to make a first impression," applies to every individual part of a hotel and is a key component of any marketing program.

Limited Service/Economy Lodging managers tend to be too busy to make sales calls. This is usually a result of overly cost conscious owners and operators who try to economize by having the manager work an inordinate amount of time as a guest service agent (desk clerk). The managers hired by many independently-owned franchise properties do not have a well developed hotel industry or professional sales backgrounds. As a result, most are either afraid to make sales calls or are ineffective. Training and inexpensive collateral materials can help over come their reluctance to make sales calls. This can usually be overcome by explaining the concept of selling benefits.

The concept of selling benefits is an old one and is explained thoroughly in at least two series of training videos available from the Educational Institute of the American Hotel and Motel Association. The idea of selling benefits is a simple four step process.

• First the sales person needs to be familiar with the features available for sale.
• Second, skills must be developed where the potential guest's needs are identified through active listening to the information they volunteer and that the sales person elicits from the guest through conversation.
• Next, the features of the hotel are offered to the potential guest in terms of benefits that will satisfy their needs.
• Finally, the person usually closes the room sale by either nicely asking for a decision regarding the choices offered or by assuming the sale has been completed.

Some features are of no value to some guests because they do not offer any benefit to them. Conversely, potentially appealing benefits can be presented to potential guests in a way which does not, from their perspective, satisfy their needs. It is essential for the sales person to have some control of the conversation in order to obtain the necessary information and understand the potential guest's needs. The hotel's features then can be strategically translated into benefits specifically addressing that guest's unique needs. This system works both on outside sales calls and in the front office. The front office's reservation and guest registration functions are particularly well-suited for this sales method. The reservationist or guest service agent both need to have sufficient information before the various room types and rates are offered to a potential guest for them to make a selection (decision). Rates should never be quoted until some basic information regarding a guest's needs are identified. Arrival date, number of people, and reason for travel are fundamentals. The key to benefit selling from a trainer's perspective is that the individuals are not taught to sell. They are trained to know their product and their customer and to explain the hotel's features in terms of desirable benefits without a hard sell. Even the most reluctant hotel staff member can be trained to sell benefits successfully.

A Limited Service/Economy Lodging property's room rate program is an important tool for maximizing income. In Limited Service/Economy Lodging hotels, the room rates are usually limited to a published (rack) rate system and simplistic discounting from the published rates for what are thought to be key markets. There is a tendency to over-look the fact that Limited Service/Economy Lodging by definition means discounted low rates. Significant discounting below published rates is usually unnecessary and when it is implemented, it should be done on a very limited and selective basis.

The former President of Hilton Service Corporation (Hilton Reservation Service), Marco Armani (deceased) was a master of the intricacies of room pricing. Mr. Armani emphasized the point that rooms were not really all alike and that guests wanted a choice. Therefor, consideration should be given to the additional price a hotel could charge for these differences. Another key point of his room rate programs was the difference in rate charged for single or double occupancy in a specific room type. Thus the spread between room types and single and multiple occupancy were the amounts he varied to increase a hotel's average daily rate (ADR) without necessarily raising the minimum published rate. As a final, point he always emphasized that simplicity in the rate structure is a key factor in training front office staff to sell the rate program to guests. These principles work in any property with more than one guest room including hotels which are Limited Service/Economy Lodging facilities.

Certainly low rates, location and billboards are key marketing tools but attention to the other details of marketing will make a significant difference in profitability. Who knows, they may even put your Limited Service/Economy Lodging property in the enviable position of having so much demand that the management can be selective about which market segments it accommodates, when, and at what price. It can happen!

Quoting the Best: Norlander on Tourism

By Kirby D. Payne, CHA

Is it plagiarism if you acknowledge it in advance, state the source and copy it verbatim? I'm not sure, and I'm betting John Norlander, CHA, President of Carlson Hospitality Worldwide will not care either!

Recently I stayed in one of John's best managed hotels. In my room I found a copy of the Nov/Dec/Jan 1995-96 Carlson Voyager. It is a nice magazine. It does what it is supposed to do-keep the reader interested with informative articles while it sells Carlson Hospitality Worldwide's services to guests in order to encourage repeat stays at the hotels associated with their various brand names and the use of the company's various restaurant concepts.

In a section titled "Executive Update", I found the following comments by John Norlander. I thought it was very pertinent to the Hospitality News reader. So here it is, Tourism On The Planet Earth, in its entirety:

"At Radisson Hotels Worldwide and Country Inns & Suites by Carlson, we are proud to play an active part in the White House Conference on Travel and Tourism. U.S. President Bill Clinton commissioned the conference to examine nine key issues relating to the tourism industry: research, promotion, facilitation and reduction of barriers, education and training, travel safety and security, and environmental concerns. I was privileged to serve on the Environmental Committee.

"When the President calls for a White House Conference, it is an indication that he deems its subject to be of great importance. Travel and tourism provides employment for more than 6 million Americans and generates a payroll of almost $104 billion.

"The title of the popular best seller Men Are From Mars, Women Are From Venus, symbolizes the polarity of thought and philosophy that is often portrayed in our society as separating environmentalists and the business community. News reports of environmental activists clashing with business interests would lead us to conclude that business leaders are from Mars and environmentalists are from Venus.

"Our vision of this issue was shifted dramatically through fascinating testimony and presentations. We began to see many opportunities for the tourism industry to work positively with environmental interests to achieve common goals. I believe a key to this process is to create a balance between the interests of the environment, tourism industry and the tourist: the Triangle of Preservation.

"The work of the White House Conference Committee has focused on development of policies and procedures to create this balance. This includes such strategies as building public awareness through education and developing "best" practices and policies for both private industry and local, state, federal and international governmental bodies. Codes of ethics also need to be developed to create a framework for training programs and public/private partnership, efforts. We also need to celebrate and showcase success by developing awards and recognition programs for outstanding examples of environmental responsibility in the tourism industry, of which there are many.

"The Triangle of Preservation is a symbol we all can embrace to ensure the future of the tourism industry and our world. In fact, business leaders are not from Mars, and environmentalists are not from Venus. We are all from planet Earth, and we need to work together.

"The White House Conference is a great opportunity to showcase the far-reaching economic impact of the tourism and travel industry and the many ways it enriches our lives."

Sweeping Changes in the Hotel Industry Are Good for Everyone

By Kirby D. Payne, CHA

The most recent two or three years have brought changes to most companies in the hotel industry. While many may feel as if these changes have made their lives and their businesses more difficult, I feel this stimulation of competition has been good for the industry.

Many major companies have taken significant ownership positions when previously they were either only franchisers or management companies. Examples of this include Choice Hotels International's parent company, Manor Care, hiring Don Landry, CHA, to expand their small ownership and operating company into a major division of Manor Care.

Management companies such as Richfield Hospitality Services (Denver), Sage Hospitality Resources, Inc. (Denver) and many others have become major players in the ownership arena while many other smaller management companies. American Hospitality Management Company included, have developed and executed acquisition strategies, also.

Tony Isaac, President of Summerfield Suites Hotels (Wichita) has announced they will start franchising their concept this year. Hyatt Hotels Corporation (Chicago), through an affiliate, has begun to franchise as a way of expanding its market penetration. This was a major follow-on to completely re-engineering its management structure and communications lines within its hotel operations as a way of increasing operating results for its management contract clients.

Steven D. Joms' American General Hospitality (Dallas) has successfully competed for a sizable contract with the Hungarian government to buy many of its national hotels and help it dispose of others. This is a clear demonstration of the cash flow and access to capital the larger companies have. Richfield's access to capital is based on its client base and its Hong Kong ownership. Sage's capitol comes from its client contacts and its networking with major investment houses in New York.

Cory Jackson, Sr., CHA, founder of Jackson Hospitality Services, Inc, (Birmingham) is expanding his management company not only by gaining new contracts and by gathering investors to buy hotels, but also by forming a new hotel brand. He and his team have over six hotels open or under construction in the southeast under the name Key West Inns.

Another exciting change is Victor Management Company (Newport News) forming an ESOP (Employee Stock Ownership Plan) so that the management company employees can participate in the success of the company. While ESOPs have been around a very long time in other industries, they are just now arriving in our industry.

Mainstreaming

The last several years have, seen the mainstreaming of Asian-American hoteliers. Mainstreaming has come in several forms: the public's, competitors' and suppliers' acceptance of this group as they have become better known; the growth of significant ownership and management companies; and the thoughtful work of the Asian-American Hotel Owners Association (AAHOA) to counter biases. The well-known hoteliers in this group are too numerable to list, but one comes to mind as a true leader and patriarch, Ravi Patel of SREE, Incorporated (Charlotte) with over 15 hotels. Someone from AAHOA will emerge as Chairman of the American Hotel & Motel Association by the end of the century. That is only five years away, not 20!

The developer of the most hotels in the past five years only owned a few Super 8 Motels ten years ago and had a small insurance agency in Valley City, ND. Now Gary Tharaldson owns and operates over 130 hotels with brand names such as Super 8, Days Inn, Comfort Inns and Suites, Sleep Inns, Fairfield Inns, Hampton Inn, Courtyard, Residence Inn, and Econo Lodge. Tharaldson Enterprises has been developing over twenty hotels a year during this period and dominating markets.

New Ideas on the Horizon

New ideas and concepts will spill into the industry over the next several years at a breathtaking pace, Marriott has recently announced it will open 30 upscale full-service Gourmet Bean coffee outlets right in its hotels by this year's end. Food courts, just like in the shopping centers, are being tested by Manor Care Hotel Division for its sister company Choice Hotels International. Limited service hotels have "Vroom Service" in the form of Pizza Hut pizzas being delivered to Choice Hotel international's guests in their rooms. The McDonald's across from our Dickinson, ND hotel delivers right to our rooms in five minutes or less.

Marketing bas gotten more sophisticated as hotel companies have tied into movie themes with their TV ad campaigns and travelers will soon be booking room reservations on their home computers after shopping for alternatives on Reed Travel Group's electronic version of Hotel &Travel lndex.

While not one of these events on its own, with the exception of Landry's all cash hotel buying binge and Tharaldson's construction frenzy, has had significant impact on our industry, they clearly demonstrate, again, that the only constant in our business is change.

Thoughts for February

By Kirby D. Payne, CHA

I'm writing this column on Sunday, March 9th, the first weekend I haven't been traveling in nearly a month. It's nice to sleep in one's own bed. Since the beginning of the year I've slept in beds in from Dana Point, California to Zephyrhills, Florida. I've slept in beds that were in rooms of independent hard core budget rooms and beds that were in Ritz Carlton's nicest U.S. resort, not to mention beds in my own hotels that were purchased just last year. No matter the price of the room or the quality of the hotel, my bed is the best! Now, if I could only get paid based on the miles I've flown or driven...

Early in the month, my wife, Vicki Richman, and I attended a hotel conference on the west coast. Mornings were filled with meetings and afternoon schedules permitted one to get a sense of the area and relax. Without going into the entire conference agenda let it suffice to say that it was very informative, motivating and supportive of being with old friends and making new ones.

Peter Ubberoth (best known for managing the Los Angeles Olympics and being Commissioner of Baseball and lesser known as Chairman of Doubletree Hotels) and Jonathan Tisch (President of Loews Hotels and Chairman of the American Hotel & Motel Association) both spoke in different sessions. Significant portions of their speeches included a call to all of us in the hotel industry to remember we are citizens of our home and business communities. As citizens we have a responsibility to the surrounding communities of both. A responsibility to impact our community in a positive way by actively supporting area schools, community volunteer social services by encouraging staff at all levels to participate both in person as volunteers and financially when resources are available.

Both men encouraged us to have our management reach out to the nearest local school and ask what we can do to help them be more successful. Doing things to enhance civic pride and responsibility can't help but make a community a better place to live and one that supports more businesses. Clearly we hoteliers have a responsibility for our surroundings and clearly act- ing on that responsibility is good for business in the long run.

Think about the places where you see poverty rubbing up against wealth and you'll find two of them relate to the hotel industry. There are a significant number of hotels which are located within a block or two of very low income residential or economically deprived commercial areas. This isn't good for business whether it makes visitors apprehensive or is a catalyst for crime. We also have a large disparity between our lowest paid employees and many of the guests we cater to. While in some cases the contact is minimal, both parties are keenly aware of it.

We feel that giving those at the bottom of the economic ladder tools for getting to the next step is good for business. Currently in several of our hotels we have established a dental program for cleaning and check-ups. When one doesn't have extra money, teeth are only attended to in emergencies. Yet, they affect your appearance and self esteem in a big way. We also like our employees to smile! Another program is English as a second language. We have three goals: we want to communicate with our employees more effectively; we want our guests and employees to be able to communicate specialized hotel subjects like asking a room attendant for more towels or to simply have the employees confidently greet our guests; and finally an improved ability with the English language gives our entry level staff an ability to get a better job with us or elsewhere if we do not have one to offer.

Later in the month I was in Florida with a long list of things to do. My first stop was Daytona Beach where our company operates two hotels for clients. Mid-February in Daytona Beach is the beginning of Spring Break when the Canadian college students come and it was also Bike Week. Bike Week, for those of you that aren't up on the latest in motorcycle trends is a gathering of 650,000 motorcycle enthusiasts similar to Sturgis, South Dakota in the summer. More on this later in this column.

As I traveled in February I became more and more conscious of how dependent I was becoming on voice mail and e-mail. With voice mail on my direct phone line I was saving tre- mendous amounts of time because callers could leave me very detailed messages which I could act on rather than continue a game of phone tag. Interestingly, I feel like we lost business because a potential client did not have it.

We had issued a proposal to a group in South Dakota who were building a hotel and wanted help opening it. They had passed me a message through a third party rejecting the proposal as beyond their means (Interestingly it was a hotel associated with a casino!) and asked for a scaled down proposal. Each day, or two, as I traveled I called the responsible individual, who was either on the phone or out of the office, and left a message with various people who answered in his office stating that because I was traveling I couldn't be reached but that I would call again. He had no voice mail and any detailed message I needed to leave would clearly have been too long and detailed, not to mention confidential, for any one but a very competent administrative assistant or voice mail to deal with. After a few days I received a voice mail from an associate of the individual I had been calling saying they had elected to use another firm.

When I finally reached the individual a week later he stated he'd only received one message from me rather than the four or five I'd left him and that he had left me several messages but could not remember whether he left them with my assistant or my voice mail. We, as you may suspect, have no record of any of his calls! Clearly it is easier to do business with people you can reach and who can reach you. You're easier to do business with if you fall in that category!

In some of our hotels where we have no voice mail we have been placing answering machines in the maintenance and housekeeping offices. These facilitate communication with those departments, especially when there are language problems. If the front desk needs to com- municate quickly with either department and radios aren't available they can simply page the per- son they need on a beeper and then enter their answering machine's extension number so the person knows there is an urgent message waiting for them.

As for e-mail, it has arrived for business and it is here to stay. Whether it is e-mail over the internet or any other net you can imagine, it is has arrived and it is growing fast. I chair an annual workshop for management companies and multi-unit owner operators and nine related regional receptions and meetings. The primary means of communication between the various sponsors, the AH&MA and me is e-mail with some support from voice mail and fax. In the case of one of the hotels in Daytona Beach initially most of the communication with the bank officer involved in the matter and our attorneys was done by e-mail. At last count over 125 in four months.

E-mail allows me to pick up written messages as I travel. Usually I pick them up at night from my hotel room. The people I send them to find them in the morning when they get to work. I can write reports on the plane and e-mail them when I land. E-mailing or faxing from the phones on the plane is simply too expensive. If it is that urgent you probably need a real conver- sation! I also use e-mail to keep in touch with friends, business associates and my daughter in college. I encourage you to look into and use these technologies to your advantage if you are notalready. Regularly I get e-mails about this column or questions from readers.

As for Spring Break and Bike Week - let me skip descriptions of the obvious visual and behavioral entertainment which you may have been expecting and comment on some other less obvious ones. Kids from American colleges on Spring Break out spend Canadian college kids by multiples of two or three. The behavior is about the same. Some kids clearly revel in the outlandish behavior while others try to ignore it and relax or simply observe it. I suspect kids who are polite and responsible at home and at school are that way at Spring Break, too. All hoteliers know people may behave somewhat differently when away from home, how differently is the issue.

As for the bikers, they are an interesting group. Affluence clearly ranges from those who can barely afford the bike and the cost of getting to Daytona Beach to those who come in 150 foot yachts and have a semi-trailer driven in with an assortment of their bikes to use while there. I saw people on mopeds and $70,000 bikes cruising down Main Street enjoying each other. Clearly the Harley-Davidsons dominated the more comfortable Japanese bikes with air-conditioning and CD players.

Among the bikers who had tattoos the tattoos were larger and more lavish than on the Spring Breakers. Theirs were smaller and more discreet. The Spring Breakers had more body piercing! The clothing of each group was distinct from the other's except that they both love to collect tee-shirts commemorating their visit to the World's Most Famous Beach.

Don't Leave Potential Profits Lying on the Front Desk

by Kirby D. Payne, CHA

In limited service hotels, over 98% of the profit is associated with room revenues. In full service hotels, the corresponding figure is probably at least 80% and usually more, with few exceptions. While the importance of expense control in all areas of any hotel is critical to success, the fact remains that maximizing revenues is equally important and usually more difficult.

Expense control involves fewer people in the decision and subsequent action steps on a per dollar basis and the issues are usually more clear cut. Maximizing room revenues involves more people, in more subjective steps, for thousands of transactions (20,440 in a 100 room hotel with 70% occupancy and an average stay of 1.25 days!). Each of those transactions' value is at least equal to the average daily rate (ADR) and usually a lot more, depending on the length of stay. You could have several dozen employees at the front desk alone with the potential to make a significant impact on your room revenue. This staff includes reservationists, guest service agents (a.k.a. desk clerks), night auditors, switchboard/pbx operators and various supervisors.

In the case of the 100 room hotel above, assuming it has a $45 ADR, this would be room revenue of $1,149,750! And most of these employees are only paid between $1 to $3 over minimum wage. Imagine a 300-room hotel with a $65 ADR. Clearly, this is where the money is in a hotel; it's a hotel's reason for existing.

How many reservationists answer the telephone and search for an excuse to give a discount so the sale will not be lost? "Are you with a company or a group?" are almost the first words spoken. Some franchisors use discounting as the core of their marketing; one even tried to get their motels to sign people up for discounts when they were checking in with a confirmed reservation for a higher rate. No owner can take occupancy percentages to the bank to pay the mortgage, only dollars are accepted. Any time ADR is given up to achieve peak occupancy, money has usually been lost. Here is an example using our 100 room limited service motel for a year with a variable rooms department cost of $6.25:

There are 25,550 occupied so the variable rooms so the variable cost cost is $159,687.50 is $148,281.25. Profit before departmental Profit before departmental fixed costs is $990,062.50 fixed costs is $1,002,381.30

_________________________________________________________________
Typical Situation:
100 rooms x 365 days x 70% at $45.00 = $1,149,750.00
There are 25,550 occupied room nights so the variable cost is $159,687.50
Profit before departmental fixed costs is $990,062.50
_________________________________________________________________
Better Situation
100 rooms x 365 days x 65%at $48.50 = $1,150,662.50
There are 23,725 occupied room nights so the variable cost is $148,281.25
Profit before departmental fixed costs is $1,002,381.30
_________________________________________________________________

Add into that savings on credit card commissions, franchise fees, wear and tear on rooms (maintenance) and energy and things really start to look better. This situation resulted in almost equal room revenue but considerably higher profit. Of course, you need to calculate what the trade-off in occupancy is and at what rate to improve profits at your property. Remember, occupancy is expense and ADR is revenue.

The point is that a properly trained and motivated front desk and reservations staff can dramatically increase a hotel's profitability. I have previously written about hiring in this column and am not writing a column on training today but I do want to stimulate your thinking on increasing ADR with little or no corresponding decrease in occupancy.

A typical hotel has five opportunities to establish the room rate charged the first-time guest:

• location;
• affiliation (or lack thereof);
• physical appearance and condition,
• the reservation process;
• and check-in.

These items might occur over time or almost simultaneously. The owner and management impact the first three while the front office staff have the largest impact on the last two.

Yes, location can be improved by changing names (Days Inn Capitol Hill to Days Inn Capitol Downtown for instance), adding van service to one or two major demand generators or stretching the truth in maps and descriptive materials. The latter doesn't help repeat business, though. Affiliation must be appropriate to the market and the hotel's physical characteristics. The potential guests must perceive the condition and appearance of the physical facilities, particularly the exterior and lobby, to be equal to or somewhat better than what they are expecting to pay.

If the finishes and decor are much higher quality than they expect, they will be scared into believing the rates are higher than they actually are. Conversely, extra investment in guest rooms and in-room amenities will have a positive impact on repeat business. The owner and manager must give the front office staff a base from which to work on maximizing the room rates each day.

Even the simplest original design Super 8 Motel can offer at least two room types: a room with one double bed or a room with two of them. From that simple choice on, hotels and motels can layer on various bedding types, room sizes, locations, view and access. While construction and furnishing costs are almost identical, the room rating variations are larger. The room rating plan and related descriptions which are developed to appeal to the property's major customer types are one of the keys to increasing ADR at the front desk.

Here is a simple example of how this applies to an guest checking in with a confirmed reservation for the Super 8's room with one double bed: The guest service agent (GSA) simply offers the guest the room with two double beds so he or she will have more room to, "spread your things out." And the GSA points out that the double-double is "only $5.00 more". It is important to stress only the marginal additional cost. Clearly in a more sophisticated hotel with a concierge level, suites and king bedded rooms, the options are much larger and the opportunities to increase ADR easier. The point is, just because a guest has a reservation with a confirmed rate it does not mean an attempt cannot be made to upgrade the guest to a higher-rated room.

The real opportunities occur when people call to make reservations or walk in. In this situation, the first exchange with the guest is usually rate related. Instead, however, the pertinent questions at this point are really, "What dates would you prefer, for how many nights, and how many adults are in your party." One of the things a good reservationist or GSA will begin to discern from the answers to these questions is the purpose of the stay. This forms the basis for offering the guest the most appropriate room choices for their stay. Here it is of utmost importance to understand need/benefit selling and the concept of offering choices as a selling tool.

Need/benefit selling is simply the art of making a sale based on developing an understanding of the guest's needs and then subsequently offering the various room types not by just describing their physical characteristics but by translating those characteristics into benefits that might satisfy that guest's needs. The classic example might be offering a family of four two connecting rooms at a slight discount (single occupancy rate) rather than a double-double or offering a couple a king-bedded room. An obviously exhausted person might be offered a room with a whirlpool tub or a business person a room on the concierge level because it includes an honor bar and other amenities which are designed to appeal to those guests. Remember, these offers can also be made to a guest checking in with a reservation.

Another aspect in offering choices is how the rate offer is made. There are several techniques available for quoting rates and the appropriate one needs to be used for a particular guest. Some of the alternatives are:

• from the bottom up (that is quoting lowest first, then higher rates);
• top down (offering the highest rate and then backing off);
• or quoting the full range from bottom up and then repeating one, usually the middle one for emphasis.

Offering room and rate choices to a guest based on their needs is an excellent way for a reservationist or GSA who does not want to be a pushy sales person to really be the most productive sales person. If properly motivated and informed about the results, a front office team can have a substantive impact on room revenues using these techniques. The best training materials I have seen for these subjects are the Educational Institute's training videos (part of the American Hotel & Motel Association, it is based in East Lansing, MI). I encourage you to try them as they will pay for themselves in a month or less.

Once you use them, or any other training program, keep using them for new hires and refresher training. Good luck and go for the dollar!

Let's Put Some Sense in Room Rates

By Kirby D. Payne, CHA,

There always seems to be some confusion about all the different rates offered at a hotel. Recently I distributed a memo to some of our limited service economy lodging properties trying to help the front office staff understand our company's philosophy on rates. I'll share it with you this month.

Note-The Club program referred to has to do with the frequent guest program we use in many of our hotels. One hotel might call it the Coach Club while at the next it is the Econo Club.

Rack Rate

That phrase is for internal use only and should not be used with the public. By definition it is the hotel's published rates excluding any promotional discount programs.

Published Rate

The rates published in travel directories of various general types. This is the base rate for a room that would be quoted to a guest for an average or typical night. Usually there is a range of published rates representing different types of rooms for single or double occupancy. During peak demand periods it is acceptable to quote the high end of the published rates for rooms that are sold at a lower rate. During peak periods it is also acceptable, even desirable, to not quote single occupancy rates.

Extra Person Rate

This is the additional charge for additional adults in the room above double occupancy to create triple or quadruple occupancy. The extra person rate is usually the difference between the single and double occupancy rates.

Group Rate

Not necessarily a discounted rate! It is a rate appropriate to the group, the nights of the week, length of stay and the time of year. Group rates must be approved by the Corporate Director of Sales and Marketing and the General Manager. Group rates may be higher than published rates.

When taking reservations or quoting rates, it is always advisable to ask if the person is with a group if a group is booked for the dates the person is inquiring about. If their response is, "Yes, what groups do you have?" or something equally transparent, do not volunteer what groups are in house. They should know their group. Knowing about group affiliations before quoting the rate will eliminate the underselling a group rate which might be higher because of various factors.

Club Rate

These are rates which are established for each hotel's program. Part of marketing the program is telling the participants that "active participants" will be guaranteed this rate for a period of time. Ideally, we start the rate in the slow season and attract business and then leave it in for the high season as a reward to the active members. We do not want to implement it during the high season so people can use it once or twice and then not use our hotel during the slow period.

I want to emphasize that the various hotels' Club programs are frequent guest programs for legitimate frequent guests. These guests will almost always, without exception, be commercial guests. This rate may or may not be the same thing as a commercial rate. Club rates include additional special amenities that are not included with the commercial rate regardless of which one is higher.

Commercial Rate

Commercial rates are typically established when rates are submitted to the franchiser once or twice a year. In that case they may be discounted from rates published in various general directories. Note that the word "rack" was not used. Commercial rates used directly by the hotel may be changed from time to time in consultation with the director of sales and marketing.

There may be different commercial rates in effect at the same time. For instance, several high volume corporate accounts may have one, while walk-ins have another (if any at all) and the franchisor may have others for their special programs. Ideally most, if not all, commercial rates start in the same place once or twice a year, get eroded away for larger accounts or particularly slow times, and then get corrected again when directories are published.

It isn't automatic that every Tom, Dick and Mary who has a business card gets a commercial rate. Most of the time companies should have an agreed upon rate for their visitors or the guest should be a club member. Individuals should be offered whatever rate necessary for that particular day. The statement, "We have no commercial room rates available tonight," is not a four letter word. On the other hand, offering a commercial rate is a perfectly legitimate way to discount off published rates.

Remember most of our hotels are economy lodging facilities so the published room rates are already "economy rates". We don't need to discount when we don't need to discount!

Negotiated rates

Any rate negotiated for special situations. These might include hospital visitors to patients, National Guard, etc. These rates are only available to qualified guests. They are not to be offered when they are not requested, the person's eligibility must be verified in some manner and the rates are not available during peak periods unless a special exception has been made in advance and approved by the Director of Sales & Marketing.

Distressed Rates

These are rates which the hotel's General Manager has authorized during distressed occupancy periods. Typically a GSA (Guest Service Agent/Desk Clerk) would offer published rates first and if this were declined, begging to search for bonafide discounts the guests might be eligible for. If the guest isn't legitimately eligible for any, the GSA might ask if they are regular visitors to the area and offer a "discount bonus" for signing up to the Club program if the guest appears to be legitimately eligible. The GSA might offer a discount for some other purpose such as helping the GSA rent the most rooms that week or to try a room the plumbing was just repaired in, but has not yet been inspected.

The point of all of this is not to erode the hotel's published rate credibility.

Revenue Management Isn't New But It Is Important

by Kirby D. Payne, CHA , October, 1997

Kirby D. Payne, CHA is Secretary Elect of the American Hotel & Motel Association, and Chair of the AH&MA's International Council of Hotel-Hotel Management Companies.

In the Friday, May 30, 1997 issue of the Minneapolis Star Tribune's business section I happened to see a book review by Michael Pellechia. He was reviewing "Revenue Management: Hard-Core Tactics for Market Domination" by Robert G. Cross (Broadway Books, $27.50). The title of the review was, " ' Revenue management' is the way to build profits".

Any hotelier who has been around more than a half hour knows that revenue management (a.k.a. yield management) is the only way to make a significant profit in rooms and when applied to other operating departments it is an important contributor to profits, as well. When I saw the headline I thought it would be an opportunity to see how businesses other than hotels undertake yield management.

Being your basic lazy reader I quickly scanned the boxed off column to see if there were any lists. Sure enough, there it was, "seven core concepts of revenue management". Here they are:

• Focus on price rather than costs when balancing supply and demand.
• Replace cost-based pricing with market-based pricing.
• Sell to segment micro-markets, not to mass markets.
• Save your products for your most valuable customers.
• Make decisions based on knowledge, not supposition.
• Exploit each product's value cycle.
• Continually reevaluate your revenue opportunities.

After reading the list I went back and started reading the review. It began with, "It is a new holy Grail that means selling the right product to the right customers at the right time for the right price." Clearly I was about to learn something!

The next paragraph, to my astonishment, began, "Successful practitioners have included Marriott International, Southwest Airlines, Hilton Hotels Corp., American Airlines and many other hospitality and aviation businesses with a large percentage of fixed costs."

Finally, somebody was subtly recognizing the hotel industry for doing something first and right. Remember, we did yield management before the airlines. Airlines didn't do it until they were deregulated. We've probably done it since we put up tents on the newly opened camel trail from what is now Cairo, Egypt to Amman, Jordan 200 generations ago! Just think of the peak rates hotels were getting about 2,000 years ago when we blew that reservation in Bethlehem and walked that couple to the barn next door during the Roman census!

The review was excellent in that it used examples from the book of both large businesses such as airlines and car rental companies but also small businesses like barbershops. A barber shop example was interesting in that it suggested discounting on Tuesdays to attract customers who might want to avoid the Saturday crowds and save money.

A word of caution might be in order. I don't care how much one discounts Christmas night you cannot develop a sell-out in most hotels! I believe that during off times you need to combine a positive reason to come along with a price which is perceived to be a value while not degrading the hotel's image. Friends of mine market their upscale resort during the slow times as being "quiet time" but they don't discount off its low season rates to do it. In fact his quiet time is so successful that they're raising the rates for that period each year.

I'll relate my interpretation of Mr. Cross' list to some hotel concepts with words you and I use. I think you'll find you're very familiar with each item.

1. When demand for rooms exceeds available rooms in the area, raise your rates. If you know what you're doing you can even try to be one of the last to sell out when people are really desperate for rooms and are willing to pay an extra premium.
2. Pricing should be based on the market situation rather than costs. While seemingly the same as the first, there are some subtle differences. For instance during normal demand periods evaluate the features of your hotel relative to the direct competition and their prices and position your rates accordingly. If they include a continental breakfast in their rate and you don't have one, consider pricing just below them. Then market into the situation in a positive way by pointing out to guests who comment about the lack of that feature, that you charge slightly less and for the price difference there are numerous breakfast alternatives in the area where they will get something better than a doughnut and warm coffee!

   Another example of this pricing concept is applicable to beer. If, under cost based pricing, you're satisfied with a dollar profit on your highest volume beer why not do the same with your premium beers? Think what a great value they'll be as a result and what the resulting increase in consumption might do to your bottom line.

3. None of us has enough money to mass market and it is inefficient. Even in your target geographic markets, no matter how small a part of a larger area, only a very infinitesimal percentage are your potential guest. within that geographical area, marketing must be targeted to the most likely decision maker. What media are best to reach them, what will catch their eye or ear, what will attract them to your destination, if they weren't planning on
   going there already, and your hotel specifically? What about socio-economic subsegments or life style groupings or demographic niches? When we target families we only show one adult with children in our photos. This way we don't inadvertently alienate single parent families.
4. Saving your rooms for your most valuable guests is obvious especially when you remember value is not just a function of how high a rate they'll pay. For instance a guest who stays both Friday and Saturday night is more valuable than one guest for each of those nights as you have less front office and housekeeping effort associated with the former. If your peak weekend night is Saturday save some rooms that night for Friday -
   Saturday reservations and walk-ins. After all, if Saturday is that good you'll sell out Saturday at the last minute to same day reservations and walk-ins. It is simply a matter of knowing what last day demand is.
5. As the previous item implies, making decisions based on knowledge is critical. Keeping tallies of how people heard of you or examining reservation lead time are examples of critical research to develop real knowledge. Supposition comes from accidents, coincidences and prejudices. If you come to work early each morning and visit with guests checking-out at that time their comments will begin to out way information you might receive on a second hand basis from some of the staff. If one staff member who is more vocal than others has an opinion it will also begin to stand out. Gather information both formally and informally. Make ads and coupons traceable whenever possible and tally the information. In our hotels we try to ask every person inquiring about availability how they heard of us.
6. I'm not sure what the author means by "exploit each product's value cycle." While the phrase seems obvious I can't seem to apply it to a specific hotel example. I would imagine it means that a package which relates to a season or an event should be marketed on a timely basis or it could mean to be aware of consumer trends and always be ready to adjust your hotel's image or amenities offered (priced accordingly) to accommodate market developments.
7. Continually reevaluating revenue opportunities takes many forms. At one extreme are systems like Holiday Inn Worldwide's HIRO system which constantly adjusts a hotel's discount programs and rate ranges. The other extreme, other than ignoring the subject, are hotels that have revenue management meetings daily in order to adjust rates and give the front office staff selling guidelines.

One of the best stories I heard on this subject was about a very ritzy hotel on the southeast Florida coast. The hotel's staff was forced to follow the results of a yield management computer system even though they knew the previous year's data was an anomaly. The corporate office kept telling them to, "trust the computer." As a result they over priced and missed out on a lot of revenue opportunities during the peak season. According to the book review, American Airlines, due to a software glitch in 1988, lost $50 million in possible revenue!

Revenue or yield management is critical to maximizing a hotel's profitability. The concept applies to every revenue department and across departments. Saving banquet space to sell in conjunction with group guest rooms is a classic example of this concept. Early bird specials in restaurants is another example which happens to tie right to the barber shop example the author used.

The review closes by remarking that the book is, "a good stab at describing market forces from the revenue perspective. The marriage of marketing and operations research is a definite strength of the revenue management model."

Of all the points made, the one I think is most important is, "make decisions based on knowledge, not supposition." Gather information in a methodical, formal way. Analyze it and make decisions based on that rather than gut feeling.

Revenue Management Systems “Must-Have” or Luxury?

Special Report

By: Jon Inge (Special from Update Plus)

November 1998 - The marketplace is becoming more complex and competitive than ever, and everyone’s looking for ways to increase revenue and profitability. Given that revenue management systems are routinely claimed to return 3-6% revenue increase for their users, why isn’t everyone flocking to buy them?

Even in good times, the best properties look for the highest return on their investment in rooms. When things get tighter – as they always do – it’s far more financially productive to stay focused on maximizing revenue than to try to survive solely by cutting costs to the bone. The best rooms revenue results come from correctly forecasting exactly how many of each room type on each night can be sold to the highest-paying customers. In today’s increasingly fragmented market, though, doing this manually can become impossibly complex.

The salvation you need may just be a property-based revenue management system (sometimes called a yield management system), that can calculate for you. Several systems are available specifically designed for the hospitality market; each vendor claims that its system will produce a 3-6% increase in revenue, and achieve a consequently fast payback. Nevertheless, many properties are reluctant to take the plunge and use one. Why?

What’s RM All About Anyway?

This isn’t going to develop into a detailed treatise on the theory and practice of RM. There are plenty of better sources for that, starting with Bob Cross’ excellent book, “Revenue Management,” which grew from his experiences at Delta and his founding of Aeronomics (now Talus). But it may help to understand the real value of the systems if the basics are covered first.

In a nutshell, revenue management is the science of using past history and current levels of booking activity to forecast demand as accurately as possible to maximize revenue. Everyone attempts to even out the peaks and valleys of occupancy by increasing rates during times of high demand and discounting them when demand is low. Most properties break this approach into manageable chunks by applying different rates and booking constraints to different market segments, and make changes as necessary as bookings come in. Too often, however, the trigger for action, especially discount action, is an emotional reaction to low levels of bookings for short-term arrivals, and not a reasoned decision based actual – but hard to see - trends.

However, if a property has good historical data on its major market segments and their typical booking patterns, it might be less tempted to offer a discounted rate if it could reasonably expect that full-rate guests would, as they have done before, book only in the last thirty days before arrival. Equally, if it knew it had a pattern of medium-stay guests (say, four to five nights) at a particular point, it might be more confident about turning down a full-rate single-night stay in favor of the greater overall revenue available from the longer stay, even at a slightly lower rate. And if it knew it had a small but reliable group of guests who regularly called for a room right at the last minute and were willing to pay a premium for that flexibility, perhaps it could increase its rate for those guests without driving them away.

This approach to managing rates and length-of-stay restrictions to get the most income over any particular period isn’t rocket science. Given appropriately-detailed records (enough market segment divisions to be useful, not too many to be monitored effectively) this level of Revenue Management is easily done in a manual environment, and falls under the general – but crucial –heading of knowledge-based decision-making.

Every room in a property on any night has a wide range of potential customers. For maximum profitability it’s vital to know how much someone who really values that particular room on this date with this amount of lead time is willing to pay for it, and then to have the courage and confidence to hold out for that rate from that customer.

Where do you get that confidence? From the knowledge that you have a firm bedrock of property history, coupled with your own assessment of how similar current circumstances are to those of the historical data, and a clear understanding of the purchasing patterns of your particular customer mix. In other words, your Revenue Management allowes you to make informed decisions, not just relying on gut feelings.

How RM systems help

The above RM practices have become essential to effective, focused marketing. But not only has the marketplace become increasingly fragmented and fast-paced, with each subdivision and micro-segment having its own judgements on the relative value of a room, outside influences change rapidly too. The constant re-calculation of the value of taking a particular booking, compared to all the other possible bookings you might expect to be requested for that room later, becomes an impossible mental task.

But this kind of high-speed evaluation is where computer systems, RM systems in particular, excel. Far faster than even the most experienced director of sales, an RM system can take historical data, current booking levels and the forecasts of which market segments are expected to be looking for these rooms in the future, balance the various rate tolerances of these segments, and set minimum rate hurdles and length-of-stay constraints below which you should not accept a current booking request. These forecasts are updated at least every night - some systems do it every hour - to make sure that there’s no delay in deciding whether to take a booking; the criteria are always right there on the users’ screens.

They also refine their calculation formulae if the original assumptions don’t seem to be working. To take an example from Opus2’s Eric Orkin, you normally assume that a tossed coin has a 50:50 probability of coming down heads or tails. If it comes down heads seven times in a row, you’d expect the eighth toss to have a high probability of coming down tails, and could make predictions based on that. But if it comes down heads three more times before showing tails, perhaps you’re not dealing with a symmetrical coin; you might want to skew your formulae a little towards the actual characteristics you’re recording, say to 60/40, and then continue to watch developments.

Rather than be totally occupied with these kinds of calculations, management can leave them to the system and stand back, monitoring the activity and checking that the overall marketing direction is still appropriate. They can ensure that constraints and special-event knowledge that the system wouldn’t otherwise be aware of (an upcoming city-wide conference, a new sports franchise’s schedule, a new hotel opening nearby) are entered appropriately, and that system parameters are updated to reflect what’s happening in the real world as bookings come in. The RM system can highlight potential problem areas that fall outside pre-set limits, allowing the managers to focus on these exceptions.

Note the critical point here; the systems don’t make your marketing decisions for you, they just try to achieve the goals you’ve set in the context you’ve defined through experience. Humans can’t calculate as well as computers; computers can’t make expert evaluations of the effect of changes in their operating environment. Setting your marketing goals and strategy, and changing them if you’re not reaching the right potential guests, is still something you have to do yourself.

Setting these baselines is another area where automation can help out, of course. Guest history and database analysis tools allow a far more detailed look at historic and potential customer base, and automated marketing plan development and tracking tools (such as those available from Driving Revenue) can make a really significant difference to setting your focus and goals. Identifying what’s actually happening from your RM results can also provide valuable feedback. The most productive approach is to let humans and computers each do the work they do best.
Who can use these systems?

Pretty much any property can benefit from a RM system. Size isn’t so much a factor – successful implementations exist in properties from 40 rooms to 1,200 – but typically the more complex the environment, the more varied the mix of market segments, and the greater the peaks and valleys in current occupancy, the greater the benefit. A high percentage of transient guests also helps, since applying RM principles to group bookings is still a relatively young art.

It’s easier to say who wouldn’t get much benefit. It’s a short list:

• hotels with a very high percentage of group business at pre-negotiated rates with guaranteed last-room availability, i.e. if a single room is available at rack rate, a group member can take it at the discount. Even then, RM can help by shifting stay patterns, e.g. locking out that available room-night by imposing a minimum-length-of-stay at that point.
• a hotel which sells all its rooms, all the time, at rack rate – and they need a consultant to advise them on re-positioning their marketing strategy!

So why aren’t more hotels buying? We can’t afford it

The price issue has a couple of aspects, one illusionary and one more real. The illusion is the belief, coming from most people’s experience with RM coming from dealings with the airlines, that these systems only apply to hugely complex operations and must therefore be hugely expensive. Maybe that was true once, but now the programming expertise and the power of those mainframe systems has migrated down to PCs. Hospitality-specific systems are available from XXX and YYY per room, or about $25,000 for a 200-room property.

At least one vendor – IDeaS – offers a revenue-sharing approach: no revenue gain, no payment. While determining how much of that gain is directly attributable to its system pretty much has to be done with their own measurement tool – unless you’re in an unchanging market and have kept your rates constant before and after RM installation - those hotels that have gone this route do seem to validate the systems value. If a decision to purchase one outright is made, even a 3% revenue increase should see a ROI pretty quickly – but you’ll need to buy it for the right reasons and use it in the right way, of course.

The pricing issue that’s real is the one of every property having multiple projects competing for the same capital dollars, and, as for all computer-based systems, it can be hard to see any immediate tangible benefit from investment in an RM system. You can’t feel higher revenue like you can feel new guestroom furnishings or a new lobby carpet – although wouldn’t you like to invest in a system that will produce more income to spend on such items? This puts a premium on the realistic management of expectations, using relevant examples of similar properties’ favorable RM results, and on good, regular feedback to management of the actual impact of a system.

This feedback should include the regular reporting of revenue changes, with a realistic assessment of how much of each period’s improvement is due to market changes (general inflation) or hotel action (general rate increases) and how much to the system getting the maximum return from a constant rate structure. It can be generated either manually or via a tool such as IDeaS’ before-and-after comparison program. But there have been enough successful implementations of RM systems to leave no doubt that they have a real and positive effect. As always, good communications is the key to getting the benefits appreciated and more widely known.

I don’t understand it

As for being too complex to understand, the airline origins of revenue management do seem to have given it a mythic image, of being beyond the ability of mere mortals to understand or to manage. Surely it’s too much for an individual property? Not at all; it’s the individual property that’s best positioned to use these tools to leverage its own knowledge and experience, and fine-tune them to reflect local conditions. Further, a centralized hotel chain RM operation only really works when the CRS sees all the rooms available at all the properties, since local input on local context is vital.

Certainly the statistical math behind computer-based RM systems is complex, requiring rocket-scientist levels of IQ to develop and understand. But the calculations required to build a car are also complex, and we don’t expect drivers to be as technically-gifted as their vehicles’ designers. You can run a sales operation manually with good and appropriate goals in view, just as you can walk to any destination you choose. But you can also learn basic RM system operations, and learn to trust that the machine will do what you tell it, just as you learned to drive. You’ll reach your goals faster and more effectively – and avoid the risk of getting run over by the traffic that’s already on the road.

Who’s in control here?

Finally, RM systems don’t control you; you control them. They don’t make your marketing decisions for you; you still have to tell them where to take you, and what special factors to allow for.

Some managers are more comfortable just working with the rate management functions built into many modern property management systems; sell only five of this package, cut off these rates if occupancy goes above 75% on these days, and so on. They understand exactly what the system’s doing because they know what they told it and can see all the steps involved. With a full RM system, they have to trust that the “black-box” nature of its calculation engine is doing the right thing, a premise that can only be proven by checking the results. This trust and confidence will only come in time, but it will come, as the accuracy of the forecasts is borne out. If you don’t like the results, resist the temptation to blame the system; it’s only doing what you told it. Re-examine your strategy, and see if it’s still appropriate for what’s actually happening in the real world.

Criteria for success

So what does it take to make a successful RM implementation? While all the vendors agree that hotels of all sizes and types can benefit from their products (no surprise there), they also all agree that the criteria must be met for the systems to work effectively. These are:

• the right culture
• management commitment
• PMS interface
• good, plentiful historical data, and
• constant attention to relevancy and context.

The right culture

Like any other computer-based system, RM systems are tools, not magic bullets. Dropping a PMS into a disorganized rooms operation just gets you more disorganized faster. Dropping a RM system into a sales operation running on instinct and guesses will give you misleading results you’d rightfully have little confidence in. The most important requirements for a successful RM implementation are that the property must already believe in the operational importance of knowledge-based decision-making (or be willing and ready to embrace it), and must have a focus on maximizing revenue rather than minimizing cost.

One reflection of the culture would be the nature of any incentive plan for your reservations agents. If bonuses are based on the number of room-nights they sell, you may increase occupancy but at what rate? The temptation to offer discounted rates during peak demand periods could be too high. A revenue-focused organization would lean more toward rewarding agents for closing increased RevPAR sales in high, medium and low demand periods.

As a further benefit, encouraging awareness of the property’s unique value and revenue potential rather than constantly reminding everyone how tightly costs must be controlled has an enormously energizing effect on morale and productivity, even before you leverage that energy with a RM system.

Management commitment

The enthusiasm and direction must come from the top, and exist throughout the operation, to get the most benefit from the system. Everyone needs to accept that it’s a tool to be used, kept sharp and its strengths and weaknesses understood and worked with. Ideally each property should have a RM champion, someone who focuses on keeping the systems parameters current and revenue flow maximized across the property. A lot of time and resources will be invested to set it up. Stay committed to making it work and understanding what it tells you, and you’ll see results.

PMS interface

This sounds as if it should come first; after all, the very basis of an effective system is the wealth of detailed reservations data captured by you’re the PMS, and without an automated interface to transfer it to the RM system you’ll never keep up. However, it’s still essential that the property’s culture accept the need for the concepts first, otherwise no RM system will have a chance of being used properly. The need for a PMS interface may place limitations on the options somewhat, since interfaces are produced according to customer demand. Most RM systems have interfaces with varying degrees of complexity to at least one of the major PMSs (Fidelio, Geac, LANmark, etc.). (Check with your PMS vendor to see not only if it has an interface to transfer data to an RM system, but that it can also make maximum benefit of the rate hurdle and length-of-stay information coming back.)

Good, plentiful historical data

The accuracy of any RM systems forecast is directly related to the size and detail of the database it is working from, regardless of the specific mathematical approach it takes. Ideally, most vendors like to have at least a year’s worth of complete, detailed property data to use as the forecasting basis, usually from the PMS’ archived end-of-day back-ups and reports. Frequently, however, this amount of data isn’t available, or isn’t as complete as it could be. For example, some PMSs don’t track all changes to a group block along with the date and time they occurred, and it really helps to know what booking constraints were in effect when a reservation was taken. In such cases – and especially with newer properties – the available data has to be supplemented with general information from management experience, and with additional system detail captured on-site. Most vendors will record live data for three months before cutover to give a more accurate starting point.
While systems’ accuracy improves from day one as real-world data can be compared to predictions, it’s important to have the baseline be as solid and complete as possible.

Constant attention to relevancy and context

Always keep in mind the basis of the RM forecasts when considering the results. Soon after cutover, forecasts will still be based on some unvalidated assumptions and incomplete data, and maximum forecasting efficiency usually comes after a full year of operations, when all real-world seasonal variations have been included.

Also remember that RM predictions are based upon the parameters plugged in. Despite the system’s attempts to compensate for unusual levels of activity – high or low - there is no way it can detect changes in context, such as a competing property opening across the street or announcing a massive discount incentive program. As with a manual marketing strategy, always keep an eye on its current relevance; the playing field may have changed.

But not too much attention…

On the other hand, micro-managing the system and second-guessing it can be deadly to results. You’re working in a complex, fast-paced environment where situations and influences change by the minute. You’ve bought a computer system to handle the monumental task of recording and evaluating the millions of pieces of data that affect this. Trust the answers it gives you. You don’t have time to check its arithmetic, and it probably knows rather more about statistical probabilities than you do. Work with it, not against it.

Humans don’t seem to be genetically programmed to understand statistics. Scientific research has some interesting things to say about the success rate of using your gut reaction and instincts to override computer-based decisions (see sidebar). Certainly you have to keep an eye on the big picture, but you gotta have faith, too.

A Word on Ethics

Sometimes you hear comments that the very nature of RM is somehow unethical, that properties have no right to take such advantage of people’s last-minute needs by charging them extra, or that the very pursuit of every possible dollar is somehow immoral.

But most of us have trouble fully understanding the value that someone else can put on our product under circumstances that don’t apply to us. That doesn’t mean that it’s not a fair price; it becomes a fair price to that person at that time in those circumstances. Understanding the effects of these value judgements is what RM systems do well, by impartially evaluating all the circumstances under which such guests have paid high rates and predicting when they’re likely to do so again. If it sells, it was the right price for someone. You don’t have to understand it, just believe it. As Bob Cross says, when a last-minute guest arrives to take your last room and complains that the price is pretty steep, your staff can say, with perfect confidence and a smile, “Sir, we’ve been expecting you, and we kept a room for you. If it was priced any lower, it wouldn’t be here.”

Nevertheless, an obsessive focus on making every last dime can be a pretty unhealthy approach to life. Yes, you need to get the best return you can for your operation, but sometimes that return doesn’t come in monetary form. Airlines discount last-minute fares for bereaved passengers; hotels often offer cheaper rates to the families of critically-ill children. An RM system doesn’t force you to be Scrooge; you control its guidelines, and you can make exceptions. Combining good business judgement with compassion will give you a better overall reward – and can also pay off later in terms of increased business from an enhanced reputation.

Summary

In good times and not so good, any hotel focusing on increasing its revenue by every means possible will do better than one solely concerned with containing costs. If you’re not already following revenue management principles, think hard about how long you can stay competitive without them. And if you are, a RM system will take away the sometimes overwhelming burden of keeping up with all the essential forecasting details, and give you the time and confidence to apply your experience where it’s most effective – in the big picture. Go for it.

Room Keys and Security

By Kirby D. Payne, CHA

Control of guest room keys is one of the cornerstones of what hotels must do in order to provide the safety our guests have a right to expect under common law. We, as innkeepers, have an obligation to take reasonable care that our guests will be safe in their rooms from intrusions by people who may have room keys.

The following policies should be considered by all hoteliers who do not have key-card lock systems:

1. Room keys must not have any form of tag which identifies the hotel or key blank which is particularly unique among the surrounding area's hotels. No key tag at all is preferred.

2. Keys mustn't have the room number on them. Keys must be identified by a numeric or alpha code. That code cannot, in any way, directly correspond to the building or room numbers.

3. When keys are given to guests at registration the guest's room number must not be said aloud if there are others in hearing range. Room numbers should be shown to the guest in writing with a reminder that they should note it if a guest check-in packet is not used. Explain to the guest that the coding system is for their protection.

4. Guests should be asked for their room keys at checkout by the Guest Service Agents (GSAs). Hotel employees, particularly Housekeeping and Bell staff, who see guests who are obviously in the process of leaving the hotel for the final time (taking their luggage out) should ask guests if they have returned their room key. This is also a good time to thank them for staying with you and make other pleasantries.

5. Room attendants and others who find keys in guest rooms or elsewhere should place them in their pockets or in the locked key boxes provided, not on their carts where they are accessible to others, and turn them into their supervisor to be returned to the Front Desk.

6. All section masters, room masters grand masters and emergency masters, (normally kept in a safety box) should be signed out each time they are taken and their return noted. All of the keys should be stamped "DO NOT DUPLICATE." Persons who carry these keys should be spot checked to insure they have them on their person. The inspection is logged in the front office log.

7. A record must be kept of how many keys are made for each room and when they are made. This record must be reviewed on a weekly basis by the General Manager. The General Manager must initial and date the key making log each time s/he reviews it.

8. If indicated as a result of this review, the General Manager must instruct the maintenance staff either to rekey the lock or to exchange room locks around within a housekeeping section in order to save the expense of rekeying the lock.

Numbers on keys must be adjusted accordingly and overstamped until the old number is illegible and the new number stamped nearby if locks are swapped in a section. As a standard practice it is recommended that some locks in a section be moved quarterly.

9. A log must be kept of all lock swaps and rekeyings.

10. If a section master is lost under circumstances which may result in our guests being at risk, the entire section should be rekeyed. If you rekey a section consider also rekeying to a new grand master and emergency master so that you are in effect beginning a phased rekeying of the entire hotel if it has been some time since this was done.

11. If a master key or emergency key is lost under any circumstances it must be reported to the owner or corporate offices immediately by the General Manager. After the circumstances are discussed, they can decide whether the entire hotel should be rekeyed.

12. As an additional step, the General Manager or somebody s/he delegates the responsibility to must cross index all incidents of theft, missing property, damage, etc. as follows:

• Room Number or Location. (Watch out for locks that have been moved.)
• Names of potentially implicated employees (usually more than one). You may discover that room thefts never occur when so and so is off or regardless of the room number so and so was working in maintenance or housekeeping.

Remember, you want to do your best to protect your guests by anticipating potential problems and want to protect your business by taking "reasonable and prudent care" and documenting your actions.

Safety Deposit Boxes and In-Room Safes

by Kirby D. Payne, CHA

More and more hotels are either using in-room safes for securing guest valuables or even foregoing having safety deposit boxes available for guest use at all. This is creating some confusion as to how to take advantage of the protection hotels enjoy under Innkeeper's Law regarding the loss of guest valuables.

In spite of the availability of the in-room safes, I believe a hotel must continue to accept and deposit valuables and to be prepared to, "give the guest a receipt for them" (the valuables). The passive in-room system is not covered by Innkeeper Liability if the Innkeeper does not comply with Minnesota Statute 327.71 in its entirety. In other words, a guest who loses his or her property in the guest room, whether they use the in-room safe or not, has a claim against the hotel if the hotel does not comply with all the details of the law.

The Innkeeper's Liability Law must be conspicuously posted near the front desk and on the back of the guest room door in Minnesota. (Some states require the law to be posted in the room and don't say where and don't require it to be posted in the lobby.) Failure to post the law as required means the hotel foregoes the protection the law gives.

At some hotels with in-room safes, as part of the registration process, guests are asked to initial a stamped area on the registration card without explaining its significance. This stamp explains briefly something about the in-room safes and a dollar key charge or deposit. The hotel then adds a $1.00 per night charge for the in-room safe to the guest's folio. The typical guest would not carefully read or understood what they are initialing.

The initials are the vehicle by which these hotels obtain the guest's authorization for the daily charge. None of the stamps I've seen are worded as releases from the Innkeeper's Liability Law. Even if they were worded that way, I am not certain that would stand up in court if the hotel did not comply with the remaining requirements of the law.

These hotels are sometimes instructing their front office staff to tell the guests that the $1.00 is "security insurance". The term "insurance" has a very specific meaning and the application of this $1.00 charge for the availability of the in-room safes is probably not related to any real insurance policy. To say these safes are covered by insurance, if they are not, is misleading.

To insure that the use of safety deposit boxes, in those hotels that have them, is adequately controlled, here are a few ideas to consider:

• File the box record (signature cards) with guest folios rather than in separate file. This will cut down on guests checking out and forgetting they have a box. It also insures that only guests and employees have boxes.
• File employees' box records with their personnel records. The General Manager or Controller should keep a current list of what boxes are assigned to employees.
• Keys for unused boxes should be kept in the Front Office Cash drawer or some other locked place, not in the key holes.
• Two or three employee safe boxes should be pulled and counted each month on a surprise basis to insure the boxes are correct and that no unauthorized items are in the box.
• Guests should be given privacy or a discreet distance when they are placing or removing articles from their box.
• I suggest that if your hotel has in-room safes that you maintain a few safety deposit boxes at the front desk so, that in addition to posting the law properly, you will have fully complied with the Innkeeper's Law.

As a final point remember, I'm not a lawyer so you should seek competent counsel on this subject from an attorney. Copies of Minnesota's Innkeeper Laws are available from the Minnesota Hotel & Lodging Association and its usually available in other states from that state's association.

Taking Care of Travel Agents and Their Referrals

by Kirby D. Payne, CHA , 1999

Kirby D. Payne, CHA is Secretary of the American Hotel & Motel Association, and Chair of the A. H. & M. A.'s International Council of Hotel-Hotel Management Companies.

Travel agents are an important source of business referrals for many hotel properties. To maximize this source, everyone should treat travel agents, and the business they refer, in the best possible manner.

As a major potential source of business referrals, travel agents must receive a commensurate amount of attention from the hotels to which they refer business.

The three most important things to a travel agent are:

1. Ease of making reservations with confidence.
2. Client (guest) satisfaction.
3. Prompt and accurate commission payment

General Rules General hotel procedures to remember to get the most out of this business:

1. Never dishonor a reservation made by a travel agent.
2. Clearly note on each reservation, registration card and folio that the guest was booked by a travel agent. This is best done by obtaining a rubber stamp, "TA," for this purpose.
3. If a travel agent uses your hotel regularly, be sure to tell their clients at check-in that you appreciate the fact they booked through that agency and that you think very highly of that agency. Leave a small gift or treat for them occasionally, compliments of the agency that booked them. They'll appreciate it and their thanking the agency will get the word to just the person you are really trying to please.
4. If it won't cost the hotel any revenue, upgrade the guest to a better room and advise the guest you are doing it because they used that particularly agency.
5. Keep a list (see procedures below) of reservations booked by agencies and use them to learn:
• Agency productivity
• Recent bookings
• Frequent guests using a particular agency
• Frequency of bookings by a specific agency
6. Use this information in your marketing efforts. On a periodic basis (at least quarterly) the travel agent payment files should be reviewed so that targeted marketing can be developed to further penetrate this often essential source of business.

While having a policy of never dishonoring a travel agent's reservation, it is also very important to make sure they can communicate with the hotel with ease and that they have a good point of contact. Ideally, this could be the Front Office supervisor in a smaller property. In a larger property, it might be both the Reservations Manager and someone in the Sales Department. These people should visit with the agents booking the hotel on a regular basis at least quarterly just for the sake of having personal contact or bonding a little. Thank you notes and other gestures are always welcome with the booking agents and agency managers.

For chain affiliated properties, it is important to insure that the hotels' data is accurately reflected in the various airline reservation systems used by the travel industry. Stop by a travel agency where you have contacts and ask them to show you the hotel's displays. Usually, the chain's headquarters can also provide copies.

Pay ASAP

Always pay travel agents as soon as possible. The goal should be paying on a daily basis. This is only possible if the hotel has someone at the hotel with the authority to write these checks and is truly only feasible if the hotel has more than 120 rooms with sufficient travel agent volume to justify the steps. The following are suggested procedures for smaller hotels paying on a weekly basis:

1. Each day have the night auditor list the checkouts, if any, of guests booked by travel agents. The list should include:
   • Guest's full name, room rate paid, arrival date and departure date.
   • Agency name, agent's name (if available) and complete address.
   • Your calculation of the 10% commission due on room charges only.
2. Each Thursday, the Front Office Supervisor (or General Manager for a smaller property) should review and sign the list as authorization for your central office, General Manager, or your Accounting Department to pay the commission. The reviewer should check the list against actual folios on a frequent but irregular basis.
3. Your central office, General Manager, or your accounting department should pay the commissions as soon as the list is received on a weekly basis. Consider including a hotel brochure or some other promotional piece with the checks when they are mailed.

Adopting a "Pay Travel Agents Today" program can be well worth the effort. It is designed to address the prompt and accurate commission payment issue often complained about by travel agents across the country. However, I do not recommend that this program be adopted by a hotel with fewer than 120 rooms.

1. Each hotel should operate a separate checking account for commission payment purposes only with the following specifications.

Single signature

• Authorized signatures - Front Office Manager, his/her supervisor, Controller, General Manager, company president.
• Checks should be marked "Not Valid For Over $50.00" (or the maximum reasonable amount for your hotel), have vouchers and be two-part forms.
• The balance in the account should normally not exceed one week's average commission payments. Verify the amount with your Corporate Office.
• The bank statement should be mailed directly to the Corporate Office or your accounting department if all bank reconciliations are done on the property.

2. Each night, the night auditor should list the previous day's checkouts on which a commission is due and leave the list for the Front Office Supervisor.

3. Each morning the Front Office Supervisor will pull the folios from the night audit packet and copy, then return the originals to the packet.

4. The Front Office Supervisor should prepare checks payable to the travel agents in the appropriate amount.

5. A check register should be completed and a copy of each folio should be attached to the register. The copy should be annoted with the check number and date.

6. The check should be mailed that day with the voucher portion clearly showing the guest name, dates of stay, room rate commission amount and the name of the booking agent, if available.

7. Each Friday the check registers and the supporting folios must be turned into the hotel's controller, or to the Corporate Office if your hotel is on centralized accounting, along with a check request. He/she will review the documentation and, if all is in order, will immediately reimburse the account for the amount spent with a check payable to that account.

8. The copy of the check/voucher retained by the Front Office Supervisor should be filed alphabetically by agency name in reservations or at the front desk.

Adapting these ideas to your hotel will help increase travel agent business over time. If your hotel is using the central payment program offered by many hotel chains, you can still make many of these ideas work to your benefit.

Brochures Are a Great Way to Tell People About Your Hotel

By Kirby D. Payne, CHA

The following are some ideas for distributing promotional brochures and packages for your hotel. Most of them were provided by George P. Hannau of Bill Bard Associates (516-681-7974). They are an excellent national brochure and graphics company.

I. Brochures

Start with your own property. Brochures strategically located at the registration area, bell captain's or travel desk, and public areas including the restaurant, cocktail lounge, shops and of course, guest rooms for packages and special promotions. Educate your managerial and sales staff to carry brochures wherever they go! This should include sales calls, blitzes, civic meetings, and any where a potential referral source or meeting planner might be encountered. (You run into an acquaintance at the grocery store who has an out of town friend along who he introduces as the head of 3M's travel department.

II. Mailings

A. Utilize qualified lists (purchased or complied from directories and other sources) of people, companies, and organizations in your market area.

B. Previous quests.

C. All inquiries-direct, from advertisements, Chamber of Commerce and Convention and Visitors Bureau.

D. Special Promotions like golf and tennis, honeymoons, singles, family, or weekend package plans.

E. Vacation and sports clubs including indoor senior centers and travel departments of rural banks.

F. Tour bus operators.

G. Incentive firms who arrange trips for large groups and companies. Minneapolis-based Carlson Companies is probably the largest in the world.

H. Travel departments of companies that set up accommodations for their traveling executives.

III. Bulk Distribution

A. Independent properties. Reciprocal trade of brochures with other properties not competitive with yours (those one day's drive or more away.)

B. Franchised properties. Reciprocal trade of brochures with other franchised properties in feeder market cities and national; sales representatives.

C. State information offices.

D. Chamber of Commerce/Department of Tourism (U.S. Travel Service)

E. Highway information centers.

F. Tourist attractions.

G. Libraries and supermarkets in selected areas.

H. Travel agencies:

• In-house mailing through lists, directories or pre-printed labels.
• Distribution by reputable mailing house.
• Approved package plans through Air Travel Conference and included in the Consolidated Air Manual.
• Mail periodically to those travel agencies to which a commission has been paid in recent years.

I. Airport city properties should exchange brochures with properties in other airport feeder cities.

J. Your hotel and representative offices, both those of the chain the hotel is affiliated with and any independent representatives which they may be retained.

K. Dining and public areas of large corporations and manufacturers.

L. Airline, train and bus terminals and sales offices.

M. Car rental agencies.

N. Government offices

O. Trade and travel shows.

It is a good idea to mail inquiry cards at pre-planned intervals to the above mentions sources to check if they have an ample supply of your brochures.

It is not just good enough to have quality collateral materials; it is critical that they be widely distributed into the hands of likely users of your facilities and to those who will refer guests. As a final thought, monitor the effectiveness of your distribution by coding materials when appropriate and asking everyone who inquires, makes a reservation of walks in how they heard of your hotel.

Creating Rack Cards and Brochures

By Kirby D. Payne, CHA

I don't care how small the hotel or motel is, one absolutely must have a rack card or brochure as a fundamental for promoting the property. You just can't do without one. In the August 1994 issue I wrote about ways to distribute brochures and rack cards. These critical pieces are necessary just to keep up with the competition when prospective guests stop by and ask for information about the property or if you have the opportunity to be in an area attractions brochure case or a chamber of commerce mailing. In short, it's a fundamental right up there with the beds in a guest room! While a four panel, single fold brochure or larger piece is necessary for hotels with more services, features and amenities, a rack card on post card type stock is more than adequate for most economy lodging properties. At a minimum, even the smallest independent motel should have at least a rack card size (4" X 9"), vertically formatted piece printed on both sides, on heavy colored paper.

Consult the Franchisor

The best place to start a brochure or rack card is by obtaining the guidelines from the hotel's franchisor and a half a dozen or more competitors. Next, make several lists your hotel's features-area attractions (both nearby demand generators and area attractions); items promoted by your competitors which may apply to you; the reasons people stay at your hotel; make a few notes on positioning statements; and finally any new ideas you have as to features or services you may add to attract guests.

The franchisor's guidelines should be followed very closely, particularly on the front side. If you do not, the franchisor may not distribute the brochure/rack card. Additionally, it defeats the purpose of affiliating if you don't tie to the chain's marketing theme and presentation. You may get away with some deviation on the inside and the back. Usually Its not very necessary but there are exceptions.

For instance I assume a brochure/rack card will occasionally be placed backwards in a display case or left lying upside down. As a result I design the top of the back of my brochure/rack cards to be very similar to the front. The bottom of the back should also always include a space for travel agents or other referral sources to stamp their names, addresses and phone numbers. More on guidelines on necessary items later. Back to using the lists.

Features Lists

The list of features should be refined and listed in order of importance to prospective guests. In a rack card you'll only be able to list 5-8 depending on the room you need for area attractions, directions, a map, location information, and reservation instructions. If you're doing a brochure, more features can be used because you have more space. Some might be used in a list format while others may be expressed as benefits that attract guests and used as part of general copy or photo captions. The list of features should be adapted to include features that place your property in a better competitive light and worded very succinctly and grammatically correct.

Include Logos

Whenever its reasonable consider including logos for the franchisors programs that the hotel participates in. Logos for equipment and supplies the hotel uses can also be included. In the brochure for our Best Western we include the logo for, Gold Crown Club international, their frequent guest program; AAA in bright red, because we have an official appointment (you can't use it if your only inspected and rated or advertise in their TourBooks®); and Jacuzzi®. We actually purchased Jacuzzi® brand whirlpool baths so we could use the name in our marketing and avoid confrontations about using it generically inadvertently as many do. Using know brand names and logos gives your hotel credibility if those brand names are held in high regard by your guests and prospective guests.

Highlight Area Attractions

Area attractions and demand generators need to be listed relative to your hotel's location. Mall of America 12 miles (or whatever), Metrodome 5 minutes and Grand Casino Hinckley 1 mile are examples of this. Again, in a brochure these might be incorporated into the copy or referred to through a photograph.

How you want your property positioned is an important Item to consider. If you want to attract more mid-week commercial business, consider using a photograph of a businesswoman checking in. A photo such as that covers a number of issues simultaneously. If you need more winter business and it's appropriate use a snowmobiling action photograph. Set the tone with your largest photograph. It should usually be a destination shot. While you may be proud of your hotel nobody but the owner and the General Manager will travel very far just to see it!

Front Layout

A brochure/rack card's front layout should have some standard features. The place name should be at the top followed by the hotel's name. Those two should take up no more than 1" to 1.5 This is also true on the back. Below that it's up to you and your franchisor but keep in mind that if it's too cluttered the reader will get lost. I also seem to recall that a person's eye travels from the lower left to the upper right of a page. Clearly the center is most important. Whenever I'm in doubt or in a hurry I'll do a rack card. This permits me to have a front which looks as good or better than a brochure and a back that is jammed full of important information in an orderly way. I always do these on post card stock. The printing should be sharp and high contrast while the color separations should come from negatives, quality slides or high quality prints.

Speaking of photographs, I've used professional photographers, amateur photo contests and stock photos. Each serves its purpose and has its cost effectiveness. The photo contest can also be used to generate some free publicity for the hotel. Stock photos can be pricey but they are quick and you know exactly what you are getting. Stock photo prices are very negotiable. Don't cheat and use the sample without permission. If you hire a professional you have to deal with models (amateur, professional or both), photo releases and personalities.

Watch the Budget

For inexpensive promotional pieces where funds are very limited use colored paper stock and lay out the front like one would the back of a rack card. Then use the back to supplement it. don't bother wasting your valuable spare with art, duotone photographs, etc. of guest rooms or the front of the hotel. They'll never do it justice and you'll just look cheap as opposed to frugal. As a final concept consider a shell. This is a brochure/rack card that has the look and feel of your principal brochure/rack card but where significant open space has been left in one or more areas. Subsequently, these can be over-printed with special promotions, packages or rates.

Shown on the facing page is the rack card we did several years ago for our Econo Lodge. Note that there is no photograph of the hotel. We wanted to promote Minneapolis as a destination, show our newly remodeled rooms and point out that we had an outdoor pool. We emphasized the chain's 800 number because we feel their full time professional reservationists can do a better job than our harried guest service agents trying to check in a guest and take a message.

Brochures and rack cards are the foundation piece of even the simplest marketing effort including responses to inquiries. With little effort they can also be used for each incremental step you might take towards a more sophisticated and effective marketing program.

Marketing Strategy

by Kirby D. Payne, CHA

I believe the foundation of a marketing plan is the marketing strategy, or as some people call it the positioning statement. These can take many forms and ours have evolved over the years. The one we are currently using has three components, which are presented below, as developed for one of our two hotels in Daytona Beach, Florida:

1. All Guests We Accommodate Must Leave Willing to Return -

   and speaking to friends, family, acquaintances and business associates about the Best Western Mayan Inn Beachfront, in Daytona Beach as one of the best, if not the best, hotel values they ever received. We want them to feel it was a service value not just at check-in/out but also in area information, breakfast, recreation and courtesy calls. We want to insure that we have a physical facilities value in cleanliness, maintenance, room ambiance and in-room amenities. We will market to the two and three diamond market and give the guest, at least three diamond service and facilities.

2. Maximize Market Share in Historically Profitable Segments

   This will be done by examining what has previously worked in marketing and improving on those; by marketing more aggressively to those same types of people (psychographically) in the places (demographically) where they have come from in the past. The registration card data base currently being established will be a key to this effort.

3. Find and Exploit New or Smaller Profitable Segments

   This will be done in various ways. Among them will be using research and our data base to find and pursue niches in order to expand them and to convert them into mainstream business. If we're popular with bike week attendees during bike week, why aren't they staying with us all season and for other events and attractions? Are Disney cast members (employees) a potential market? They may have a disproportionate amount of weekdays off due to their busy weekends. Why shouldn't we be "their beach hotel"? The concept of "their hotel" will be tested on several potential market segments in order to enlarge the hotel's demand base.

A hotel's strategy development should include, to some degree, representatives from every department so that the staff takes ownership of the strategy. Employees, in more cases than you might imagine, know where guests are coming from, why and what they are doing while in the area. Capitalize on that knowledge.

Even more important, is making sure that all the staff is made aware of the strategy and the relevant details of its execution. For instance, part of a guest's perception of value is a friendly, service oriented staff. That means every employee passing a guest must make eye contact and greet the guest, hold doors, and generally be aggressively friendly.

Once the hotel's strategy is decided upon the hard work of turning the strategy into an action plan and budget begins. Based on financial and human resources sales tools need to be selected for each market segment and spread over a calendar. The timing of doing things relates to the both resources and the lead times needed to for timing the market. It probably wouldn't be appropriate for a north shore resort to start pushing ski packages in May for instance.

Sales tools that are generally overlooked include employee training, scripting, uniforms and landscaping. Tracking inquiries, actual room nights, geographic origins, modes of travel and, where applicable, coupon redemptions is critical to measuring the results of your strategy over the long run. Be religious in this and modify your spending based on this information so your dollars can be spent more efficiently each year.

The marketing strategy is an important part of the vision the owner and management have for growing the profitability and value of a hotel.

Marketing to Seniors and Other Observations

By Kirby D. Payne

I've refined my thoughts on marketing to seniors, learned new things about interactive marketing, and given more thought to employee training and retention. This month's column will touch on these subjects.

At a recent convention there was an excellent session on marketing to seniors which brought out some things I had not thought about before. The first thing I learned was the concept of "cohort traits or likes".

Marketing to Cohorts

Cohorts as you may know are groups or associates. Cohort traits include, among other things, a preference for a type of music. For example, I know many seniors like big band music from the thirties and forties. The Baby Boomers won't suddenly start liking that music when they become seniors, they'll prefer rock and roll or what ever they enjoyed during their formative years, Bottom line, many items which appeal to today's seniors won't appeal to seniors a decade from now.

That's not to say they won't need some of the same features. Big alpha numeric characters to compensate for poor eyesight could probably be marketed just that way to today's seniors, but in a few years, the same feature may have to be marketed as convenient or modern!

Self Perception is Reality

How people perceive themselves is also very different. I asked the speaker what age the people in photographs used in promotional pieces, such as brochures, should be if my target audience was 60 to 75 years old. The reply was about 15 years less as that is how people perceive themselves. How true, I'm almost 49 and certainly don't picture myself as being that old. I imagine when one is packaging features some items which cross the boundaries of age should be included. We've been promoting the availability of complimentary bicycles at one of our hotels. Until I attended this workshop it had not occurred to me what a broad appeal that feature had. We need to look for more like that.

Male/Female Ratio

One must also consider the disproportionate number of women as a ratio to men in the current batch of seniors. The fact is that at the oldest ages the ratio is approximately four to one. That may be useful in targeting one's marketing efforts to be more efficient. The number of true seniors had actually been failing off recently because of the lower birth rates during the depression and World War 11. Starting next year, however, the full impact of the post World War 11 baby boom will begin to be felt as those people born in 1946 begin to reach 50. Supposedly someone will turn 50 every 8 seconds beginning next year.

Think about how different a 45 to 50 year old is in their interest and activity level than a person that age when I was a child. Almost everyone that age was a grandparent and acted like you and I might picture grandparents acting. No in-line skating, no aerobics classes or SCUBA diving! We all know many people of that age today who, whether they are a grandparent or not, undertake those activities! The scariest thing was that the presenter was a woman who appeared to be in her mid-thirties. She was in her mid-forties and had children five and eight years old. This isn't my grandmother's generation, it is mine!

Marketing to Boomers

How do we market to ourselves? For the next twenty years the boomer bubble will be going through their biggest spending years. As the session on seniors brought out, the people we consider seniors are children of the depression with all the baggage relating to financial security that goes with that. The following generations are all more prone to using credit or otherwise spending to the limit. So not only are the numbers of people huge, but so is their willingness to spend.

We really do need to get ready to market to our own generation and we need to do it efficiently. How many of these people are surfing the Internet? How many of these people will respond to interactive marketing?

Look to the 'Net

I suppose everyone thinks they know what the World Wide Web and the Internet are. Maybe they do, maybe they don't. I'm just starting to use them. Much to my surprise, even these columns are available on the Internet. I've heard the lnternet described as the world's largest library, but that its books are all laying on the floor, There's some truth to that in that one really needs to know more than the Dewey Decimal System (or what ever replaced it) to find something on the lnternet. From everything I've heard and seen the lnternet and World Wide Web will become exponentially more important every year.

Interactive Marketing

I guess I should explain what interactive marketing is. You may be familiar with in room city magazines which are heavy in advertising in addition to having a few articles about local history, culture, restaurant reviews, etc. Imagine putting this magazine on the guest room TV. You select the channel that has the magazine when you want to read it and you decide which ads you may want to see based on what you want to know about at the moment. The ads may be categorized under restaurants, night life, movie theaters, etc.

After selecting the subject, you might also want to select some sub category. You then page through the main part of each ad pursuing more detail when you want it. For each ad you can have a map and coupons printed out on a laser printer at the hotel's front desk to pick up later. You can even have the TV dial a particular advertiser and put them on your guest room telephone so you can make reservations or get more information.

Interactive marketing is not like TV advertising in that you don't have to watch it except when you want to and need the information, It is more like a high-tech yellow page directory. The question is, of course, who is benefiting and who is making money? The answer is that it is a win-win-win situation for everyone, particularly hotels which have the demographics to appeal to the interactive marketing company.

The advertisers win because they get high quality advertising in full color with high graphics in hotel guest rooms. Full motion and animation is available, but should be used with care so that the guest doesn't get the feeling they are watching intrusive (regular TV) advertising. The advertiser gets a record of the inquiries, calls forwarded to them and an audience that is very focused. It is truly efficient advertising.

The advertisers, of course, pay the interactive media company a fee to offset that company's expenses. This is no different than paying a magazine publisher or a radio station.

The interactive marketing company adds benefits to their programs to entice the hotels into allowing the program to be placed on its guest room TVs. The first of the benefits is obvious: a no cost additional amenity for its guests. A second benefit is free advertising for the hotel and its various profit centers on the system. Not so obvious are other features such as voice mail and fax reception. These last two features free up the hotel's staff and can be provided with a higher quality than typically found in other programs. When the guest wants the fax printed out it comes out at the front desk on the same laser printer used by the advertisers. The voice mail simply comes out of the television's speaker thus leaving the telephone free. Clearly these products won't find their way to the limited service economy lodging and rural markets in the near future. Major markets and full service mid and upper-tier hotels should start seeing these offers outside of the test markets in the next year or so.

Employee Retention

On to employee retention and motivation with a quick idea my wife, Vicki Richman, picked up at a workshop she went to at the International Hotel/Motel & Restaurant Show. One speaker suggested testing different groups of employees to see what motivates them. Questions might include, but not be limited to, "what would you rather have: $25 gift certificate to a store, lunch with the General Manager, or an acknowledgment in the company newsletter?". The speaker's idea appeared to be that we should learn what motivates different groups of employees because each of these options reflects an individual's unique hot buttons.

An adaptation of this idea which we're considering using in our company is to test every employee hired for motivational and disciplinary ideas and alternatives. We would file the results of the test in each employee's personnel file and refer to the test results when necessary so we can tailor our leadership style and methods to each individual employee. Obviously a lot of discussion and testing is needed before we implement this, but on the surface it seems to have possibilities. There is nothing worse than thinking that you are providing desirable rewards for behavior and never knowing that your staff has no desire for those rewards.

Thoughts on Promotions

by Kirby D. Payne, CHA

People who don't know me but work with me will usually tell you that I am pretty creative when it comes to marketing and promotions. Frankly, I have them fooled!

Virtually everything I do in marketing is either someone else's idea or an adaptation of someone else's idea. I'll grant you that after I have used and adapted an idea for ten or twenty years the originator might not recognize it. My problem then is not creating new ideas, because I rarely do, but rather keeping track of other peoples ideas and then measuring the success of the ones we try.

Keeping track of ideas is fairly simple. One simply has to organize them in a way that will allow them to be found in a timely manner later. On the surface that would seem simple enough, just set up some file folders with headings for each different type of event, holiday, etc. Where that system might fail is in cases where a promotion might apply to more that one holiday with a little bit of adaptation. The same holds true on theme events for coffee breaks or tour bus welcoming parties. When you get right down to it everything needs to be cross referenced in some manner. Here are some ideas to solve the problem and keep your ideas available for use and make implementing ideas easier.

Create a three ring binder that is the detailed resource file, where can you get various types of decorations, special equipment, entertainers and so forth. Who is willing to provide free materials in exchange for a little promotional exposure? Also note each time you use the individual or company, what they did and how well they did it. Even make a note when they turn you down and why. This resource file will grow over time as you do more promotions.

As for the various ideas themselves, it all depends on how your mind stores and retrieves information. Consider putting the information in file folders using headings that are clear to you. These might include holidays, cultural affiliations for theme parties (Mexican, for example), seasons, activities, etc. More importantly get in the habit of making cross reference notes on file folder covers. When you clip out an article or hear about a promotion that interests you make a few notes about it and file it in the most logical place. At the same time make notes on every other file folder cover that the idea might relate to. All you need to note is a line describing or titling the promotion and what file it is in. This cross referencing will help later. One of the most important things you can file are the details of promotions you do along with an after-action report.

This leads me to another important area. Why do so many good promotions fail? When I ask our marketing departments that question I get a lot of different answers. I don't doubt that most of them are accurate to one degree or another. What I rarely hear is that the promotion may have been done badly by them!

Here are some causes for failure that people don't volunteer too often:

• The promotion may not have started off with brain storming sessions that included most of the people that had to buy into the idea and execute it with enthusiasm. The lack of some brainstorming with the line staff usually results in failing to adapt the promotional idea to fit the local situation and circumstances.
• The manager wasn't enthusiastically supportive of the idea and plan. He or she didn't get sufficiently involved.
• Lack of lead time and attention to detail usually results in failure unless the promotion has been done several times before and the wrinkles have been ironed out. The two most important aspects of lead time relate to actually communicating the promotion to the intended audience and the fact that promotions are usually executed by people who already have other time commitments. Who can afford a full or part time promotions coordinator? Attention to detail is primarily a result of insufficient lead time and to some degree a lack of organizational skills in the person a lot of the work may have been delegated to because the responsible person is too busy.
• Failure to keep detailed notes at planning meetings causes a lot of problems. First, people forget some of the things they are supposed to do or when they are supposed to do them. Follow-up becomes a problem. These events should be treated with as much care as an event for a paying customer. The lack of notes also leaves you with a weak basis for doing an after-action analysis to examine what went right and what went wrong. It makes it kind of hard to improve!
• One error I have observed numerous times is inadequate staffing. If you draw the expected crowd or even more you will need staff available to service them properly. If attendance falls significantly short, the extra staff can either be sent home or used as shills. Don't laugh, spreading your extra staff around (in street clothes) to be active and enjoy themselves accomplishes a lot. They have fun and feel rewarded and important. They create an active energy which will carry over to your real patrons. Most importantly it will keep the promotion from looking like a failure to those that contributed time and materials and the patrons that did come won't go away saying it was lousy because no one was there.

When you consider doing a promotion or a marketing campaign ask yourself what you are trying to accomplish and why. Don't lose sight of those things during the planning, implementation or execution of an idea. Equally important, when it is all over measure your results against those answers. Then discuss what your team did right and what it did wrong. Learn from the answers.

Another activity which will help you avoid problems is going to promotions put on not only by your competitors but also businesses in other industries. You will get lots of ideas, see new ways to do things and get new sources for your own promotions. If you see their promotion failing remember that the best kind of bad experience is a second hand one!

The Easiest Sales

by Kirby D. Payne, CHA

As the autumn months are upon us, most hotel management is either in the throes of 1997 planning or getting geared up for it. One of the most crucial components of annual planning is the Sales & Marketing Plan.

In the hotel business, and I'm sure it's true of many other businesses, an enormous amount of resources in time and money is used to increase sales. All of us know we need a market plan with its many components that build toward an action plan to increase market share or reposition ourselves in the market to a more profitable segment. Many dread preparing the market plan almost as much as we dread preparing the capital plan where the necessary improvements (or catch up work on deferred maintenance!) which will help achieve the plan's goals are budgeted. In many of the plans I see there are some crucial components which are either given short shrift of are omitted completely.

Accountability is a rare feature. Who is supposed to do something and by when is a fairly common part of a market plan. The details of the mechanism for reporting what actually occurs is weak. Knowing this becomes very useful whether or not the plans goals are met. This is true when one wants to know what or who was most effective in contributing to the success of the plan. Almost needless to say is that if the goals of the plan are not met this information will be equally as useful. This information feeds into the reward system and into modifications one may wish to include in updated versions of the plan. No, accountability does not directly increase sales but it is a key to holding the market plan together.

Everyone has heard that the easiest sales are the successive sales to satisfied customers. However, how many market plans specifically address this fact? Why do so many hotels forget this essential market in the annual planning? Keeping these guests happy needs to have specific strategies and actions planned. The first thing that needs to be done is to know specifically who our satisfied customers are, why they feel that way and what improvements they would like to see. Market plans need to focus on continuing to take care of that group and facilitating their word of mouth referrals and comments about the business.

Another important task is keeping familiar with the existing guests' constantly evolving needs and plans. This information allows you to sell them additional (and possibly more profitable) features or services when appropriate. It also keeps you more knowledgeable than your competition. Never forget that once someone commits to use your services or buy a product from you a certain level of trust has been established and the beginning of a habit. Build on that by continuing to find needs that customer has that your services can satisfy by explaining the benefits of your services. I believe Xerox use to call this, "Need-Benefit Selling."

I do not know whom to quote, but there is the old saying, "you never get a second chance to make a first impression." This cliche needs to be applied as an active part of a market plan. One must think about all the first impressions the business has in addition to the obvious. In hotels it can be little things such as the sound of gum being chewed by a telephone operator, the appearance and manners of the maintenance staff (that person may be in the parking lot when the potential guest arrives), odors, lighting in rest rooms, detailed cleanliness, internal signage program and the level of familiarity with which we treat people are all first impressions. They are all manageable.

The capital plan needs to relate to the market plan because it has a direct impact on repeat business. It is not just a matter of building additional features such as pools, larger bars or replacing worn carpet. It is a matter of also asking what will make the hotel prettier (or homier or more elegant or more sophisticated, or whatever you want your image to be). It is attention to detail in physical facilities that capitalizes into repeat business or a better price value perception (and lower maintenance costs). Obviously, there is a cost-benefit curve involved. Walls covered with foam padded fabrics are only cost effective in very special circumstances. When doing capital improvements for marketing purposes, one should always remember the marginal or hidden ongoing costs associated with the project.

It is important to understand that most capital projects relate to marketing and every little decision affects the potential repeat sale tremendously. There is a hotel in the Twin Cities which spends a tremendous amount of money getting new guests while the ownership won't spend money to get the HVAC system working properly. The owner's development and operating division have been arguing for years over what the problem is! They have literally had meetings regarding this across from the front desk as they have overheard guests checking out of the hotel before their scheduled departure dates.

This leads to the final point. Every employee in a hotel has potential legitimate ideas that apply to sales and marketing. Most of these relate to repeat sales and are usually very cost effective. This is true because most of the employees, because of their pay levels, think almost any amount of money is a lot. Additionally, their exposure to the guest is frequent and at close quarters while the guest is in the property. Take advantage of this insight by drawing it out in a non-threatening environment and give them credit for the idea.

In summary, let's keep focusing on booking new business but let's spend an equal amount of time focusing on keeping the business we have. A specific plan to this end needs to be incorporated into our annual plans if we are going to give this crucial marketing activity the time and attention it warrants.

My Three Databases

By Kirby D. Payne, CHA

I have always been hesitant to write on this subject because I felt like it was one of our company secrets that gave us a competitive advantage. Data bases, of course, are no secret. Neither is what you can do with them. Most hotel property management systems (PMSs) have a guest history feature. The key is that they are PMSs, not sophisticated relational data bases!

What's the Difference? The difference is that in a relational data base one can ask for a list of people that stayed more than once, arrived on a Sunday night, paid rack rate, for three or more nights in January, said they would return, live within a two hour drive, and were not smokers. Yes, we know that for our hotels and we can send a personalized letter with unique references for each of them within a few hours of deciding to do it.

We collect the necessary data in several ways. In hotels without PMSs, registration cards and folio data are input into a simple data base file with the necessary fields by the night auditors. These data are subsequently appended to our main history data base in our corporate offices on a monthly basis. In hotels with a PMS, the necessary data are either imported to our office local area network (LAN) by modem or disk and manipulated until ready to be appended to our history data base.

Historical Database

I use the term manipulated because guest history data on a PMS does not typically include the necessary fields we need for our subsequent data queries. For instance, a PMS will probably have a field for arrival day and number of nights but not for the days of the week that encompasses. While a PMS knows which rooms are non-smoking for the purpose of doing room assignments, the fact a particular room is non-smoking is not saved to the guest history record. Additional editing work includes verifying American and Canadian postal codes, getting all the names associated with the proper gender for personalized addressing and to get capitalization, spelling and spacing just right.

For many of these things the software we use, Smartware II by Angoss, will do the work for us with either standard formulas or special queries. For instance, "TRIM" will clean up all the spacing issues while, "PROPER" will take care of almost all capitalization issues. Queries which effectively say, "If the arrival was on a date which was a Sunday and the number of nights was two then code the record as a Sunday and Monday stay." Or, the query might say, if the guest stayed at such and such a hotel during a certain time period in one of the following rooms then the record should be coded as a smoker, etc. Yes, we know that is not foolproof but it is a start and our experience is that smoking rooms are more costly to clean and maintain. We also are careful to remove duplications but not multiple stays. Multiple stays are coded as necessary. At some point, we want to begin noting how long its been since the previous stay so we can use the information to our benefit.

While many PMSs have guest history modules that collect much of the same data we are and can merge it into letters, we have found that the combination of information and the unique lists we want to extract cannot always be done. They also need purging as their storage capacities are filled over time. We believe that the best PMS focuses on what the hotel needs in reservations, registration, guest accounting, etc. As long as we can get the data off the PMS we can make up for the PMS's data base and word processing shortfalls relative to what we can do in the office.

Comments Database

The information in our history data base is also screened against our guest comments data base. This data base is a collection of all the information collected on comment cards in our hotels. At each hotel the comment cards which do not have complete information regarding the guest are researched and the information added to the card whenever possible. The General Manager reviews all comment cards at the weekly staff meeting before forwarding them to the corporate office where they are reviewed and then entered in a data base.

Each week for every comment card which we have a complete address for (over 95%), a personalized letter is sent to the guest automatically on that hotel's stationery. The content of the letter varies based on the guest's experience and comments. Each letter appears to be personally signed by that hotel's General Manager. Monthly summary printouts are prepared and distributed to the various hotels for additional review by the leadership team. We also use the ideas and comments from the guests to plan capital budgets and service upgrades.

We then run the history and comment data bases simultaneously and matching key information to identify the guest as being the same person. We don't match entire names as the room may have been registered in the husband's name, Joe Smith, and the comment card completed by Mary Smith. By matching room numbers, dates of stay and the last four letters of the last name we get a pretty accurate match so that the history record can be coded appropriately from the comment card record.

This extra work allows us to do some pretty amazing extra things in our direct mail campaigns. In the case of the Econo Lodge in Minneapolis which benefits from some hospital-related business, our system, which involves some other coding on the registration information, keeps us from confusing those stays with commercial or tourist guests. We just would not want to confuse a hospital stay in late November from Fargo with a Holiday Season shopping trip!

We can use our analysis of guest comments from certain types of rooms or time periods and correlate them to the corresponding types of guests in general. These two data bases, along with some good letter or post card copy writing are key components of our hotel guest history marketing efforts. They are also crucial in deciding where to advertise and make sales calls. The front office staffs also uses extracts of the information along with reports from the central reservation systems of the hotel chains we are franchised with to more effectively manage our room inventory and rate programs.

The history data base also carries nonguest data records. These include Chamber of Commerce membership lists from local communities, travel agency information (combined from what is paid by the chains centrally and what we pay direct), snowmobile clubs, or whatever we might accumulate.

One feature of a relational data base is that two or more data bases can be linked together in useful ways. We have created several views of our history data base that include tables that are actually the continuous call report for a particular record. In this way we can look at a travel agent's record and see both the extent of our marketing efforts (direct mail and sales calls) along with the total revenue they have generated for us and the details of their bookings with us regardless of which hotel it might be.

Prospects

Our third data base is our prospect and business contact data base. This data base is used in the marketing of the management company. It, too, includes views which have tables including the history of our contacts with a particular person or company. This data base includes trace dates, quality ratings, source information and attributes.

Quality ratings help us keep track of hot, warm and cold prospects, etc. Attributes are alphabetical and numerical codes assigned to each record. A record might have more than one attribute. For instance consultant, "C" and owner "W" in the case of a California consultant who owns a New Orleans hotel. In this case we need to market for both referrals and possible management business. There are insurance companies that might lend, take ownership positions and/or use our consulting services.

On at least a monthly basis our Director of Business Development, Bill Hauge, runs a special routine on our prospect data base that includes sorts and multiple queries so that this large data base is broken down into indexes by geography, attribute, trace date, account responsibility within our company and other characteristics. This information is used to help manage our marketing efforts.

As I look back over many years in our industry, I sometimes wonder how we managed before we had computers. Twenty-five years ago computers were still in their genesis in our industry. They were typically only found in central reservation systems, high end telephone switches and the fancy new electronic cash registers. Now these items are relatively inexpensive, have features to enhance service and marketing opportunities that we only dreamed about and in many cases are beyond what we dreamed about.

Using these many technological marvels effectively, both hardware and software, can take creativity and be time-consuming. Those that don't learn them and use them will be left behind in the battle for market share whether they are a small player in a local competitive skirmish or a large chain trying to maximize the benefit of a frequent stay program.

This Sales Incentive Plan Helps Reward

By Kirby D. Payne, CHA

Our company's Sales Incentive Plan is intended to motivate and encourage the sales staff by allowing them to share in the income the various hotels derive from the sales effort. This article details all the aspects of the Sales Incentive Plan we use in some of our hotels.

A portion of the collected revenues derived from group booking of 10 or more room nights, banquets or planned dining room group service, meeting room rental (in excess of $75) or room revenue derived from locally developed corporate programs, contract business and similar accounts will be placed in a pool to be divided among the sales staff.

The percentage of revenue which will be allocated to the Sales Incentive Pool are as follows:

5% new group rooms revenue (as noted above).

2% of food, beverage and repeat group rooms revenues (as noted above).

1% of corporate programs, contract business and similar accounts revenue (number of room nights generated times and ADR for that month)

On stress dates, a premium percentage may be offered by the General Manager subject to corporate approval. Stress dates must be previously identified and approved as part of the annual market plan. As a guideline, days with less than 40% occupancy during the previous year should be considered as stress dates for the following year. Special events, dates with major business already booked, city wide convention, etc. should be excluded.

The money in the Sales Incentive Pool is divided by the total number of points in the pool, which are arrived at as follows:

Points - Job Position

6 points - Director of Marketing

5 points - Director of Sales & some Directors of Catering Sales

4 points - Senior Account Executives & Assistant Director of Sales

3 points - Sales Representatives, Account Executives, Sales Managers and Program Coordinators or similar positions, regardless of titles assigned (eg. Sales Director actually functioning as a Sales Representative.)

2 points - Sales, Banquet, Catering Coordinators and Secretaries in hotels with no Coordinators for programs, if applicable.

1 point - Secretaries

The points allocated to each position are multiplied by the number of persons in that position. The results are added together and divided into the amount of money in the pool to arrive at that month's dollar value per point. The dollar value per point is then multiplied by the number of points assigned to each individual to arrive at the amount of money due each individual.

The Accounting department is responsible for maintaining the necessary records for this program. All the following standard features apply to the program in each hotel:

1. Money is not allocated to the Sales Incentive Pool until the entire function or group is fully paid.
2. The program will be calculated based on monthly results and payment will take place within 30 days after final statements are complete.
3. 20% of the Sales Incentive Pool will be withheld each month and be paid in December prior to Christmas and at one other time during the year, usually about six months later, but at any time of the company's choosing.
4. In the case of newly assigned staff members, they will be entitled to participate beginning with their second complete calendar month.
5. Sales staff who leave the company (hotel) (excluding transfers) for reasons imputable to themselves will not be entitled to the payment corresponding to the month they leave, nor the 20% previously withheld and not yet paid.
6. In cases where termination is not related to any action by the employee he/she will be entitled to the bonus earned through the prior month and all the previously withheld funds.
7. In cases where the sales staff member resigns voluntarily and gives adequate (2 weeks) notice and performs the turn over responsibilities in a professional manner, s/he is entitled to the bonus generated during the month in which s/he departs less the 20% withheld. The staff member who resigns will not be eligible to receive this accumulated withholding.
8. Any excess fund or funds not paid to an individual as stipulated in this plan, may be distributed, if at all, as directed by the president of the company.
9. Any anomaly or extraordinary event which might occur may affect this program in a positive or negative manner. In all cases the President of the company reserves the right to adjust the program or an individual's results so that the program is fair to both the company and the individuals involved. This discretionary authority will not be delegated.

Obviously, this plan won't work everywhere. We adapt it for certain situations particularly for larger hotels with higher average daily rates. In those cases cutting the percentages by as much as half seems to keep the program fair to the staff and the owner.

In limited service hotels we sometimes leave the program as is but use higher base salaries as the business is sometimes difficult to place into identifiable programs.

By manipulating the percentages and the points one should be able to adapt the program to many situations.

An important point, in our view, is that there is no maximum that can be earned. We don't want to put a ceiling on people's efforts. Additionally, if we're achieving the sales we can afford the program.

High incentive pay seems to be good for sales staff retention. If an individual is not pulling his weight we usually are aware of it through our booking reports, sales call reports and comments from our management team.

Invest In Your Staff for Big Dividends

Prepared by the Educational Institute of the American Hotel & Motel Association

July 1998 - While most managers understand how great guest service begins at the top, not all can "walk the talk," That's where Kirby D. Payne, CHA, comes in. He gives a superb demonstration that can be copied anywhere in the world. Payne is President of the Minneapolis based American Hospitality Management Company, a hotel investment, management, and consulting firm, and provides managers with a menu of tips they can choose from to produce happy employees who is turn produce happy guests.

"People need and want acceptance, approval, and recognition," says Payne. The most important actions you can take to respond to those needs are communicate, communicate, communicate, recognize, recognize, recognize, thank, thank, and thank." After that, Payne recommends developing ongoing weekly or monthly programs that will keep employees connected to you emotionally, create excitement, and make your business unique compared to your nearby competitors. Here are just ten ideas Payne offers to reap the rewards of satisfied employees.

• Praise individuals publicly.
• When an employee must work overtime, give money, chocolates, or a lottery ticket to the person's spouse.
• If you hear a negative comment from an employee, put 25 or 50 cents into a jar and use the money for a Fun Committee.
• Take out a full-page ad once a year thanking employees individually, by name.
  Allow those with perfect attendance records for the month to enter a drawing for gift certificates.
• Give every employee printed business cards.
• Ask employees regularly what else you can do for them to help them do a good job.
• Include career development discussions in all performance reviews.
• Have the General Manager spend at least an hour with every new employee.
• Most important-insist on Professional Certification.

At American Hospitality Management hotels, Professional Certification through the Educational Institute of the American Hotel & Motel Association is required within the first 120 days for all line-level employees and supervisors. Department heads and general managers are also required to pursue certification within appropriate time periods.

"Don't underestimate the power of developing your staff," Payne advises. "Investing in staff in various ways, especially with certification at every level, goes a long way toward helping retention. And improving the employee retention problem will go a long way towards solving the recruiting problem." Payne recommends certification because it creates the framework for each hospitality professional by defining exactly what it takes to be successful in a particular role.

"Certification creates a level playing field" says Payne, "especially when a company operates hotels of various brands. And it provides a new starting point for ongoing professional and leadership growth. If anyone is serious about the hospitality industry and committed to a career in it, certification is a must."

Employee Recognition And Motivation

By Kirby D. Payne, CHA

Kirby D. Payne, CHA is Chair of the AH&MA's International Council of Hotel-Hotel Management Companies.

At a recent company meeting for General Managers, Assistant Managers and Sales staff our CFO, Vicki Richman, led a discussion on Employee Recognition and Motivation. The following comments and list are from notes she developed from several sources.

The foundation of recognition and motivation is that people need and want Acceptance, Approval and Appreciation. Almost all positive motivation is based on these needs. People want to know that what they do makes a difference. Just recognizing the staff is the most important step one can take. You may want to count the number of "we's that are said instead of "I's in order to assess the extent to which your staff feels part of the team and part of the business' future. One saying is, "Powerlessness corrupts, absolute powerlessness corrupts absolutely."

These nine actions will help immensely to give your staff what they need: Communicate, Communicate, Communicate, Recognize, Recognize, Recognize, Thank, Thank, and Thank! From various sources, Vicki developed a list of ideas for ongoing weekly or monthly programs to keep employees connected to the hotel or restaurant emotionally, to create excitement and to make your business unique relative to your nearby competitors for employees. Remember, the competition for staff may be from other industries such as retail, manufacturing, etc. Pick a few and try them for a while; but, you must give them a chance, one time will not do it. The staff will see right through you.

• Gift certificate for the most challenging question posed to the President
• Money or chocolates or lottery ticket to a spouse with a note thanking for his/her support during overtime
• Thumbs-up certificates redeemable for merchandise
• Soda, fruit, snacks to housekeeping staff all the time
• When anyone makes a negative comment, put $0.25 or $0.50 into a pot and use the money for a Fun Committee
• Bring Polaroid camera to work occasionally and take candids of staff and post pictures on a bulletin board for all to enjoy
• Selection of employee of the month/quarter/year by peers not just management
• When he/she is employee of the month, give him/her a special name tag highlighting that status
• Points given out at any time for anything, good attendance, helping out a guest, etc., and are redeemable for prizes
• When you reach a certain level in revenues, give all staff a reward, being sure to give them the goal in advance
• Spontaneous calls from corporate to line staff saying how they are appreciated
• Allow line workers to participate in all personnel function decisions, hiring, training, evaluating, firing, schedules
• Fine those who arrive late to a meeting and distribute the money to those who were there on time
• Create a symbol of the team, maybe just property logo but put it on T-shirts, mugs, caps
• Certificate of achievement, lunch, and mug for perfect attendance, gift certificate to the one with longest perfect attendance
• Allow those with perfect attendance record to enter a lottery to get a $100 or $200 gift certificate
• Quarterly teleconference with all employees and support staff, especially CEO
• Family orientation for new employees with slide show or video program with refreshments
• Several line staff call new hire to welcome him/her to the team the day before he/she starts
• Toll-free hot line to President where they can leave any question, suggestion, etc. and will get a response
• Hold a regular meeting to tell staff what is going on and how they are doing
• Always hang charts, graphs, etc. to depict regularly how the property is doing
• Full page ad in newspaper once a year thanking employees and name all individually
• Public praising of an individual at a department or hotel meeting
• Make sure all rewards, praise, bonuses, etc. are in public
• Have the General Manager spend at least an hour with every new employee
• Golden Broom Award to all (excluding housekeeping staff) who are seen picking up trash - after two, they can redeem them for a gift
• Pick a trophy that is passed from rewardee to rewardee so it is much desired, it does not matter what it is and actually the odder the better so it is fun
• Pre-printed "you done good" or "a pat on the back" or "bravo" note cards to have management inscribe whenever appropriate spontaneously
• Praise immediately and tell them specifically what they did right and how it helps the company
• Always find ways to get staff's input into the operation - just simple suggestion box works great
• Work hard at finding a way to implement each suggestion and give a clear explanation why it cannot be used if that is the case
• Acknowledge all suggestions, even if not implemented, express appreciation perhaps also a small reward If you implement an idea, give a reward, and widely publicize it
• Pins for uniforms that say "The guest comes first" or "I will do my best" or "We're glad you're here" or something similar
• Periodically hold contests like a TV game show where employees answer questions about the property hotel, perhaps in teams
• Use an 800# service which employees call periodically to be given randomly selected test questions and win a prize if they get them all correct
• Give a small gift on the date of their anniversary
• Hold an annual banquet for those with more than a certain number of years of service
• Give every employee printed business cards
• At Ritz Carlton, all employees throughout the hotel are authorized to spend up to $2,000 each incident to resolve a guest's complaint, but few spend anywhere near that amount
• Ask employees regularly what else we can do for them to enable them to do a good job
• Tell employees regularly what else they can do for management to enable you to do a good job
• Hold weekly meetings with small groups of employees to discuss anything, serve food
• Hold a weekly 20 minute meeting with one employee to discuss anything
• Make it personal, people naturally commit themselves to other people, not to organizations
• Hold monthly employee meetings at which the financial performance of the previous month and other goals are discussed in specific
• Distribute daily reports of revenue performance last night and month-to-date
• Send employees and family to a competitive property and have them write a report
• Send employees and family to your property and have them write a report
• Imprint the hotel's four key business goals on T-shirts
• Include career development discussion in all performance reviews
• Send line staff to schools to do recruiting and interviewing
• Tell staff that if they achieve x,y,z, etc., you will call their mothers and tell them how great their child is and actually do it
• Always make sure their work environment is positive, attractive, and reflective of your goals and values
• Ideas for back-of-the-house areas: plants, framed art (let them choose), clean unworn carpets, adequate ventilation, natural light, meeting space, adequate work-space, well-functioning equipment, attractive break facilities
• Form a recreation committee to plan monthly activities
• Regular employee newsletter
• Ask for input on cost-cutting programs during times of low demand
• Implement management reviews where line staff assess management's performance

These are only a few of the infinite number of ideas to keep good staff members and motivate them to work hard toward common goals. Whatever you choose to do, keep doing it consistently and make sure that you are sincere. Good luck on making your hotel or restaurant a unique and rewarding place to work.

An Incentive Program for General Managers in Limited Service/ Economy Lodging

Kirby D. Payne, CHA

This article details the incentive program for most General Managers (G.M.) of limited-service lodging properties managed by AHMC. The program is intended to motivate a G.M. by allowing a G.M. to share in the results of his or her efforts if certain criteria are met relating to his or her own performance and the financial results of his or her hotel.

Payment

Payment for the incentive program is computed in the following manner, subject to the features described:

A. One half of one percent (0.5%) of Total Revenues in excess of ninety (90.0%) of Last Year's Total Revenues if one hundred percent(100%) of Last Year's Income Before management Fees and Fixed Charges is achieved.

In no event is the amount paid for this item allowed to decrease the current year Income Before Management Fees and Fixed Charges to an amount less than the previous year's.

B. One percent (1.0%) of Income Before Management Fees and Fixed Charges in excess of ninety (90.0%) of Last Year's Income Before Management Fees and Fixed Charges up to one hundred and five (105.0%) of Last Year's Income Before Management Fees and Fixed Charges.

C. Two percent (2.0%) of Income Before Management Fees and Fixed Charges in excess of one hundred and five (105.0%) of Last Year's Income Before Management Fees and Fixed Charges.

D. An additional year-end bonus of ten percent (10.0%) of annual base salary is paid if the property's Income Before Management Fees and Fixed Charges exceeds the annual budget or the proforma used by the owner to finance the property, which ever is the higher goal (after deducting previously earned bonuses noted in A,B and C above) by ten percent (10.0%).

Features of the Program All of the following features apply to this program:

1. This is an annual program paid quarterly.

2. The maximum earned bonus is sixty percent (60.0%) of his or her year-to-date base salary.

3. The program's calculations are based on his or her Year-to-Date results and is paid quarterly on a separate paycheck less previous payments under the program about thirty days after statements are complete.

4. Twenty percent (20.0%) of each quarter's payments is withheld and used as described below or paid with the fourth quarter's payment.

5. If the program's calculations in any quarter result in a negative payment the previously mentioned withholding is applied against it. No participant in the program is required to pay back an amount greater than the sum of the year's withholding.

6. Newly assigned General Managers are eligible to participate as of their third complete month at the property.

7. Calculations and payments are not made on sales unless one hundred percent (100.0%). Last Year's Income Before Management Fees and Fixed Charges is achieved.

8. General Managers who leave the company for reasons imputable to themselves are not entitled to any payments or withholdings due them under this incentive program.

9. In cases where termination is not related to any action or lace of action by the General Manager, he/she is entitled to the bonus earned through the prior quarter and the balance remaining in the previously withheld funds.

10. In cases where the General Manager resigns voluntarily, gives four weeks notice, performs the turnover in a professional manner and the hotel's operating results are maintained during the period of notice, he/she is entitled to the incentive program through the month in which he/she departs. Payment, however, will not be made until two full monthly accounting cycles are completed.

11. The year-end bonus of ten percent (10.0%) of base salary previously mentioned will only be awarded if the General manager has been at the hotel more than nine months.. All calculations are made on a pro rate basis based on the time at that property.

12. An anomaly or extraordinary event might occur which might affect this program in a negative or positive manner. In all cases, the President of the company reserves the right to adjust the program or an individual's results so that the program is fair to both the General Manager and the hotel. Any such adjustments are at the sole discretion of the President and are not subject to any appeal outside the company.

13. This program may be discontinued at any time by the company without reason and further payments and as a result of such discontinuance no retroactive or further liability shall exist to any current or previous participant or their heirs and/or successors.

14. By accepting this program and remaining in the employment of the hotel the participants acknowledge and accept the features of this incentive program.

The incentive program has the components necessary to motivate General Managers to generate revenue and control expenses. However, this magazine, the author and his company are not recommending this program for the reader's use nor are they intending to set industry standards or certify as to the legality of the policies outlines in this article. Prior to adapting this program to a specific hotel it is suggested that the formulas and percentages be tested and adjusted for the unique circumstances of a particular hotel.

Employee Turnover: It's Keeping Me From Having a Boat!

by Kirby D. Payne, CHA , October, 1998

Kirby D. Payne, CHA is Secretary Elect of the American Hotel & Motel Association, and Chair of the AH&MA's International Council of Hotel-Hotel Management Companies.

Turnover costs big bucks! You didn't it hear it here first and you may even be tired of hearing it. I am tired of hearing it. I know it costs and I am tired of paying for it. What our owned and managed hotels pay for turnover each year would probably be enough to make the payments and operating expenses on the company boat I want.

As a reminder: the costs are comprised of recruiting expenses; training expenses; unemployment insurance; and guest service of a quality less than one has been striving for.

You are not going to find the real answer to the problem in this column. If I had the answer I would sell it not give it away! The real answer is in one's ability to consistently execute through other people, such as managers and supervisors, all the good ideas one reads and hears about. Getting from whatever level one is at with the turnover problem to where one would like to be is expensive in time, money and perseverance.

Seeing it in Action I was visiting with someone who puts in only enough work time to oversee the strategic issues in his business. He works a few months of the year. His managers, who have been with him for years, take care of the details and day to day operations. This man used to do it all himself as he brought along and developed his managers. This person, who is clearly smarter than I, simply stated he is able to maintain his life style because he has a stable staff. I am not mentioning his name because I am not sure he wants anyone to know
how tremendously successful his four diamond western dude ranch is and how little time he works relative to the complexity and success of his business.

Stable staff, isn't that low turnover? I didn't ask him how he got from the place I know he started to where he is now. I was embarrassed to. I did ask him how he maintained a stable staff. The gist of his answer was that he stays out of their way and pays well. Obviously he can afford to!

Three Important Questions I have always told our managers to ask themselves three questions when an employee leaves for any reason, no matter how long that employee has been with their hotel. The three questions are:

1. Should I have hired that person in the first place?
2. Did I see that the employee received a good orientation and training?
3. Did that employee receive good leadership?

If our managers ask those questions, are brutally honest with themselves and act on the answers, one would have to expect reduced turnover and improved guest service and margins.

Hiring: The First Step

The first question relates to the hiring process. There are many sources of information on interviewing, skills and personality testing. There is a shortage of information on where to recruit and how to select out on the uncontrollables. Many companies are also making job offers subject to clean results on drug testing. My friend at a big downtown chain affiliated hotel tells me it makes a significant positive difference in the quality of his staff and the problems he used to have.

Our company is on line with Trans Union (Vicki Blatz 612-639-0007) for pre-employment credit checks. We are also on line with AVERT (800-367-5933) for criminal histories nationwide. AVERT also provides workers' compensation histories, education confirmation, previous employment verification, driving records and credit reports. Pre-employment credit checks cost us less than $5.00 each while criminal checks run over $20.00 each.

When you are sitting in court explaining why the employee you hired has a history of rape and assault convictions that $20 times every employee you've hired will look very cost effective! Just telling applicants you do such things weeds out a lot who know they won't stand the test.

We tell applicants a bad credit or criminal history won't necessarily preclude employment but it helps us know what we are getting into and allows us to work with them productively. Get advice from your labor lawyer regarding hiring practices and employment law if you are not sure about something. (We use Matt Damon of Popham, Haik at 612-333-4800 or 800-989-4500.)

We recently inherited an employee when we assumed the management of a hotel, who has an extensive drug dealing, shoplifting and assault record. She had told us of the record when she was completing our application forms. She had been with the hotel several months and her supervisor was generally pleased with her work. Bottom line is that she is staying and we may be the best reference she has as she gets on with her life.

The important thing with question number one: don't knowingly hire the wrong person out of desperation. Pay a little over time, work your supervisors a little harder, do anything but hire an obvious loser.

Step Two: Training

The second question relating to orientation and training has been the subject of several recent articles in trade publications.

The Cornell H.R.A. Quarterly. December 1994 had an article by David J. Kennedy, Ph.D. and Florence Berger, Ph.D. titled Newcomer Socialization: Oriented to Facts or Feelings. The lead in was, "A strong orientation process is one way to reduce employee turnover in hotels."

The editor summarized the article as follows:

"A contributing factor to employee turnover in hotels seems to be the one dimensional focus of their orientation programs. Employees encounter feelings of uncertainty about the unknown whenever they accept promotions or transfers, but the greatest stress and uncertainty come when they accept a new job with a new employer. For that reason, orientation programs should deal with both the emotional and the informational needs of new hires. A look at the orientation programs of six hotels found many similarities among the programs. Their initial component
extended from one-and-a-half to five days in length, with few programs having additional orientation follow-up after 12, 60 or 90 days. All but one included specific information about the new employee's department along with general information about the organization. But only one property had the express purpose of reducing new employee's anxiety and thereby turnover."

Think about how many new hires only work one or a few days and then don't show up. Find these people and do exit interviews. Find out where you failed! Did you overwhelm them and scare them away? Did you not offer a clear picture of what the work actually entailed?

Another journal, World's Eye View on Hospitality Trends, published by Northern Arizona University's School of Hotel and Restaurant Management had an excellent article in its fall 1994 issue, Our Take on Training by Charlie Nicastro, Regional Supervisor with Bobby McGee's Conglomeration. In the article Mr. Nicastro states, "It our purpose in training individuals for their positions is to:

1. Inform them of the standard towards which they must strive.
2. Ensure they understand policies.
3. Make them knowledgeable of the product that Bobby McGee's Conglomeration presents to its guests.
4. Teach them the purpose and techniques for marketing this product
5. Afford them the opportunity to develop individuality and achieve full potential."

He then goes on in the article to discuss their "7-Phase" training schedule. The seven phases:

• Orientation
• Mock Runs
• Observation
• On-the-job Training
• Reverse Training
• Evaluation
• Probation

Mr. Nicastro says about Probation, "Immediately following the training program, the department coordinator and manager carefully schedule the new employee according to his or her capabilities for a period of two weeks. This time period is a secondary form of training and continues the emphasis on constant communication, evaluation and positive feedback to the trainee."

Step Three: Leadership

This leads into my question number Three: Did that employee receive good leadership? Leadership is a balance of positive and negative feedback tailored for that individual. Tailoring is critical, as each employee reacts differently to a manager's leadership. A statement of disappointment may have more of an impact on a particular employee than a week's suspension would be to another. Likewise, a thank-you may be better than a cash bonus. People crave feed-back.

I have expounded on incentive plans, mentoring and other pieces of the employee retention program. Individually none of these, including unreasonably high pay rates, will reduce turnover. All the different ingredients need to come together consistently.

The real answer to reducing turnover is in one's ability to consistently execute through other people, such as managers and supervisors, all the good ideas one reads and hears about.

Good Employees are Hard to Find (a.k.a.: Looking for Employees in all the Wrong Places)

by Kirby D. Payne, CHA

The labor market where your hotel, restaurant or resort is located is undoubtedly difficult and unique. Nobody really understands how difficult it is to staff your business with an adequate number of competent, caring, efficient, and trustworthy, employees. Now that we have that on the table, let me be the first to disagree!

Back in the early seventies I used to hear that from the General Managers of the many Hiltons in the Southeast that I was supervising. I was in my late twenties and believed almost anything except I couldn't understand how it could be unique if almost everyone had the problem. To look at it more closely, we had everyone list their staffing problems and found that nearly 90% of them were common to all the hotels.

Interestingly, the hotel managers who complained of staffing difficulties had high turnover of new employees. The hotels with low turnover didn't feel there were staffing problems. Further, there was no correlation to hotels with staffing problems and any objectively quantifiable socioeconomic issues in the surrounding communities. Interviews with regional supervisors at other hotel companies revealed that they had the same situation but not necessarily in the same communities. Our conclusion was that most of the problem was a management problem. If you accept that you should gain something from reading the rest of this article as it contains a few ideas which might cause you to rethink your solutions to staffing.

Any time an employee quits or is terminated the supervisor and manager should ask themselves these three questions:

1. Should the person have been hired in the first place? Adequate screening depends on the obvious interview questions as well as the not-so-obvious but still legal ones. Why do you want this particular job, how will you get to work, what other kinds of jobs have you been applying for? To the greatest extent possible, require that all applicants pass job-related skills testing and examine the person's ability to follow directions and learn. Don't hire someone just because you are desperate with-out taking the time to check references and in some cases credit and criminal records. You do have a release on your employment application, don't you?
2. Did the employee receive an adequate orientation and quality training? Did anyone that cared explain the mission, culture, physical layout, rules, etc. of the hotel or restaurant? Did he or she meet other employees and leaders during a tour of the hotel? All those things are part of an orientation and give a new employee an even playing field to start with so they are familiar with the workplace and feel as if they belong. Training should be conducted by supervisors and staff who are trained to train, have lesson plans, and understand the learning process. Is it fair to a new employee to have them trained by someone who isn't even good at the job, is overworked, and is not certifiably enthusiastic about their job and the business?
3. Did the employee benefit from good leadership? Leadership is a balance of positive and negative incentives specifically tailored to the individual and the circumstances. A public praising for some employees might be more effective than a raise while a thank you note or a pat on the back will be enough for another. As to negative incentives, it is essential that they be implemented in a timely and constructive manner. Further, the severity of negative feedback must be tailored to the individual and the undesired behavior or work quality. All negative feedback should have a positive goal where everyone and the business gains rather than simply punishment.

If these questions are reviewed whenever an employee leaves for whatever reason, management should be able to improve their ability to handle each of these three items. The result will be lower turnover which will save the business money, make it a more desirable workplace for all, and provide the guest and patron with consistent, quality service.

A few other thoughts are in order regarding recruiting.

• Good employees are like alcoholics, they hang around with like-minded people. Get current employees to help recruit new staff and reward them with cash after an agreed-upon retention period, it works.
• There is nothing wrong with recruiting good people you observe in other hotels and businesses.
• Advertise for job openings in non-traditional areas of the classifieds. Only out-of-work hotel and restaurant workers look under hotels and restaurants. I always lay off my worst employees first, don't you? Where do the car rental companies find so many nice rental agents? What industries have high unemployment in your area? Maybe these individuals have never considered a career in the hotel or restaurant business but a well-focused help wanted ad, perhaps written by your marketing staff, could bring you quality personnel.
• Almost anyone can learn the job skills of our industry with good training, you did!

Management Conference Strengthens Staff

Kirby D. Payne, CHA

Recently our company held three day management conference focusing primarily on several items which we felt were our biggest competitive edge if they were more fully developed. The four primary items were Creative Recruiting, Interviewing and Hiring the Right People, Training the Trainer, and Giving Exceptional Customer Service.

We felt that if we could improve these four things our hotels would be more profitable. All our hotels experience some degree of employee turnover. Without exception our general mangers (GMs) claim to be in uniquely difficult labor markets. It is hard to believe everyone's situation is unique simply because by definition, "being the only one of its kind" (The New Merriam-Webster Dictionary) you can't have more than one with the same problems! We felt that by giving our GMs more tools to use and training them how to use them we would start gaining a competitive edge over time.

Creative Recruiting

The Creative Recruiting sessions were built around the Educational Institute (E.I.) of the American Hotel & Motel Association's (AH&MA) video and other materials by the same name. While these materials do not have all the answers they are an excellent start.

We built on them by having a round table discussion where we all exchanged ideas. It was clear that in addition to doing the traditional things we needed to do more. An idea which surfaced as one with great potential was inviting people in retail, fast food and other businesses who were observed to be the kind of employee we wanted to come in for an interview and get acquainted. It was generally agreed that doing that to your competitors would be damaging in the long run and that there were plenty of other industries to recruit among. Compared to many industries ours has a lot to offer. After all, would some one rather have a discount on yogurt or a discount at thousands of hotels with king beds and hot tubs?

A significant part of the discussion centered on ideas for improving retention of our best employees. Another key was the idea of planned replacement of under-performing employees who were not showing improvement with coaching as soon as better ones were found.

Interviewing and Hiring

The session on How to Interview & Hire the Right People was built around materials written by Stephen Carline and published by CareerTrack, Inc. (Boulder, CO, 1-800-334-1018). While on the surface one might have thought the materials did not always apply to interviewing room attendants, the fact is the materials did not always apply to improving one's interviewing and hiring skills at all levels. Here are a few lists from the workbook which are noteworthy:

"The Three Critical Factors in Selecting Candidates: Does the candidate have the core skills?; Can the candidate thrive in the corporate hotel culture?; Does the job and the culture meet the candidate's needs?" We feel that if a job applicant doesn't have the core skills then the question becomes, "Is that person a trainable person?"

The author also provides a list of reasons why interviews fail. The interviewer

• Fails to gain enough information by running out of time or questions.
• Does not match the candidate with the job because he does not understand the true job description.
• Fails to evaluate the resume by overlooking key factors that could provide information about the candidate.
• Settles for a superficial, rehearsed answer by not probing past the answers for additional information.
• Is only concerned with skills rather than personality.

Carline made an interesting statement: "Candidates come to an interview better prepared than the person conducting the interview."

Several of our GMs disputed that statement as it relates to level line positions. After a little discussion it was generally agreed that an applicant coming to an interview not caring whether he is hired, as many of our applicants who are covered by society's safety nets feel, are mentally better prepared for the interview.

Without exception our GMs and Supervisors felt the ideas and procedures put forth on the tape and in the workbook would be helpful to them.

Train the Trainer

Our Train the Trainer sessions were built around the E.I.'s series of video tapes. The titles we used were: Preparing for Training, Conducting One-on-One Training, Leading Group Training, and How to Train with Video. These all come with appropriate collateral materials to help the trainer.

In our hotels we use all three methods covered by these videos, particularly video. It was important to us that our GMs and Supervisors be as effective as possible in using these training techniques. We are following up with detailed task breakdowns which will be used as training checklists. There is no question in my mind that in addition to good leadership qualities one needs to be an excellent trainer in order to excel in the hospitality industry.

Customer Service

The final session in this series was based on materials by Lisa Ford titled How to Give Exceptional Customer Service. This series of four videotapes and workbooks is also published by CareerTrack. This program started with identifying customers, both internal and external to the operation. Subsequently, time was spent on people's perceptions and expectations.

The program is broken down into four sections. The total service experience: Valuing Customers, Handling Complaints & Creating Partnerships, Delivering service with Heart, Building Rapport & Establishing Trust, Pleasing the Challenging Customer, Defusing Anger & Recovery Skills, Becoming a Service Star. A lot of the material in the last section gave us additional ideas fore recruiting, interviewing and training.

The sessions indicated to us how important customer service was.

In doing business with your organization, customers have many points of contact and at each point have a chance to form an impression. These impressions are generally good or bad. Negative examples include long waiting lines, faded signs, dirty surroundings, and forgotten promises. Positive examples include attention to details, friendliness, ownership of problems, quick solutions and clean neat surroundings.

Lisa Ford's list of what characteristics "Customer Service Stars" have was excellent. The list helped us focus on who we should be recruiting because most of these are not items that can be trained into people. Here's her list of characteristics:

• Motivated to Serve.
• Sincerely interested in others
• Positive Attitude
• Energized and enthusiastic
• They take initiative
• They know the organization

It was clear that no matter what our current staffing levels are, we must keep trying until every one of our employees becomes a service star.

It was amazing how conscious all of us became of good service or poor service when confronted with it during our meetings and immediately afterwards.

A couple of anecdotes: Near our corporate office there is a jewelry store. It is a modern, well designed facility with good signage and attractive display cases. Lots of glass, special microscopes, private viewing rooms, etc. A piece of tape holds a faded, hand lettered sheet of paper under the attractive brass plate with the store's name on it on the door. The sign says, "Recording devices not permitted on these premises." My marketing sense was jolted by the unsightliness of the sign in comparison to the store. When I took a picture of the signs they got upset with me. They also left the sign up.

During the course of our meetings we had planned the American Hospitality Management Company Olympics. This included competition in bed making, toilet paper changing, sheet folding, etc. Five stopwatches were needed for two hours. I called Dick Carlson of RJ Carlson & Company and explained my problem. Even though I wasn't calling to order any products he graciously accepted the challenge. At seven the next morning we had our stop watches and the games began. That was a great example of exceptional service.

The Holiday Inn - Metrodome, managed by Scott Utley, handled our Olympic Closing Ceremonies and closing dinner. Craig in the catering department was a pleasure to deal with. I asked him to fax me dinner menus and to not bother me with the rest of his sales materials. Minutes later I had selected my menu and finished requesting a few extras rather than trying to get the price reduced. My extras included picking up our GMs at our nearby limited service hotel in the Holiday Inn's van. No problem. I wanted the place settings and service in a particular way. No problem.

When I went by early to check on things everything was promised and more. Pat, the server assigned to the function, knew just what she was to do regarding our event. The food and service were excellent, and the plate presentation was as good as those $35 - $50 average check places. The broccoli was even hot and al'dente. All this with the $14.95 breast of chicken with sun dried tomatoes!

Dick Carlson and Scott Utley exceeded our expectations and helped make our meeting a success. I want more and eventually all of our employees to be Service Stars just like Dick, Scott and his staff.

Mentoring: An Important Source Of Training

by Kirby D. Payne, CHA - 1998

With the tremendous growth of the lodging industry over the last two decades, the industry's ability to develop competent management staff has been severely strained.

The educational facilities that focus on the industry, whether they are four-year or two-year programs, cannot keep up with the growth rate and never have been a major contributor of entry level management.

The most significant source of the future leaders are line level employees or people moving into this industry from others. This means that company training programs and OJT (on the job training) are really our keys to developing managers with technical and leadership skills that will contribute to the success of the organization.

Informal Mentoring

Regardless of the source of the emerging managers, they need some support and nurturing to be all they can be. Mentoring is one way to do this. Many of us are familiar with informal mentoring but formal programs can accomplish much more.

Mentor and protege relationships generally occur on an informal basis in the hotel industry. This is typified by the general manager who takes a junior manager under his protective wing and grooms him for greater responsibility.

The traditional mentoring relationship is based on an unspoken agreement and is subject to the availability and good will of the senior manager.

Unlike the traditional mentoring relationship, a structured mentoring program clearly defines the mentoring relationship by ensuring that the mentor, protege, and organization all clearly understand what to expect and what is expected of them. Its goals are the same but its process is different.

The Aim of Mentoring

Mentoring, in its traditional or structured form, aims to accomplish the same thing-the pairing of a skilled and experienced senior person (the mentor) with a less experienced and junior person (the protege) to help the protege grow and develop under the guidance of the mentor.

The roles that the mentor may play are those of the teacher, supporter or sponsor. As a teacher, the mentor teaches the protege the skills and knowledge needed to perform the job and provides inside information about the organization, such as politics and personalities. The role of supporter is one in which the mentor helps the protege deal with his career and personal conflicts and pressures, and helps build his self-confidence. And, as a sponsor, the mentor intervenes on the protege's behalf in conflicts that might endanger the protege's career and markets the protege to upper management.

Is Mentoring For You?

Although mentoring provides an attractive training and development alternative, it may not be right for your hotel. Mentoring programs work best when specific human resource needs and conditions exist. In the absence of these conditions, a mentoring program could actually hurt rather than help your hotel.

Some basic questions need to be answered before launching a mentoring program.

• Does your organization need to prepare people within the organization to fill future management positions? Proteges join a mentoring program with the implicit promise that excellent performance will be rewarded by career advancement. If there is no room at the top for successful proteges, the organization will be burdened with a surplus of ambitious, overqualified, and frustrated individuals who will eventually take their skills and talents elsewhere.
• If future human resource needs are forecasted, are they continuing or one-time needs?
• Does your organization represent an expanding chain of hotels where continued growth insures an on-going need for upper level managers, or does your organization represent a single hotel dealing with attrition-related human resource needs? If this is an infrequent, one-shot occurrence, then a structured mentoring program would not be cost-effective.
• Does your corporate culture value the veteran employee or does it prefer to buy "new blood" from outside the organization? Developing talent from within the organization takes time, resources, and long-term commitment from upper management, making their support vital to the success of the program. A high level of upper management interest and commitment is needed from the outset since mentors come from the upper management ranks.
• Does your organization have enough suitable managers available to pair with proteges? Mentors should be at least two position levels above the protege (to prevent mentors from feeling threatened by their proteges), competent, widely respected, secure in their jobs, skilled coaches, and possess excellent interpersonal skills. They should have the time and the willingness to volunteer for the job.
• How will a mentoring program fit in with your other human resource programs? If successful succession planning and management development programs are already in place, will a mentoring program replicate, replace or enhance it? How will a mentoring program link to other training programs? Is there someone who can initiate and oversee the program? A successful mentoring program requires someone to coordinate the selection and pairing of mentors and proteges, establish orientation programs, perform periodic reviews of the pairs, and to help conclude the relationship.

No Panacea

Mentoring is not a panacea for all organizations; however, given the right conditions, its organizational benefits can be enormous.

Good mentoring programs attract the best candidates for a job, reduce turnover of talented people, help people achieve their optimum potential and productivity, assure a smooth transfer of leadership from one generation to the next, and encourage communication up and down the organizational hierarchy.

Steps To Implementation Implementing a mentoring program requires the same careful planning, implementing, monitoring, and evaluating that any major project requires.

1. Select mentoring program coordinator. The coordinator will be responsible for helping the mentor and protege negotiate an agreement, conduct orientations, monitor the relationship, and assist with concluding the relationship.
2. Select proteges. They should be intelligent, ambitious, committed to the organization, have good interpersonal skills, be positively perceived by the organization, and be willing and able to accept greater responsibility.
3. Determine the developmental needs of the protege. This can be accomplished by reviewing the protege's work record, interviewing the protege and his manager, and testing.
4. Select mentors. They should be technically competent, supported by peers and upper management, have power within the organization, be highly regarded in the organization, feel secure in their positions, have the time and the desire to assume responsibility for a protege's career development, and be able to teach, coach, and motivate others.
5. Pair proteges and mentors. Considerations in the paring would be the developmental needs of the protege and the skills and knowledge of the mentor as well as the personalities of the individuals involved.
6. Familiarize mentors and proteges with their roles. Subjects that should be addressed are time commitments, expectations of mentors and proteges, available resources, relationships between mentor, protege, protege's manager, and the mentoring coordinator, and the benefits of mentoring to the mentor, protege, and organization.
7. Mentors and proteges negotiate and agreement. Mentors and proteges negotiate an agreement which includes their expectations and responsibilities, confidentiality, duration of the relationship, scheduling of meetings, and the amount of time that will be spent on mentoring activities.
8. Develop plan. The mentor and protege develop a plan for meeting the needs of the protege.
9. Implement plan. The mentor and protege meet periodically for coaching sessions, evaluating progress, and reviewing the development plan. Progress is periodically reported to the coordinator.
10. Conclude the relationship. Relationships might be concluded when all goals are achieved, the agreement date is reached, or the protege and mentor feel that the relationship is no longer productive.

Don't be confused; a mentoring program might consist of just two or three pairs of people.

Whether you undertake a formal mentoring program as we described above or simply take some of these ideas and improve the informal mentoring already occurring in your lodging facility, the result will be a stronger base of people.

One of the most surprising results may be improved retention among your entry level managers and the line staff that works for them. What better assets could a lodging facility have than high employee retention with outstanding job skills and great loyalty?

Protect Yourself and Your Workers: Formulate A Sexual Harassment Policy

By Kirby D. Payne, CHA

We recently decided that just telling our general managers and supervisors how we felt about harassment was not enough. In the past, we had included brief statements on harassment at departmental meetings and new employee orientations.

We were being clear that harassment of any type would not be tolerated and that anyone who felt they were subject to it could go to any level of the company to report it. However, we recently decided that our verbal system was insufficient and that a formal policy needed to be developed and implemented.

Unfortunately, the rules have changed and all employers need to be able to demonstrate and document all of its policies and that they were communicated to employees. The realities of the workplace and our litigious society necessitate being very clear on where an employer stands on these issues. What is included here is our recently issued policy we circulated to all our general managers:

No Harassment Policy - American Hospitality Management Company and Hospitality Employees, Inc., are committed to providing our employees with a work environment that is free of unlawful discrimination. As part of that commitment, we do not and will not tolerate harassment of out employees.

"Harassment" includes, but is not limited to verbal, graphic, or physical conduct relating to an individual's race, color, gender, sexual preference, religion, national origin, citizenship, age or disability.

"Sexual Harassment" in specific may take a number of forms all of which are prohibited by this policy. Sexual harassment may include, but is in no way limited to, the following:

Unwelcome sexual flirtations, sexual advances or propositions, requests for sexual favors, unwelcome or offensive touching, explicit, degrading or demeaning comments about another individual or his/her appearance, the display of sexually suggestive pictures or objects, telling suggestive jokes or making sexually suggestive comments or gestures or other offensive verbal, graphic or physical conduct of a sexual nature. Taking or the refusal to take any personnel action based on an employee's submission to or refusal of sexual overtures. No employee should ever imply or even joke that an individual's "cooperation" with sexual overtures will have any effect on the individual's employment, assignment, compensation, advancement, career development or any other condition of employment.

A sample Sexual Harrassment Policy

VIOLATION OF THIS POLICY PROHIBITING HARASSMENT WHICH AFFECTS THE WORKPLACE WILL SUBJECT AN EMPLOYEE TO DISCIPLINARY ACTION UP TO AND INCLUDING IMMEDIATE DISCHARGE

All employees must avoid behavior which may even raise the implication of harassment. If your question whether or not something you do could be deemed harassment, the best choice would be not to perform that behavior.

1. If possible, tell the harasser that his or her actions are unwelcome and that they should stop.

2. Immediately notify your supervisor or corporate personnel director if you feel you cannot go to your supervisor. Supervisors must immediately report all incidents of suspected or reported incidents to their supervisors and corporate personnel director.

3. If additional incidents occur, immediately report them to the same individuals to whom you reported all prior incidents.

4. If you feel that a supervisor or member of management has acted inconsistently with this policy or if you feel that your complaint has not been handled to your satisfaction, please contact the corporate office immediately.

All reported incidents will be thoroughly investigated. Although neither American Hospitality Management Company no Hospitality Employees, Inc., can guarantee confidentiality, your complaint and the actions taken to resolve the complaint will be handled as discreetly as possible. This commitment, however, will always be weighted against our obligation to investigate and act upon reports of harassment.

No employee will be retaliated against for reporting an incident of harassment and immediate action will be taken should the alleged harasser engage in retaliation or any adverse treatment against the individual reporting the incident.

You should never assume that the organization is aware of your problem. It is your responsibility to bring your complaints and concerns to our attention so that we can help resolve them.

Implementation of No Harassment Policy Enclosed is a new Communication Bulletin to be included in your policy manual, the Communications Bulletin Binder. Although this company has always had an underwritten policy regarding harassment, we feel it is necessary to put the policy in writing.

You are to Immediately:

Read this policy very carefully. Place it in the Communications Bulletins Binder in the appropriate place. Hold departmental meetings specifically to give all employees a copy of this policy and to discuss the contents of the bulletin. If you are planning to hold departmental meetings within the next week, you may distribute and discuss it at that time. If your meetings are not scheduled in the immediate future, you must schedule one to discuss this policy. Write a memo to us at the corporate offices documenting when and where you discussed this policy with all employees. List the names of the employees in attendance at each meeting. If any employee is absent, you must give them a copy and discuss the policy individually. This, too, must be documented. This memo must be received in our office no later than one week following your receipt of this bulletin.

Disclaimer: If you need to develop and implement a formal harassment policy, and I think you do, no matter how small your operation is and what the demographic makeup of your workforce is, you should consult with your attorney before implementing such a policy.

Do not just copy this one because circumstances vary from company to company. If your attorney is not very experienced and knowledgeable in labor relations, you need to find someone more appropriate to assist you. If you need a referral to such an attorney call me and I'll give you the names of two or three excellent ones.

Should You be G.M. of the Year?

By Kirby D. Payne, CHA

All hotel operators and owners value the commitment and pursuit of excellence demonstrated by the General Managers of the individual properties.

Usually they also desire to recognize and reward the General Managers who exemplify the high standards of guest service, profitability and commitment and who constantly perform above average in their category.

This article details the criteria and point system which can be used in determining General Managers of the Quarter/Year for multiple hotel/motel owners or operators. This program should be used in conjunction with a well-planned incentive bonus plan tied to each hotel's financial performance.

Procedure

A person with all the pertinent information should prepare summary information on the objective and performance items. The information should be used to help finalize the selection of the winners.

The person or persons actually supervising General Managers would rate the subjective information and put into tabulated form. This in turn would be combined with the objective data. The decision making group would then review and discuss the information and recommendations to decide the winners.

The awards should be announced and presented as soon as possible after the end of each quarter and not more than sixty days afterwards.

Criteria

There are one hundred possible points distributed among these criteria:

Salary and Wage Expenses should be ranked based on percentage of sales and cost per occupied room. Each method of calculation should be worth five points and ranking should be based on the first three places for each category. With five, three and two points respectively.

Guest Satisfaction should be measured objectively by Guest Comments Cards and subjectively based on reviewing other sources such as Complaint Letters, Observation and Other Comments. A Maximum of ten points may be earned and should be calculated as follows:

Guest Comment Card responses should be based on the lowest percentage of less than excellent comments and the greatest percentage of improvement in overall responses. Each method of calculation should be worth three points and ranking should be based on the first three places for each category. With three, two and one point respectively.

Guest Satisfaction other than the Guest Comment Card portion should be worth a maximum of four points.

Quality Assurance inspection scores should be ranked based on the lowest scores on items which are controllable by the General Manager.

Rankings should be divided into guest rooms and all other areas of the hotel. Each method of calculation should be worth five points and ranking should be based on the first three places for each category and five, three and two point respectively.

Employee Retention and Promotability should be primarily measured by ranking the hotels based on calculating employee turnover. Bonus points may be assigned for filling vacancies from within through promotion or for having employees which are transferred out and promoted into higher positions in other hotels managed by the company. A maximum of five points can be earned in this category.

Timeliness and accuracy of reporting and responses to inquiries from guests, owners and the company should be rated by deducting points from a base of five points.

Compliance with the requirements and procedures promulgated in company and franchise manuals should be measured in two ways. The supervisor and other reviews should be conducted and the resulting notes submitted to the company office. The company office staff should note errors and omissions. Points should be deducted from a base of ten to arrive at each General Manager's score.

Telephone Courtesy and Efficiency should be valued at five points. Points should be deducted based on comments received and the experience the supervisor and others note during the Quarter.

Personal Goal Achievement as set forth in General Manager performance reviews should be reviewed to evaluate each participant's degree of improvement and or success. For each goal or improvement noted a point should be given up to a maximum of five points.

Civic and Professional Involvement in the community and the industry should warrant up to five points if it is deemed to be exemplary.

Quality Sales Calls completed by the General Manager during the quarter should be averaged by the number of weeks in the quarter as ascertain the number of points awarded for the General Manager's sales effort. A maximum of five points should be awarded for this category.

Profitability should be measured objectively based on the Financial Statements. Thirty points may be earned and should be calculated as follows:

Increases in Year-to-Date (YTD) Income Before Management Fees and Fixed Charges should be ranked based on the highest percentage of increase as compared to Last Year's YTD Income Before Management Fees and Fixed Charges used by the owner to finance the property, which ever is the higher goal. The greatest excess should be worth fifteen points, the second largest, ten, the third, eight and the fourth six points, respectively.

Awards

Awards should be given quarterly and then yearly. Quarterly awards could be money items of value and yearly awards include money with a plaque or trophy or recognition. Awards should be given to first place, runner up and second place winners. Scales of value differ between full and limited service hotels.

As an additional incentive, all General Manager of the Year award winners might be permitted to attend their franchise system's annual convention. Additionally, General Manager of the Quarter award winners might attend based on availability of funds and could be selected based on highest cumulative point scores.

All of the following features apply to this program:

• This is an annual program judged and paid quarterly.
• The program's calculations should be based on your Year-to-Date results and should be paid quarterly on a special paycheck about thirty days after nudging is complete.
• Newly assigned General Managers should be eligible to compete as of their third complete month at the property.
• General Managers who leave the company for any reason should not be entitled to any payments or awards due them under this Program.
• The following adjustments may be made if your company operates only a few hotels:
  • Two managed hotels or less, two phantom hotels should be added using either last year data, previous manager, or management oversight hotels.
  • Three managed hotels, there should be no runner up.
  • Four to six managed hotels, there should be only one runner up.
• An anomaly or extraordinary event might occur which might affect this program in a negative or positive manner. In all cases, the President of the company should reserve the right to adjust the program or an individual's results so that the program is fair to both the General Manager and the hotel. Any such adjustments should be at the sole discretion of the President and not subject to any appeal outside the company.

Remember, everyone wants to be recognized for their performance, effort, and results. General Manager of the Quarter and General Manager of the Year programs can be effective in going beyond purely monetary incentives by motivating staff via both peer pressure and appealing to your staff's pride.

Staff Scheduling and Minimizing Payroll Expenses

By Kirby D. Payne, CHA

Payroll and related expenses are, in most cases, a hotel's largest expense category. The most recent PKF Consulting Trends shows payroll and related expenses to be 30.1% of the costs of operating a hotel. Anything that can be done to minimize this expense represents a significant boost to the profitability of a hotel.

Clearly, hiring the right individuals to be part of the team is key. Orientation and training are important. Good leadership, a personalized balance of positive and negative feed back and incentives, are also crucial. Employees are not mind-readers so the orientation, training and leadership are crucial to you and the employee's success.

Once the process mentioned above is in place, managing the staff schedule becomes one of the most important items in controlling labor expense. Doing this efficiently consists of several steps. These include:

• Establishing and quantifying your service and productivity standards. This step consists of deciding, for example, how many minutes, on average, it should take to clean a room or how many covers a banquet server is expected to handle for various types of meal service.
• Turning your service and productivity standards into staffing guides. Staffing guides are worksheets which can be used in conjunction with forecasts to establish how many labor hours and/or persons will be necessary to service the expected volume of business over a particular time period in a particular food and beverage (F.& B.) outlet or in the rooms department at the Front Desk, Reservations, Housekeeping, etc.
• Developing forecasting models for the various parts of your business in which volume varies. Generally, these forecasting models should result in forecasts of volume in units, such as covers or rooms broken down into arrivals, stay-overs and checkouts. Exceptions might include sales volume in beverage outlets and reservations calls.
• On a weekly basis, upcoming business volume should be forecasted. Variances between the forecasted business volume and budgeted volume should be clearly understood. If they are negative, both marketing and expense control plans are needed to counteract the impact of the revenue shortfalls. Remember, the best forecasts are made of many little estimates rather than one or two big guesses!
• The forecasts should be applied to the staffing guides to develop staff schedules. Staff schedules should always be costed out and compared to the payroll budgets for the various department. Again, variances need to be studied and understood. In addition to changes in volume, variances can be the result of bad budgeting, poor staffing guides or bad math!

Remember, the Staffing Guide is just that; a guideline for both hours and dollars that are based on a pre-planned service level. I suggest that if you have spreadsheet computer software, you convert these forms onto a spreadsheet for ease of use and analysis.

In addition to forecasting and scheduling, payroll costs can be impacted by many other factors. Previously, I mentioned hiring, orienting & training and leadership. Other items include adequate supervision, inspections and limiting, if not eliminating, overtime. Remember overtime results in premium pay for tired employees who may prefer to be elsewhere!

There are also situations where it may be appropriate to charge guests for extra labor they require. The simplest example of this is where a catering patron requests and signs a clear contract for one set-up and then requests a change after the room is set. Depending on the circumstances, including both the importance, as measured in profit potential of the patron and the hotel's circumstances, a fee may be charged for the resetting expense incurred by the hotel.

As a not too minor point, it should be kept in mind that workers' compensation and unemployment insurance expenses are manageable expenses. Pursuing an expense management program for these two items will, in time, result in reduced payroll burden. The key in these categories, like anything else in payroll expense management, is to be proactive rather than reactive.

It may be tough to judge yourself as it relates to payroll and related expenses. We all employ our staff from a similar pool of potential employees. As mangers, we all pride ourselves on our training and leadership skills. All hotels do not have the same resources available for employee benefits. Where we can make a difference is in staff planning so that we use our staff's time and resources as efficiently as possible. We can then improve the quality of our staff and reduce turn/over by returning a portion of the money saved to the individual staff members in higher pay and improved benefits.

Take What you Like From Our Meeting

by: Kirby D. Payne, CHA, September, 1997

The company meeting we recently held in Florida touched on some items which may be of interest to many other companies. Yes, we covered the usual items on improving reporting to the Support Office, guest room cleaning and reading financial statements but the focus of the meeting was human resources. We wanted to address the issues relating to this in ways different than we had in the past because we wanted to effect change.

We looked for resources for this meeting in a variety of new (to us) places. We had key staff apply at Disney's Casting Center (Employment Office) in Orlando to steal ideas (I'm sorry, I mean to say, "Benchmark our procedures."). "The Educational Institute" (EI) of the "American Hotel & Motel Association" was used in several ways I'll detail later but among them was a fabulous tour of their new offices. We also resorted to those old-fashioned things called books including, 1001 Ways To Motivate Employees by Bob Nelson and Built to Last by James C. Collins and Jerry I. Porras. One of the most important resources was an employee survey completed for the meeting.

While we would like to believe we're better than our competitors on employment issues, the reality is no matter where we are relative to them we are not satisfied. We have some hotels with excellent staffs and low turnover in all or several departments. More often there is at least one department with excessive turnover or unsatisfactory results. All departments with excessive turnover underperform. As has become more common in recent years turnover results in unfilled positions and either overtime or less satisfied guests.

In those places where we have a particular staffing problem we just never seem to find a long term solution. The problems just seem to keep repeating themselves. Hence, the search for new ideas. I also firmly believe that if we solve the employee retention problem we'll make most of the recruiting problem go away! So what did we decide at our company meeting? The first issue to attack was employee retention followed by better recruiting and selection. Although employee retention starts when the person applies, the portion we addressed relates to current staff.

We examined the issues which were brought up in the employee survey which was done by SQS of Irving, TX. The survey results were cross tabulated every way one could imagine and actually will take weeks, if not months, to digest and understand. At our meeting, with the help of planning forms provided by SQS, we started working on correcting some of the problems brought to our attention through the survey and highlighted in the Executive Summary.

Two items which caught my eye were:

• employees, in spite of staff meetings and other functions, did not feel they had enough information and involvement in the decisions being made in their hotels;
• and that benefits were inadequate.

In the latter case it was 67% but 60% also said they did not feel they had a good understanding of the benefit package! Clearly we have to communicate better with the 60% so they'll know what their benefits are! Nearly half our employees felt it was difficult to get a benefit question answered! Clearly we are being told we're not good enough communicators at the hotel level.

To solve these problems we're working hard to improve our staff meetings by helping each member of each hotel's leadership team develop better skills in leading meetings and in training. We're also developing better tools to communicate with employees. Among these will be a small pocket size four panel brochure explaining benefits. This piece will also be used as part of the recruiting package later. As an additional tool, we are installing a toll free number with voice mail for any employee to call the Minneapolis Support Office with questions or complaints. Why shouldn't employees have a 100% satisfaction guarantee just like their guests! I'm not sure what that guarantee will consist of but we're working on it.

Another thing we feel is key is to further develop our entry level leaders. In addition to knowing the details of the various positions they supervise (usually they were promoted from them) they must be trainers and leaders. In order to have a common minimum level of training for them we are requiring participation in the EI's Certified Hospitality Supervisor (CHS) program. Every supervisor who is not already certified must complete this program within 90 days of joining our company. If they don't complete it, they can't stay. General Managers now have "certified supervisors" as one of their Key Results Indicators. Every department head and General Manager must also complete the certification program pertinent to their positions as soon as they are eligible.

The next part of our plan is to have every employee in every hotel go through the EI's CD-ROM "Guest Service: Out of This World" program which helps employees develop skills relating to interactions with guests. We're using this program for three reasons:

• to enhance guest service,
• to help enhance the sense of teamwork among the employees because they'll all have gone through it,
• and to include staff from maintenance and back-of-the-house who normally don't get included in special guest service training.

The EI has various programs for certifying line level staff. We are using these to enhance the technical proficiency of various groups and equally important to get them certified or registered in their positions. We feel this will have several benefits. Becoming a Registered Front Desk Representative, for instance, sets the base for pay increases, preferred scheduling and, hopefully, will let both the employee and the hotel's leadership team know we are serious about training. A common training platform that may be enhanced by local features and materials offered by the franchisor will provide us with a company-wide standard. We know the line level programs are effective because several of our hotels were among the beta test sites a few years ago for the EI.

We are continuing all of our existing retention programs and trying a few new ones. Each hotel has a $15.00 per employee monthly budget for employee functions and activities. These funds are used for pizza parties, circus tickets, movies, and so forth. After six months, we offer each employee a certificate for a dental check-up and cleaning with the hope we are starting them on a new habit. Among the new ideas we're considering include calling the employee's mom, dad, spouse, or whatever to tell them what a great job they are doing. We'll do this regardless of age! At the meeting we gave our General Managers a list of 60 pre-approved employee motivational activities that any hotel could implement with little investment. We stressed to them, however, that starting motivational programs and then letting them peter out is demotivational.

All our existing incentive and benefit programs will remain. We're taking greater care to insure that the staff is aware of them and understand them through the brochure mentioned previously and on-going communication.

As for recruiting, we're struggling with finding new ideas and our General Managers have told us they are willing to try anything in this tight labor supply. We want new ideas our hotel competitors and anyone else in the economy are not doing. A cornerstone will be handing out recruiting cards to any working person we observe who fits the profile of people we want working for us. That person might be working in retail, an area hotel, restaurants, the overnight shift in a convenience store (night auditor!), or what ever.

We're going to improve our application and interview process so that there will be more self-selection. That means that, like Disney but with a smaller budget, we're going to let applicants know what we have to offer and what our expectations are before they even complete an application. Appearance standards, hours and days for work, attendance and timeliness standards are all among the many things that will help a potential applicant decide if we're right for them. Peer interviews are another area we're going to experiment with. Most of our incentive plans are based on team performance within a department. Why not move to the logical idea of letting some members of a department help select new staff? Sure, some training and ground rules will have to be established but the results could be excellent! Better hires, more involvement by existing staff and more commitment to the hotel's success.

The ideas and projects which evolved form this meeting won't create overnight results but they have high potential. And you know what they say, "If you keep doing what you've been doing, you'll keep getting what you've been getting."

Branding and Repositioning Food & Beverage - the case for outsourcing partnerships

By Sally Robinson and Stacy Saef, London and Lawrence Kantor, Los Angeles - Summer 1998

When Regal Hotel Group struck an alliance with a major restaurant company this past summer, it cast light on new ways hotels compete for food and beverage (F &B) revenues. With more than half of the revenues in Regal's 102 hotels coining from restaurants and bars, the F&B function has played a significant role in the chain's profitability. U.K.- based Regal moved to bolster this business by taking a £1 million equity position in The Restaurant Partnership, an organisation that devises F&B solutions and outsourcing to the hospitality and leisure industry. Even more than opportunities for adding branded outlets, management cited the expertise brought to Regal's F&B operations as the ventures most important benefit. 1

Hotel guests generally enjoy the convenience of F&B outlets, hut when given the chance, they frequently choose a known brand off the premises, leaving a hotel for nearby restaurant chains. In the process, they take much-desired dining dollars with them. As customers become more brand - -aware, competition for F&B business continues to grow in importance for many hotels. From the hotel's perspective, a joint venture or outsourcing arrangement can provide a combination of restaurant skills and brand strength, often supported by national advertising. Hotels adding branded restaurants have reported improved F&B volume, including room service sales, as well as an attendant increase in occupancy and average rate. In a period of hospitality industry consolidation, branded restaurants may become a point of differentiation among hotel properties.

Restaurant companies, of course, also stand to gain from this flurry of alliances. In today's market, many companies are being forced to look outside traditional development options and to consider new types of locations.

Given these benefits, it is surprising there is not more outsourcing of food and beverage in the hotel industry. In this article, we explore outsourcing trends, as well as what goes into a successful partnership between hotel and restaurateur.

Core Competencies and Outsourcing

During the early 1990s, businesses faced the difficult task of assessing procedural strengths and weaknesses to trim fat and streamline processes. Outsourcing non-critical activities allowed companies to extend their organisational core competencies. The hospitality and leisure industry was no exception to this trend. During the past few years, hotels have been called on to assess their core competencies, while attempting to shed responsibility for non-core activities.

Core competencies can be defined as those unique disciplines that confer competitive advantage, motivating customers to buy a company's goods and services over those of a competitor. As this decade comes to a close, businesses are further dividing the non-core segment into two categories: "essential non-core" and "non-essential non-core." Those activities that are both non-core and non-essential are being shut down. Processes that are essential, but "non-core," become prime candidates for outsourcing. Providing quality rooms and guest services remains a hotel's primary function. The F&B function, however, commands attention because of its importance to guest satisfaction and brand management. Many hoteliers, however, make the mistake of thinking that it takes the same competencies to operate a restaurant as it does to run a hotel. In actual fact, the restaurant business requires a different set of skills, including more attention to detail, than rooms management. By reengineering F&B operations, hotel management has the opportunity to redirect energies from the restaurant business and focus efforts on enhancing hotel operations and profitability and, potentially, shareholder value. This raises important questions for management. When does it make financial and operational sense to outsource F&B? If the decision is made to outsource, how can a partnership be structured most successfully?

The Outsourcing Equation

Outsourcing partnerships typically bring together organisations with diverse capabilities. Understanding what each side of the equation requires to succeed is essential. This important guideline applies whether a hotel owner is considering outsourcing all or part of its F&B operations to a restaurant chain, or merely outsourcing its coffee shop to a local restaurateur.

Historically, restaurant chains have been strict about the demographics and economic indicators in a market before committing to a location. And until recently, there was no shortage of suitable sites. Prime demographic indicators include a mix of office space, upper-middle class residences, and upscale apartments with higher-income professionals looking for an element of fun. If a potential restaurant site was not viewed as a "home run" location, a restaurateur would typically pass on a development opportunity. Due to increased competition and a limited number of prime sites, restaurant companies have found they must go further afield than in the past, breaking traditional biases about what locations work.

Until recently, hotels have been reluctant to outsource their F&B operations - or single restaurants. Traditionally, hotel management viewed F&B operations as a low margin or unprofitable service required to enhance guest satisfaction. As such, F&B profitability was always examined with a mentality of "minimizing a loss." As a way to rationalise an unprofitable track record, hotel management often convinced itself that there was insufficient demand for profitable F&B operations. In addition, as hotels emerged from the last recession and downturn in hotel profitability, emphasis was placed on the renovation of guestrooms, lobbies and banquet space over F&B outlets. Based on historical trends, renovation priority has consistently been given to profit-generating guestrooms over unprofitable food and beverage operations.

Additionally, hotels opting to create a new concept or introduce an existing, branded concept may find start-up costs to he exorbitant. Estimated costs of upgrading a food and beverage outlet to a chain's specified standards range from $500,000 to $1.5 million, depending on the extent of renovation and equipment purchases required. Of course, outsourcing operations to a local restaurateur would likely cost far less. The hotel, however, would not benefit from the brand recognition associated with a larger, more established name in the marketplace. Lastly, hotel management companies earning fees based on gross revenue may be reluctant to reduce the base on which their management fee is calculated. This may prompt hotel owners and managers to reassess their management position. Frequently the parties agree to either renegotiate revenue-based fee percentages or include revenues earned by third-party F&B operators in the management fee calculations.

Despite the issues associated with outsourcing of food and beverage operations, there are compelling reasons for hotels to consider this option. Brand strength and competitive positioning for the hotel property are among the most important.

Branding and Repositioning

Why is it that guests often prefer to patronise known brands rather than a hotel's stand-alone F&B outlet? While consumers are more brand aware than ever before, research suggests there may even be a perceived stigma associated with dining in a hotel restaurant. Integrating a branded concept into a hotel is a way to minimize the stigma, bringing guests back to the hotel outlets and reducing internal costs. Additionally, familiar dining concepts seem to put travelers at ease. Customers who are away from home and out of their element are comforted by the availability and consistency that accompanies a known brand name product.

In 1995 Choice Hotels surveyed its full service hotels and learned that most of its properties experienced a great deal of difficulty keeping restaurants profitable. Reported food expenditures of 40 to 50 percent of their F&B revenues, accompanied by labour costs of 45 to 50 percent, made it virtually impossible to generate a profit, according to Barbara Shuster, Director of Choice Hotels International's Choice Picks programme. To combat this trend, select Choice hotels implemented a food court concept in the F&B area, and were surprised to see food and labour costs on F&B revenues drop to an average of 32 percent and 28 percent, respectively.

In addition to brand identity, most operators find that guests are not only more willing to patronise high-street brands conveniently situated within the hotel, but they are also willing to pay more for the privilege of dining with a familiar concept. Increased willingness to dine coupled with increased willingness to spend results in increased revenues.

Hotels introducing a branded restaurant into their property often experience higher external traffic. Market exposure translates into increased outlet revenue and enhanced customer perception of the F&B outlet brand name, as well as enhanced customer perception of the hotel itself. Thus the net result of rebranding and repositioning can be increased profit and enhanced shareholder value.

Making it Work

Before taking the plunge into the world of outsourced or reengineered F&B operations, hotel management must take several factors into consideration:

Competition

No outsourcing arrangement will work, unless there is market demand. Competitive analysis should include restaurants in neighboring hotels, as well as stand-alone restaurants in the area. Profitability issues and pricing a new outlet also must be considered in the market context. Many hotels find that the brand name restaurant buys recognition in the customer 5 mind and creates a draw for business. The partnered restaurant sets the hotel apart from other hotels in the area and segment by providing a strong competitive and marketing advantage.

Marketing

The hotelier and restaurateur must establish responsibility for marketing of the new concept. Frequently hotels agree to advertise the operator in the guestrooms, although the outlet typically absorbs the cost of signage in the rooms and throughout the hotel. Additionally, the restaurateur typically assumes responsibility and accountability for all external advertising.

Guest expectations

The goal of outsourcing F&B operations is to enhance profitability by increasing
internal as well as external traffic, without losing the current customer base. It is essential to consider guest reaction to the change in F&B concept. If a negative reaction is anticipated, a hotelier risks losing its customer base and thus future earning potential to the competition.

Management styles

It is important to look at both the local and corporate management styles of both the hotelier and restaurateur, Incompatibility of the two styles could result in a rocky relationship and tumultuous times. In order to avoid this friction, some hotels have found it advantageous to appoint the general manager of the restaurant to the hotel's executive team, thereby creating a sense of responsibility and belonging and enhancing relationships throughout the organisation.

Terms of the Contract

The operational terms of the contract must be set out in detail. Quality standards and monitoring mechanisms should be detailed to ensure that the restaurant is operated at a standard that is acceptable and complementary to that of the hotel. Additionally, hours of restaurant operation, including room service, are critical specifications. As breakfast is typically a money - generating activity, and frequently not one that restaurant chain operators are accustomed to serving, many hoteliers prefer to maintain responsibility for this meal. However, concessions affecting profitability occasionally need to be made in order to solidify a working relationship.

A successful outsourcing relationship involves first and foremost trust and cohesion between the two partners. Of course, operational terms must be clearly detailed and make economic sense for both parties. While the requirements of a restaurant chain may be more stringent and costly than those of an independent restaurant operator, the basic tenets of a trusting partnership, complementary levels of quality, compatible clientele and a location with sufficient demand to justify a restaurant operation are all necessary. Successful implementation of an F&B outsourcing partnership can result in enhanced brand recognition and profitability for both the hotelier and the restaurateur.

Structuring an Outsourcing Partnership - The Options

Leasing

A hotel leases a room or section of the hotel, preferably with self-contained back-of-the-house areas in exchange for a flat fee and/or a percentage of sales. Statistics are not available for this type of transaction, as leasing deals vary depending on the area of space being leased, the brand being introduced into the market, the location of the hotel and agreements that may have been established by a head office. The hotel benefits by receiving a guaranteed rent, plus a revenue "top-up" each month. The landlord, however, loses control of F&B operations. Management must agree to let someone else run the show.

Franchising

This option suits a hotel seeking to change a restaurant concept without investing in an internal and potentially untested concept. The hotel buys an established brand and system for a fee. The process begins with an upfront payment - a buy-in to the right to operate a better known and more profitable concept. Frequently, the franchisor requires the hotel to make an additional payment for a capital investment, requiring a purchase of specified equipment. Under the franchising terms, the hotel pays the franchisor a royalty fee, usually based on a percentage of sales, for the privilege of using the name and resources. Throughout the relationship, it is the franchisees responsibility to ensure that hotel staff is adequately trained to assure quality consistent with other branded sites. Marriott International was one of the first major hotel chains to enter into F&B franchising arrangements, with a 1989 franchising partnership with Pizza Hut. Marriott has since introduced Pizza Hut outlets and in-room dining options at many of its properties throughout the world.

Joint Venture

This is a variant of franchising and contracting. The hotelier creates a strategic alliance with a known, successful restaurateur. The two parties create a separate financial company, which is appointed as the lessee of the restaurant. The new organisation, the restaurant lessee., then outsources the F&B operations to the restaurateur. Typically the hotel provides the capital expenditures and the restaurateur brings intellectual property and expertise. The two parties share the successes and the related profits. For example, Marco Pierre White formed a joint venture with Granada hotels valued at £2 million to provide F&B services at seven select Forte hotels in the UK. The new organisation, MPW Criterion, will reengineer the way select Granada hotel F&B outlets do business. Additionally, before its merger with Starwood Lodging, ITT Corporation, owner of Sheraton Hotels and Caesar's Casinos, formed a partnership with Planet Hollywood International to develop, construct and manage Planet Hollywood - themed casinos in Las Vegas and Atlantic City. The two parties were also entertaining the idea of converting existing hotel outlets into Planet Hollywood restaurants.

Proprietary Brands

Hotel chains can create a proprietary brand, introducing the concept into all of its properties. This approach appeals to guests who enjoy consistency throughout a hotel chain. However, it is difficult to gain wider customer identity outside of the hotel properties. Marriott, for example, already has its own concepts in place, including JW's Steakhouse, Allie's American Grille and Champion's Bar. Likewise, Regal Hotels is growing its own brands, including Hard Edged and Morrisey's Pub, in several of its hotels as well as developing F&B solutions through its alliance with The Restaurant Partnership.

1. UK: Finance News- Regal Restaurant Deal, The Times, June 17, 1998

Sally Robinson is a Senior Consultant in Arthur Andersen's Hospitality & Leisure Practice. She is based in London.
Stacy Saef is a Consultant in Arthur Andersen's Hospitality & Leisure Practice. She is based in London.
Lawrence Kantor, based in Los Angeles, is a Senior Manager in the firm's Hospitality & Leisure Practice

©Arthur Andersen

Food: Barbecue-Up in Smoke

Food: Barbecue-Up in Smoke

Chefs take up smoking as barbecue’s trendy next step.

Novembre 16, 2007

By William Rice, Special to R&I

Slow-smoked turkey breasts yield a popular sandwich for the Dallas-based Dickey’s Barbecue Pit chain.

In tiny, rustic West Ossipee, N.H., Chef-owner Joe Ferreira marvels at how sales continue to climb at The Yankee Smokehouse, a shrine to classic barbecue that he has operated for the past 25 years. In the heart of Chicago, meanwhile, rookie owner Barry Sorkin says he and his four partners in year-old Smoque BBQ are fortunate. "We have had really good crowds from day one," he says.

Ferreira speaks of Americans becoming more familiar with real barbecue over the past decade as they traveled in the South and West. Sorkin posits that "smoke and meat have finally found each other in Chicago" and credits television’s Food Network as well as travel for having inspired in urban areas a curiosity about barbecue as a culinary method, "not just a condiment."

With barbecue becoming firmly and nationally established, chefs looking to take the category to the next level are experimenting with slow-smoked meats prepared using indirect heat. Full-tilt pit barbecues are the traditional equipment of choice, but small smokers and even range-top models allow chefs to add smoky flavors to consumer-favorite dishes.

Chefs such as Ferreira describe themselves as traditionalists, but in an era in which change itself often seems to inspire impatience, they do not stand still for long. Smoque BBQ introduced a brisket of beef smoked for 15 hours.

The reaction was quick—and positive. "We’re selling a lot," says Sorkin, adding that because the meat is sliced or chopped to order ($6.95 for an à la carte platter; $9.45 with coleslaw and two sides), it stays moist. Another departure from tradition at Smoque was the installation of a rotisserie-style smoker that is virtually self-basting.

The restaurant’s brisket benefits from a spice rub composed of salt, sugar, paprika and as many as 14 other seasonings. The woods of preference here are apple and oak, and one sauce is dedicated to ribs and chicken, while another is reserved for brisket and pulled pork.
At Wayzata, Minn.-based Redstone American Grill’s four units, a rotisserie smoker cooks baby back ribs as well as pork for the concept’s Tennessee Barbecue Pork Sandwich.
In deepest New Hampshire, where The Yankee Smokehouse’s smoker is lighted at 5:30 a.m., Joe Ferreira makes a pair of spice rubs, and he, too, has had an "excellent response" to brisket. An even bigger hit is Ferreira’s version of smoked prime rib.

Claiming to have "the biggest open-pit barbecue this side of the Mason-Dixon Line," The Yankee Smokehouse’s small dinner platters (most are $10.99) include Smokehouse Fries, coleslaw, garlic and barbecue sauce on the side. Larger portions, for $14.99 to $17.99, have barbecued beans on the side as well.

Ferreira works into the midafternoon and then goes home for a brief rest. He returns in the evening to greet diners who come from near and surprisingly far—Pennsylvania, for example. Comments gleaned from these conversations and the guest comment cards he distributes assiduously provide valuable feedback.

"My recipes don’t change," he says, "but I’m on the lookout for new ideas." Past suggestions led to the creation of a weekly dinner featuring smoked turkey and smoked, not boiled, scallops wrapped in bacon. For more than a quarter-century, he has learned to use freshly cut "green" wood (apple, oak and some maple) because it provides more smoke.

Experimentation

At Equus in Louisville, Ky., Executive Chef Kevin Rice (no relation to the author) can be excused for claiming a hometown advantage when it comes to fueling his backyard-size, oval-shaped smoker. "Since we’re in Kentucky, we have access to used Bourbon barrels," he explains. "They provide a lot of sweet-smelling smoke. Also, we were the first restaurant here to use little smokers to cook limited quantities at a time."

Equus in Louisville, Ky., has used its oval smoker to cook venison and elk as well as fingerling potatoes and bacon.
His oval smoker holds a large pork butt, a dozen pork chops or a 4-pound slab of bacon. Other foods exposed to smoke here have been fingerling potatoes ("I smoke them for 20 minutes, then roast them," Rice says), salmon, elk chops and venison. Applewood-smoked bacon was combined with sweetbreads, mushrooms, Madeira and veal reduction.

Bone-in steaks have proven more satisfactory than filets. Rice thinks of experimenting with smoking root vegetables such as carrots and parsnips but frowns at the suggestion of smoking traditional Asian ingredients.

"They are more acceptable as an element in a dish," he says.

Unlike many of his peers, Executive Chef Rodney Freidank, who oversees the kitchens of Greenville, S.C.-based Soby’s five locations, is not obsessed with keeping secrets. "One of the reasons I’m here," says the 39-year-old chef, "is because others have been so willing to share their knowledge with me over the years."

He successfully combined smoked chicken and collard greens in a spring-roll appetizer and has "mirrored" Chinese flavors by making a coulis of mustard greens and pepper jelly. The New South bows to Italy in Freidank’s hickory-smoked pulled-pork bruschetta.

In a gas-fired smoker, Freidank slow-cooks heirloom tomatoes that are later transformed into the broth for a seafood soup. Smoking experiments that also have prompted a positive response include barbecued duck leg, a soup made with puréed smoked butternut squash and a hash made using smoked sweet potatoes.

A Fully Smoked Menu

Austin, Texas, is home to its share of stand-up barbecue, so it only makes sense that customers often have to stand in line for a table at Salt Lick Three Sixty. One menu hit is the Smoky Burger, made with fresh ground beef and hickory-smoked brisket. The $8.50 burger is topped with lettuce, tomato, onion and garlic aïoli.

Also popular is the novel chicken-fried smoked-turkey steak with roasted-garlic mashed potatoes and jalapeño-bacon gravy. For $12, guests can customize a combination platter of smoked brisket, sausage, pork ribs or turkey (which brings a $1 upcharge). Coleslaw, beans and potato salad accompany all smoked-meat dishes.

The restaurant closes at 10 p.m., but Assistant Manager Brian Berger explains that cooks stay on through the night to give brisket and ribs (anointed with a "traditional" dry rub) the lengthy cooking they require. In addition, as part of an informal "full-service" smoking policy, Salt Lick Three Sixty offers turkey and chicken (with light-pink flesh that indicates proper smoke absorption, not rareness, Berger says).

Traveling to Hocking Hills, Ohio, south of Columbus, leads the barbecue addict to the high-energy Millstone BBQ, a year-old store with a quintet of investors new to the restaurant business. General Manager Adam Wetzel says the restaurant’s three 500-pound-capacity smokers are tested when as many as 600 diners appear on weekend nights.

Playing around with ingredients and techniques led to revelations for Millstone. Cherry and applewood seemed to darken chicken too much, so hickory—already considered the most-agreeable flavor—was given the assignment. Wetzel says the Millstone staff sampled and tweaked rubs and sauces until everyone was happy.

Equus’ Rice reflects, "One thing we have learned is there are a lot of people out there who will accept smoked foods in a fine-dining restaurant." Barry Sorkin adds: "Our customers really want to talk barbecue. It’s amazing how much knowledge they have."

• Power House Rib Rub
• Almond-Wood-Smoked Chicken and Spinach Pizza

William Rice covered food and wine for the Chicago Tribune for nearly 20 years.
_________________________________________________________________________________
A Campus Barbecue Powerhouse

Built in 1934 to house gas-fired boilers that heated the classrooms and dormitories of the University of Southern Mississippi (USM) in Hattiesburg, Miss., the structure that is now home to Power House Restaurant had long since been decommissioned when Aramark assumed management of the university’s foodservice in 2004.

"It was storage space, just rusting," says Pat Foley, USM resident district manager for Philadelphia-based Aramark. "We knew it was a great place [for a restaurant] and wanted to do something with it, but the concept evolved over a year of interviewing students and focus groups from the whole campus."

What students, faculty and staff said they wanted was a barbecue restaurant, so last year, after a $2.3 million investment by Aramark, the old boiler building opened as Power House Restaurant, complete with a slow-smoke barbecue pit and a stone pizza oven.

Inside round of beef, St. Louis-style pork ribs and 10-ounce chicken breasts go into the smoker, which can hold up to 120 pounds of meat and which maintains a 180F temperature. The beef gets an overnight stay, while the ribs smoke for six hours and chicken breasts smoke for three. Power House chefs created a dry rub for the ribs as well as a barbecue sauce that is used for all three proteins.

"We wanted something that would go well with all the meats to give us a distinctive flavor, our little niche," Foley says of the sauce. "There’s a good number of barbecue and rib places nearby, and we wanted to have something a little different but that still fit within the range of flavors people expect. We tried several different recipes, put them in front of students, faculty and staff, and asked what they liked the best. We went with the favorite, and it’s been popular ever since we opened."

Foley concedes that he didn’t know much about smoking—other than how he likes his ribs—when they created the restaurant. But he says he learned quickly. "Just as important as the seasoning is the length of time you cook the meat and when you take it out," he says. "It has to be tender but firm so it’s not falling apart on you. The texture is as important as the seasoning. It took some time to adjust to the smoker, to find the right times for the meat. It took some adjusting to get it perfect. If you smoke it too long, especially the chicken, it will dry out very quickly."

"You just can’t throw meat in there and take it out," he says. "It takes some practice. You have to do it and experiment with it."

A half-rack of ribs with macaroni and cheese plus a choice of coleslaw or potato salad ($9.99) is the top-selling dinner choice. At lunch, the $6.99 smoked-chicken po’ boy (with provolone cheese and Cajun mayonnaise) and $6.99 smoked-chicken salad are favorites. Sliced smoked chicken breast also appears on the $6.99 Nasty Bunch Smoked BBQ Chicken Pizza baked in the pizza oven at the center of the Power House dining room.

—Scott Hume
Copyright © 1999-2007 Reed Business Information. All rights reserved.

The Ten-Minute Manager’s Guide to ... Menu Design

The Ten-Minute Manager’s Guide to ... Menu Design
November 6, 2007
By Christine LaFave, R&I

So much critical analysis, creative effort and care goes into developing menu items that it’s tempting to give short shrift to said items’ packaging—the menu. But slapping a collection of tested and perfected foods and beverages on a piece of paper and hoping for the best does not a solid menu-design strategy make.

Successful operators know that the physical menu is an extension of the operation’s brand. Extra menu touches such as the use of artistic elements from the restaurant or helpful hints for guests (wine suggestions and food-allergy notes) express a commitment to detail.

Dallas-based Boston’s The Gourmet Pizza places a tiny wineglass icon in one of four colors next to pastas on its menu as a way to recommend wine pairings. Portsmouth, N.H.’s Blue Mermaid Island Grill displays a banana-leaf graphic on the front of its menu to convey freshness and a vibrant island spirit.

Show and Tell

A previous menu design at Oregano’s, a Phoenix-based casual-dining pizza concept, was so popular that around 40 menus disappeared from Oregano’s locations within six months. Created to resemble record albums from the Big Band era and costing more than $20 each to produce, the menus proved too good for their own good. But their popularity showed Oregano’s executives just what a brand-boosting tool menus could be.

"It was really beloved," says Gary Tarr, president of Free Range Productions, which designs the menus for Oregano’s. "The goal with the menus has always been to have this stand-alone thing. It’s just more of a fun concept than listing things out and having a price ... Some of these places, I think they focus more on the cover of the menu, and then on the inside they just have a slip of paper with ‘Chicken and Broccoli, $9.95.’"
Oregano’s colorful, irreverent current menu—a clearly columned trifold—still attracts interest for its originality. The description for the Pablo Picasso Mexico Salad reads: "A masterful blend of grilled fajita chicken, romaine lettuce, Cheddar cheese, fresh cilantro, tomatoes and onion, drizzled with a slightly spicy chipotle dressing and mixed with corn strips. Can you say hola Pablo? Cubists unite!"

Playful descriptions can make guests smile, but they also communicate Oregano’s emphasis on value. Copy for the Big Beefstro Salad ("grab a fork and belly up!") and the Veggie Wedgie ("jam-packed with dusted sautéed eggplant, fresh portabello mushrooms and provolone cheese") lets customers know they aren’t in for a flimsy salad or sandwich. They might pay more—$9.39 for the Big Beefstro, $7.59 for the Veggie Wedgie—than they would for similar items at a quick-service restaurant, but with illustrative copy, Oregano’s more-bang-for-your-buck message is clear.

Design School

Ted McCall, a menu-design instructor at Johnson & Wales University in Charlotte, N.C., says that the most important element of menu design is the simplest. "First and foremost, is it readable?" he asks. "Does it flow easily for the consumer?’"

McCall worked as kitchen manager at Carrollton, Texas-based T.G.I. Friday’s and was a sous-chef at The Great Escape in Weymouth, Mass., and he notes that the basic tenets of good menu design are the same whether the restaurant is a burger joint or a three-star dining room.

"Generally, the way that people focus is tops and bottoms," he says. "Those items that are at the highest level of profit should be at the top and bottom of [a] category."

Operators need to take care not to confuse popularity with profitability. "Put your most profitable item at the top of the page, your second-most profitable at the bottom," he says. The most popular item—which may have a lower profitability—can go in the prime space just above the center of the right-hand page.

Rather than relying on servers or an album’s worth of photos to communicate a brand message, McCall says, operators should look to cleanly lined copy in an easy-to-read type as their primary in-restaurant marketing tool. If an operation uses locally sourced or sustainable ingredients, it should say as much on the menu. If it can adjust recipes to accommodate those who have food allergies, it should state so somewhere on the menu.

McCall says that restaurants have moved away from descriptive copy on menus at a time when consumers are more interested in food than ever—an unfortunate trend, he believes. While customers don’t need a paragraph-long item description, they do, for example, need to know the size of the pork chop they’re considering ordering.

"Consumers are wise, but they don’t know everything," McCall says. "We’re taxing servers with the explanation of a lot of items."

Fit to Print

A relaxed but refined atmosphere at island-inspired Blue Mermaid Island Grill in Portsmouth, N.H., betrays a menu-design process that is anything but casual.

"We go so far as to analyze to the penny the gross margin on things," says owner Scott Logan. "Knowing your numbers is a crucial element to being successful in this business." Although Blue Mermaid’s number crunching requires an extra investment of time and money, Logan says that the surefootedness the restaurant gains makes the effort worthwhile.

Blue Mermaid’s printing company helps supply menu-psychology guidance. "We spend a lot of time on that," Logan says. He notes that simple tactics such as visually setting apart items the restaurant wants to showcase in a given six-month menu cycle remain effective. "When we do a circle or highlight something on the menu, [customers] will point it out and say, ‘That must be your specialty,’" he says.

Customer comments that find support in sales analyses are useful when considering which items to keep and which to drop, Logan adds. Another bottom-line-boosting key, he says, is having every item offered—drinks, specials, desserts—in print so that customers can more easily peruse the selections.

"Anything you put in print in front of customers is going to sell," he says. "It’s very important that we have our beverage selection in print for guests to select from, because they will."

Page Turners

Experts offer these starting points for menu design:

MENU GOALS

• Ease of use. Basic user-friendliness—in the menu’s physical size, in the font’s style and size, and in the organization of items—is key. "I like to be able to find the things I want to find," says Doug MacDonald of Boston’s The Gourmet Pizza.
• A design that matches the restaurant’s concept and purpose. The menu "is part of the whole experience to take you someplace else," says Free Range Productions President Gary Tarr. Adds MacDonald: "You want something that says something about where you are."
• Standout artistic elements. "What people do with the physical menu—laminating it to a sheet of bamboo, or the way the menu is clipped or attached to a backing," can spark guest interest, says Scott Logan of Blue Mermaid Island Grill.

MENU TRAPS

• Clutter. "Jam-packed menus" are a pet peeve of Tarr’s. "Seeing one thing on a menu in three different places" irks Logan.
• Yawn-worthy presentation. Though readability is critical, a simple list of menu items and their prices in an everyday serif font is a bore, says Tarr.
• Misspellings. For the sake of professionalism and continuity, proofread.

Add/Subtract

Choice is good, but when Dallas-based Boston’s The Gourmet Pizza (menu pictured, right) overhauled its menu design in 2005, the chain’s executives realized they had too much of a good thing. A surfeit of selections made for a menu that was hard to handle.

"We heard a couple of themes [from customers]," says Boston’s President Doug MacDonald. "The first was that it was too big, too unwieldy—a party of six couldn’t read them together. And the other was navigation; we heard that it was kind of crowded and busy." The old menu was a trifold with more than 100 items; the new menu features around 90 items on seven 11-inch by 9.5-inch pages in a binder.

Boston’s also upgraded its food photography. The current menu features two full-page pizza photos and no more than four smaller photos per page. "If you put in a picture of an item, it will sell; if you put a box around it, it will sell a little better," MacDonald says. "If you’re trying to do that with everything, it becomes clutter."

Seven Steps to Food Cost Control

by Kirby D. Payne, CHA , October, 1998

After I returned from Viet Nam in 1971 I completed my senior year of college at the hotel school of Florida State University. The Chair of the department was Peter Dukas who taught a class on food & beverage management which used a text book he had authored called, "How To Operate A Restaurant". Long ago, I loaned the book out and never got it back so don't quote me as saying this is his list when I refer to it.

Professor Dukas used to love to make us memorize lists. Through the prism of over 26 years I still think I remember his favorite list, seven steps to food cost control. Over the years I have referred back to that mental checklist and adapted from it. It has been useful to me and I'll list it here as I remember it, right or wrong.

1. ORDERING - The first step is to order right. Having detailed recipes, designing purchasing specifications, doing comparative shopping based on those specifications, and comparing quality, price and service, etc. Oh yes, don't order too early in order to avoid spoilage, wasted storage space and lost interest on your money. Don't order too late, so premium costs and delivery charges accrue. I remember being told standing orders were a bad habit.
2. RECEIVING - The fundamentals are obvious: count; weigh; inspect for condition and quality; verify against the purchase order; keep the receiving area clean and uncluttered; limit access to the receiving area; train the person receiving and make him or her responsible. Get credit memos from the delivery driver.
3. STORING - Is the method and place of storage for the various items appropriate for the item? Is it secure from pilferage? Are the shelves strong enough for the product, allow air circulation and easy to clean? Are all items stored at a temperature appropriate for that product? Are items dated (with year, in some cases) and priced? Is the storage area orderly and clean? Should shelves be labeled and maybe even stocking quantities noted?
4. ISSUING - What is issuing based on? Who has access and or authority to issue or take things from the secured store rooms and walk-ins? Are issues being made in appropriate quantities and at appropriate times? Is there a relationship to volume or reasonable par stocks? Are issues being accounted for? Is a perpetual inventory or sign out sheet designed specifically for your operation or a particular store room in use?
5. PREPARATION - I'm not so clear about the details here any more because it has been a long time since I worked in a kitchen regularly. Phrases that come to mind include: trim properly; use trimmings for stock pots and other recipes. Proper tools, sharp knives, clean and neat working area, enforcing a policy of following recipes, and having photos of finished products available and used regularly are also critical. Enough said, as I suspect my readers know a lot more than I do about this!
6. COOKING - Various considerations here, again my readers know more than I. Proper temperatures, proper cooking times, following recipes carefully, using photographs of finished products, correct size, material, and type of utensils and cookware, clean work area.
7. SERVING - Serving is not only about portion control, it is also about decisions made regarding portion size and presentation. With a buffet, it is obvious. Proper serving utensils, proper holding/serving equipment, right presentation order, plate sizes, etc. In a bar its easy, too. Jiggers or other measuring and control devices and very strict discipline. I take it back, the discipline isn't easy especially in tight labor markets. Dining room service should be easy to control using good kitchen supervisors, trained cooks, photographs for both cooks and servers, etc. Watch what comes back from bused tables to see if portions are proper. Marketing decisions may drive large portions but if the patrons are not eating it or taking it home, the portion size or the recipe should be reconsidered. Proper china for each item served is important for both presentation and portion control.

Work hard on your cost controls and be consistent about them. One element of controlling food cost covers all seven categories: thorough training. Give your staff the ability and knowledge and confidence to do their jobs properly and to your specifications. Inconsistency and failure to enforce procedures will drive costs skyward. Failure here is like throwing money away.

Room Service or is it Food Delivery?

By Kirby D. Payne, CHA

I admit I'm addicted to certain cartoons, including some serial ones. As a result I regularly turn to the cartoon pages of the daily paper. I couldn't help but get an extra chuckle when I saw "The Family Circus" by Bill Keane on October 24, 1997. I wish we could reprint it here but they wanted $150 for that, which is reasonable, but wouldn't let us use it on the internet version of this column (www.American-Hospitality.com) which is unreasonable.

The cartoon showed the kids looking out the door of their room into the hall of their house speaking to their mother. On the hall floor by the door was a scattered assortment of dishes, glassware and utensils. The kids were saying, "We were just playin' hotel."

We've all stayed at that hotel, haven't we? Getting room service picked up when the guest is finished is a challenge. In Hilton's and luxury resorts I've managed, I tried tent cards, calling back to the room after 45-60 minutes and other ideas with the goal of having the tray or table never pushed back into the hall. Every employee, particularly bellmen, security and housekeeping, has been trained to pick up room service, bring it to a service area, out of guest sight, and call the room service department. Bonuses have been offered and punishment meted out. In the end, one can still find a dinner room service table in a hall at 8am. They tell me the guest put it there when they got up in the morning and didn't answer the phone when they were called the evening before! Maybe so, but it still bothers me.

Why bother with room service? For full service and luxury hotels the answer is easy, it is a service people expect, enjoy and will pay for. Women travelling alone particularly appreciate it. Room service, like food and beverage service as a whole, can drive incremental departmental profit, attract more occupancy and help support a higher average daily rate for guest rooms.

Luxury hotels offer room service while most others offer food delivery. True room service can truly help make the guest feel special and the hotel seem luxurious and comfortable. Hot food hot and cold food cold, no condiments forgotten, the order correct the first time are just the beginning of room service. The crowning moments are the work of a caring professional server that presents the food, takes the covers off to display what is there, sets the table in the appointed place so the guest can dine in the comfort and security of their room. A good server can still sell dessert for delivery in a half hour when they may even remove the portions of the service the guest is finished with. This is service, this is hospitality.

It takes motivated and committed management training and motivating the hotel's staff. It, like all quality things in a hotel, takes effort and constant, constant monitoring. No room service in any mid-priced and better hotel should be any less than that. The difference between mid-priced, first class and luxury in this case should be the menu, the prices, the service setting, the servers uniform and the quality of the room furnishings. Within a range the quality of the service and what the server says and does should be recognizably from the same planet.

Where the challenge truly comes out is in limited feature hotels (aka limited service). The guest at a Holiday Inn Express or Hampton Inn who takes their deluxe complimentary breakfast back to their room is having self-room service! The guest in any hotel who orders in a pizza is contracting out room service for one reason for another. Choice Hotels International and other chains have worked with Pizza Hut to provide "Vrroom Service". Tent cards are placed in the guest rooms promoting the service. Local Pizza Hut restaurants pay a commission to Choice for the opportunity to be promoted in those guest rooms based on the volume of sales to the Choice affiliated hotels.

Many limited feature hotels have the menus for area restaurants available at the front desk or promote area restaurants in their guest directories. If the hotel has meeting space, these hotels have caterers lined up to serve functions.

One challenge hotels don't seem to be interested in is how to make money on these deliveries. Sure the front desk staff gets a free pizza once in a while, but that does nothing for the room attendant who has to clean up the occasional mess or the owner who has to pay extra to get a bed spread cleaned or a carpet replaced prematurely! Owners and managers must take the position the restaurant is being provided with marketing, additional seating capacity and bussing/cleaning services at no cost. While taking this position the, hotelier must be mindful that the restaurant has higher food service (delivery) expense. While this food service benefits the limited feature hotel by helping it compete with full service hotels, it is also benefiting the profits of the restaurant. If it doesn't, why would they do it.

Somewhere in this mix of needs and wants there is potential for additional income for the limited feature hotel. Why shouldn't this hotel make money off of room service just as its full service siblings do? The limited feature hotel's power to negotiate lies in the fact that its premises are private. The food delivery people don't have a constitutional right to bring food there without permission. In granting that permission, why can't the hotelier set standards and charge an access fee? Excessive demands can't be made but there is a deal to be made, particularly if the hotel promotes the authorized vendors more heavily and denies access to unauthorized vendors.

Imagine how much money could be realized in a busy 120 room hotel if just $1.00 were collected for each delivery along with an employee party once a year from each of the four largest vendors. While you're making the deal, set service standards that will help your guests feel special and your hotel look special. Make sure that the restaurant's delivery staff are dressed appropriately and cleanly. Make sure the delivery vehicle is well maintained from the inside and outside as your other guests will walk by the vehicle while it is in your entrance drive. The driver and the vehicle become part of your ambience so don't let them detract from your other efforts.

And just as a full service hotel, someone needs to monitor the hallway for discarded delivery items. Guests don't want to sleep with left-over food and its containers remaining in their guest rooms. Don't let this service bring down the appearance of the hotel for other guests.

And don't forget to inspect what you expect!

Hotel F&B: To Lease or Not to Lease?

By Kirby D. Payne, CHA

You hear it all the time, particularly from new hotel owners and operators: Food and beverage operations do not make a profit.
“Hotel F&B should be leased out” is the mantra I keep hearing. This philosophy, of course, begs a number of questions, the most obvious of which are these three:

• How will an F&B tenant make money if the “landlord” can’t—especially when the tenant is paying rent?
• Why would a heavily invested hotel owner want an inter-related business with different business goals (and, possibly, incompatible clientele) in the building—especially when the owner would have minimal control over that other business?
• Here is the really big question—What, exactly, is profit?

While some people claim that hotels should include F&B facilities because they can, in theory, be profitable, I believe the profit motive should be secondary. The way I see it, the primary role of an F&B facility is to enhance the potential revenues of a hotel’s Rooms Department, particularly in the case of convention and resort properties.

A good F&B operation, whether it’s hotel-operated or leased out, allows more marketing flexibility—and believe me, this helps sell rooms in off season or slow days of the week. The mere presence of an F&B operation allows a hotel to appeal to more market segments, thus giving it a broader, more secure income base. A hotel F&B operation should be conceptualized with three goals in mind: first, to maximize room revenue; second, to do that profitably; and third, to appeal to non-hotel patrons.

To ensure that these goals are reached, a hotel needs to follow up with the same kind of F&B marketing and management effort in which a lessee would invest.

Case in point

My company, HVS/American Hospitality Management, recently took on an assignment to do an operational overview of a mid-priced, full-service hotel. Generally speaking, this hotel is operated as a limited-service, mid-priced property with a leased F&B operation. The hotel is affiliated with a well-known national brand, it’s in a major metropolitan area and it’s managed quite competently. Following are excerpts from our report on the leased F&B operation, its problems, their impact on the hotel, and some changes that we felt should be implemented in order to minimize detriment to the hotel:

Our experiences in the restaurant, recently leased to a new operator, have been mediocre at best. On several occasions we noticed one gentlemen walking around dressed in a jacket—we assume he was either the manager or the lessee—while none of the employees were wearing uniforms. This creates the impression that the restaurant is a less-than-professional operation.

On one occasion we charged the bill to our room—and there was no attempt to verify that we had indeed registered or that we had credit available for a restaurant charge. Had we been cash-paying guests who had left a minimal deposit for telephone charges, we apparently would have been allowed to charge in the restaurant even though the hotel had no ability to capture the charge. This should never happen. The restaurant should be provided with a list of guests (and their room numbers) who have established credit at check-in; the list could be produced by the night auditor and updated for afternoon check-ins.

On one occasion, we mentioned to our server that the restaurant was extremely cold. She informed us that the restaurant was on the same system as the hotel and that the restaurant could not control the temperature. (The lobby was warm enough, so we are unsure of the validity of her statement.) Regardless, the restaurant was extremely uncomfortable—and remained so.

On two separate occasions, we observed kitchen staff talking on the phone near the parking-lot entrance to the hotel. They were wearing dirty kitchen uniforms, were loud and obviously were on lengthy calls—they clearly had planted themselves there because they had beverages and were sitting down. This should not be allowed. Brief calls (no longer than three minutes) can be permitted as long as they are unobtrusive and the employees are neat in appearance—which wasn’t the case in this instance.

Suggested Solutions

Our recommendations for improving this hotel’s F&B operation could well be applied to a great many leased hotel F&B operations that neither enhance the hotel’s image nor its bottom line.

It is crucial that a restaurant operation not detract from the rest of the hotel.

Guests and other restaurant patrons, understandably enough, believe that a hotel restaurant is run by the hotel—therefore, ownership and management should demand that the F&B lessee follow the property’s standards for behavior and appearance. Restaurant employees should wear uniforms (with footwear and accessory standards and with professionally done name tags that carry the hotel or restaurant’s logo), be well-groomed and be held to behavior standards that contribute to—rather than detract from—the hotel’s image.

Sometimes, the F&B tenant’s lease includes the right to use the landlord’s liquor license—thus, it would be the liquor-license owner and fee-simple owner who would be sued in a dram-shop liability action. With this is mind, the restaurant lessee should be required to conduct server training for all current and future employees on a regular basis and provide the landlord with documentation of that training. The documentation should include the course name, content and instructor, as well as the signature of every employee in attendance.

The lease payment for the restaurant space is often predicated on the tenant’s revenues. In order to maximize these revenues—and, in turn, the hotel’s income—some joint marketing efforts should occur. These might include:

• Distribution of restaurant discount coupons by the front-desk staff at check-in and with management’s compliments.
• Guestroom tent cards promoting the restaurant, its hours and room-service items that include fast-food items such as pizza.
• Hotel/restaurant package promotions during traditionally slow periods.
• Penetrating commercial business by including a hot, cooked-to-order breakfast in the room rate.
• Availability of professionally done menus for food-and-beverage service in meeting rooms.
• Inclusion of a restaurant representative in executive committee meetings.

The restaurant should not be viewed as a space to lease out in order to collect minimal rent and avoid the hassles of running an F&B operation. Rather, it must be developed as an asset that contributes to the overall profitability of the hotel enterprise. While F&B leasing is a common practice among limited-service operators, the full benefit of the restaurant’s presence will never be realized unless the two businesses are marketed together using a well-planned, positive strategy. However, most of these ideas incur expenses and the sharing of these costs must be determined by a determination of the extent to which each party benefits from the project. And, everyone needs to be fair and every month there would be a financial analysis of the allocation of these expenses. It can get complicated.

An Analysis of F&B and Hotels

Let’s go back to the first of the three questions I referred to at the top of this article: How will an F&B tenant make money if the “landlord” can’t—especially when the tenant is paying rent?

It’s my opinion that the tenant doesn’t have as much revenue potential as the owner simply because the tenant has no way to get the full potential out of the hotel’s marketing staff. For instance, how would the hotel’s sales staff be commissioned for the banquet business they book? Would the banquet commission also be based on rooms business associated with the event? Whose money—the hotel’s or the tenant’s—would be used to pay the commission?

On the expense side, efficiencies of scale are missing. Before the tenant pays the rent, for example, the tenant must pay the same expenses the owner would have had to pay (regardless of how those expenses might be allocated on the hotel’s financial statement), plus separate accounting, insurance, etc. Many items might cost substantially more because of the lesser purchasing power, some of which can be mitigated with a lessee with multiple locations. Labor-cost efficiencies also are lost: Why should hotel staff clean up a room-service spill in the hall or remove trays from a room?

The most common conflict between the two businesses lies in the area of banquet bookings. The leased F&B operator cares only about F&B revenues—and will book any event, any length of time in advance to maximize those revenues. Hotel management normally would hold back on booking banquets without associated rooms business—mainly to have that space available as an enticement to various forms of group rooms business that includes meeting and banquet needs. Clearly, there must be cut-offs, depending on business patterns, when the space is released for banquet business—but never to the detriment of a lucrative group booking. A hotel will earn far more in revenue from group-rooms business than from even the biggest wedding banquet—but an F&B lessee doesn’t think in those terms.

Similarly, an F&B lessee may well limit the extent of time for, say, room service to be available—the thinking being that room-service orders slow down between certain hours, so why stay open and waste those labor costs? From the hotel’s perspective, though, room-service availability even during normally slow hours—say, between 10 p.m. and 1 a.m.—is a marketing advantage that may lose money during those slow hours, but compensates by being a major marketing hook.

In short, if the F&B tenant’s targeted clientele and philosophy are incompatible with the hotel’s clientele and philosophy—and they often are—the arrangements either will be difficult to settle on to everyone’s satisfaction or the hotel will suffer.

Defining profit

Finally, let’s answer the “really big question” I referred to earlier: What, exactly, is profit? To a hotel owner, it’s cash-on-cash return. It doesn’t make any difference what department is or isn’t making money—that information is simply used as a tool to analyze ways to improve cash flow. An internally managed F&B operation might have a combined departmental profit of between 10 percent and 35 percent of F&B revenues. Some F&B expenses such as credit card commissions, accounting, marketing, and maintenance, for instance, are allocated to other departments, thus eroding the true departmental margin without actually depicting it on the P&L. On the other hand, there is no accurate way to measure how much additional room revenue—which, after all, is the crucial element in a hotel’s financial success—a well-managed F&B operation contributes.

Here’s my bottom line on this topic: In the abstract, I would recommend that hotel owners never give up even partial control of the hotel’s profit potential, and that they manage the entire hotel—including F&B facilities—with the goal of maximizing cash flow. Well-managed hotel F&B operations can make a profit, but even if they don’t, they can be an asset and a contributing factor in a hotel’s overall profitability—and that is more easily accomplished when the hotel’s management has complete control. However, there are circumstances, markets, and properties where there is substantial marketing benefit to be gained by the hotel from outsourcing the F&B operation to a very well-known local or national operator via a lease or management contract due to the immediate credibility and value of the brand name. However, if this route is pursued, it is critical that the operational and marketing issues addressed earlier in this article be unequivocally detailed in the contract to ensure that the owner derives a net benefit from the arrangement. Certainly, the owner would be giving up some of the profit potential from the F&B operation but there could be greater profit derived from the rooms and other areas of the operation and all that truly matters is the net from the property as a whole.

Increasing Food and Beverage Revenues in Hotels

by Kirby D. Payne, CHA

There are many reasons why hotel Food and Beverage profits are not what we would like them to be. Foremost among them is usually the fact that revenues are not as high as they might be. The lack of separate identity and entrances for outlets has a negative impact but for the most part hoteliers aren't the street fighting promoters our free standing restaurant counterparts are. This is quite understandable, after all why should we focus so heavily on Food and Beverage when for the time and money spent it will never be as profitable as the Rooms Division!

There are some subtle differences that make a lot of sense. Think about how you'd spend your finite promotional dollars if you had a choice between promoting the hotel in its entirety or just a profitable restaurant outlet. Clearly it makes more sense to advertise the hotel and its services or to have the sales staff either build commercial room demand or pursue group room bookings. These items have profit margins in excess of 75 - 80%.

A hotel's Food and Beverage department is an exception if profit exceeds 20%. In both cases as hoteliers must admit, administrative, marketing, maintenance and utilities expenses are not deductions from these margins. Unlike our restaurant counterparts who must bear all these expenses directly we shuffle them off as Unallocated Expenses. In the end it makes sense because most hotel Food and Beverage revenues are driven by the Rooms Department's level of activity and our buildings and operational structures are not such that some expenses can be isolated cost effectively. Can you imagine the time required to allocate the credit card commission expenses for Food and Beverage charged to the guest rooms from those having to do with the Telephone Department and room sales?

So what do I think the answer is to Food and Beverage profitability in a hotel environment? Increase hotel guest usage, increase hotel guest average checks, and increase outside patronage from the community. You say those things are obvious but do you have a mini-business plan for each of your Food and Beverage outlets? Does it address those items? Is it funded, are all the departments' employees involved and excited about it? Are the key players motivated with incentives to make the plans succeed?

Mini-business plan? You know, like the one you have for the hotel; revenue and expense goals in detail, staffing plan, capital budget, menu plan and outlet market plan. These are not all new things, everything but the menu plan and outlet market plan should be in your hotel's annual business plan, so preparing a mini-plan for each Food and Beverage outlet should not be a monumental task.

I refer to these plans as mini-plans because they can be three small lists: standard hotel procedures, one time promotions and advertising. Standard hotel procedures are simple things like having the reception staff mention the outlets to registering guests and having the bell staff mention that night's restaurant specials while the guest is a captive audience. Hyatt has a promotion titled something like, "The Winner is...". Its based on the envelope they open for the Academy Awards and is a small folded over card which the server opens and entitles the guest to anything from a 10% to 50% discount on dinner. These cards are handed out by the receptionist registering the guest.

Other standard items are elevator displays, in room promotions, and promotional cards given with restaurant and bar checks. Why not room service sales messages adjacent to the emergency telephones at the swimming pool? One hotel we work with in Denver promotes its seafood buffet with a tasteful fish- shaped card stock flyer hanging on the guest room shower heads for arriving guests. Nobody misses seeing it and reading it!

Standard hotel procedures must include services, attitudes and amenities that are very appealing to the hotel's guests. Services are kind of obvious but attitudes are a little tougher. Rather than exclusively hiring experienced servers look for people with a positive, cheerful outgoing attitude that either have experience or are trainable. A cheerful good attitude will over-come a lot of service and even quality problems, assuming they are short term! Your servers must enjoy their patrons, thank them for coming, ask them if they will be in tomorrow, how their room is, etc. In short they must care. It will help the food and Beverage outlets and the hotel in general.

Amenities are a more exciting and creative issue. Sure there should be an assortment of newspapers at breakfast and with room service. But what about a heated pot of coffee so that the patrons don't have to wait to be bothered by, "...more coffee?" every few minutes. Can you promote your restaurant or coffee shop as the area's power breakfast meeting place? Offer cut fruit with every order for the health conscious and thick slab bacon or what ever is locally popular for the heavy eaters. Why not free shoe shines as patrons leave and for people waiting for a table or for joiners? Dare to be different and work hard to find out what your hotel guests and surrounding community want. Who eats at Perkins and Bakers Square and why? What is so good and unique about them that can't be copied?

One time promotions are tried and true methods of attracting more business. Most people repeat the same ones year after year. Mothers' Day, Fathers' Day and the list goes on. Why not start some new traditions for your restaurant or bar that are annual if not monthly? This morning's paper mentioned monthly and weekly poetry readings at several Twin Cities bars and restaurants. It seemed like most of them were at slow times on slow days. Imagine free unique entertainment where the patrons entertain themselves and spend a little money! Are poets big drinkers? Anita Blatz at the Chart House in Lakeville is an expert at creating and executing promotions. She puts together big promotions around holidays or creates them out of thin air then goes out and gets others to either donate goods or services for the exposure or to buy booths and space from her. She is a hotelier that the restaurateurs stole from us. The only promotion she ever failed at was one I created to name a remodeled hotel restaurant! One of the keys to Anita's success is a source book she keeps so that she always knows sources for products and ideas, good and bad.

Advertising for food and beverage outlets ranges from the basics like the Yellow Pages and entertainment directories to such media as radio and television. Any media that can be obtained for free is good as long as one has some control over it. Trade outs are always a good idea. The best trade a Food and Beverage manager can arrange is rooms for advertising! Next to that, beverage for advertising is good if it can be obtained on some multiple like four advertising dollars for one beverage dollar. Doing joint promotions with media outlets is especially effective if one can obtain extra advertising unrelated to the promotion at a later time in order to stay in the audience's mind.

Never forget the power of good press releases. These should be done for all conventions, banquets, menu changes, new entertainment, etc. Invite the press in to try new menus and to witness promotions. Charities are good tie ins. In an Econo Lodge we manage we have a Charity of the Month where we donate 1% of the hotel's revenues to charity. For the past two months it has been the Shriners Hospital and for the next few months it will be various parts of the Athletic Department at the University of Minnesota. A similar program at a hotel restaurant will raise the outlet's profile in the community over time and accomplish worthwhile things. There are obviously direct benefits if the charity is selected wisely. Let me be candid, other charities need money, too, but they aren't next door to our hotel!

As a final point let me emphasize the value of employee involvement. They should be involved in brainstorming sessions to create ideas in every area affecting revenues and expense control. They know more about the customers and the operations than management and owners do. More importantly when they have bought into the promotional ideas they will be good at delivering the product and service to the patrons but also at going out and promoting it.

Significant long-term increases in Food and Beverage revenues can only be achieved with the staff's enthusiastic understanding and support. And that's not limited to Food and Beverage Division employees; Rooms Division employees may be the only employees to have any contact with your in-house guests during their stay if you don't get them into the outlets.

Thoughts on Buying & Selling Smaller Hotels

by Kirby D. Payne, CHA , May 2000

Virtually full disclosure and detailed analysis is what typically happens in a sales transaction involving a larger hotel particularly when a corporate or institutional type buyer is involved in the transaction. However, what if you are selling a smaller limited service property and the buyer is essentially an individual?

Here are some ideas:

• Why not just give the buyer ADR and Occupancy data for some previous period of time such as two to four years? Back it up with sales tax returns if the buyer insists on seeing something more substantial. Be prepared to explain in general the small discrepancies between the two pieces of information.
• Be upfront with potential buyers and make it clear you do not have the time or the interest in quibbling over the sales price of the hotel. Either ask them to give you an indication of what they are willing to pay or tell them the minimum you are willing to take (only slightly exaggerated) and be done with it. If you are not close why bother to go through the exercise?
• There is no rule or law that the full Profit & Loss Statement must be provided to the buyer. Let the buyer always think s/he can manage the hotel more efficiently than you can. Provide utility bills, real estate taxes, and insurance costs. Give them tours of the property but let them decide what their revenues and expenses might be under their management style. What about the argument, the lender will want to see it? Well what does the lender see in the way of history on an application for a new development deal? Not history, but the applicant’s pro-forma of how s/he believes they will operate the hotel. Obviously this strategy works best when the buyer has operating experience and established banking relationships. You do not have to provide Profit & Loss Statements.
• Don’t spend the money to fix things up because essentially the physical shortcomings are already reflected in the ADR and Occupancy and you won’t realize any additional sales price for them. When the buyer throws deferred maintenance issues at you as a way of trying too get the price down remind them you were achieving your revenues with those deficiencies and weren’t planning on fixing them even for yourself.

Don’t volunteer information that you know is not helpful to your position. Do volunteer information that is helpful. You have an obligation to be honest when asked a direct question but you do not need to expand on your answer. Instruct staff not to discuss any hotel issue, even “how was business last week”, with anyone. Have the General Manager and Engineer refer questions to you. Research the question with your staff and give a brief honest answer or tell the buyer you’d prefer if they had someone look at the item.

• Always take the position; you haven’t spent the necessary time to run the hotel to its full potential for whatever reason. It is all right for the buyer to believe they are a better operator than you might be. This isn’t about your ego and reputation it is about maximizing the sales price!
• Morning closings are nice because you have time to run late. The financial cut off does not need to be at midnight. Try this:
  1. Last night’s revenues to the seller;
  2. Today’s room cleaning and A shift at the front desk are the seller’s expense (you got the revenue);
  3. All other revenues and expenses on day of closing are the buyers; and
  4. The seller controls management until the closing is finalized. An employee meeting should be scheduled for early afternoon. Don’t make it a hardship on employees who are off and do not want to come in and do not cancel the meeting if the closing falls apart. Let the staff know what happened.
• Keep the staff appropriately informed at different levels. If staff members get nervous about job security and leave, you will be the one who suffers especially if the sale does not happen. Explain to the staff that no buyer has a vanload of room attendants or guest service agents waiting for his or her next acquisition. The reality is the higher up in management a person is the higher their risk of losing their job. The closer the person is to line level the more secure they are but they worry more! You owe it to your employees to keep their anxiety level down by being honest with them. When and if the hotel sells, do something nice for the staff as a way of saying thank you.
• In spite of the additional cost, your attorney should draft the purchase agreement. In this manner you control the details of the terms. You should use an attorney familiar with commercial real estate transactions, preferably one who is very experienced in hotel and motel transactions. Controlling the details of the transaction will ultimately result in significant savings.

Hotels are sold for a variety of reasons. As the seller you have a right to get as much for your hotel as you honestly and legally can. Don’t be bashful as it may make a difference of hundreds of thousands of dollars in the sales price.

A SALES TAX AUDIT!

By: Kirby D. Payne, CHA April, 1997

While aimed at U.S. resident readers,we recommend our Asian readers to learn teh substance of this - know the law of your country, be ready for some controls and audits, hire qualified persons to handle those issues.

I am a believer that the best kind of bad experience is second hand. This article is your opportunity to have a second hand bad experience and minimize your own potential problems with sales taxes. While this happened in Minnesota much of it applies to any state with sales taxes.

Upon receiving notification that, due to random selection, one of our hotels was being audited for state sales and use tax compliance, we worried, we planned and worried some more.

Not because we were hiding anything but simply because that is what one is supposed to do before a government audit! As the big day approached the auditor called and asked to a delay as he was running late on another audit. Good, more time to worry! At the last minute we had to ask for a delay because our CFO was ill and it was kindly granted. Maybe we shouldn't have asked. On the appointed day the auditor called in sick! More time to worry!

Finally it starts and after a few hours it becomes apparent that every invoice for the past three years will be looked at one at a time. Every room rental of a month or more where we didn't collect sales tax would be looked at. Every regular rental with a tax exempt certificate would be examined. If a transaction of any kind occurred, revenue and purchases, it would be looked at! Finally when it was over on about $5 million in transactions, we owed about $6,000 including interest! It could have been worse.

Use tax was one of the first things that came up. Use tax applies when you purchase tax- able items or services without paying sales tax to the vendor. The rate is identical to sales tax and in some cities there is a use tax in addition to the state use tax. The tax is based on the cost of the taxable purchase.

It is pretty obvious that you pay a use tax on items purchased anywhere and used in state for which the vendor didn't charge a sales tax. But did it occur to you to pay a use tax on items bought in other states where a lower sales tax than your state's was charged. Buy in one state with a 4% tax? Then in Minneapolis you'd have to remit 2.5% use tax to the state and 0.5% use tax to the city! There are other times but those are the biggies.

Sales tax must be charged on lodging furnished for periods of more than 30 days if there is no enforceable lease agreement with the guest for a specific room. The lease agreement must require that the lessor and lessee give prior notice of their intention to vacate. It must be a specific guest not a company who uses it for several different employees.

Other items for which hotels must show sales taxes separately on the folio or state specifically that they are included in the price include: in-room movies; copier (but not fax) services; food and liquor from an in-room courtesy bar; game (pinball, pool, jukebox, etc.) receipts; laundry or dry cleaning services (coin operated are not taxable); no-show charges; parking fees and car wash charges; popcorn prepared by the vendor; rental of equipment (primarily meeting room equipment if billed separately from non-taxable meeting room charges); rental of recreational equipment; telephone access charges, but not the actual cost of the service if shown separately; and a lot more things!

Here are some items which can be treated in unique ways. A telephone call accounting system doesn't show what the actual service costs. In this case charge a sales tax on the total and pay the sales tax shown on the phone bill from the vendor. The hotel is allowed to take an adjustment to the taxable amount reported on the sales tax return by the amount they are billed by the phone company for the actual costs of the guests' long distance calls. This can only be done if you can separate administrative calls from guest calls!

Some miscellaneous items. Whoever removes the coins from a machine is usually the one responsible for sales taxes. In a gift shop food, candy, soft drinks, clothing and health products may all be taxed at distinct rates. Gift certificates are not taxable and are treated as cash. The tax is charged when the recipient uses it. Items sold subject to the discount on a coupon are taxed at the discounted price unless you are being reimbursed for the amount by a third party. In Minnesota all equipment leased or purchased to provide lodging is taxable. If the vendor does not collect sales tax you must pay a use tax. Consumable supplies purchased by hotels are taxable. Food products are not, except for candy and soft drinks (containing less than 15% fruit juice - watch those labels) or food purchased from a caterer or restaurant! Please interpret that without calling me. Oh yes, if you are a restaurant some of those consumable items like place mats and paper napkins are not taxable. I'm not sure why toilet paper and tissues in hotels are treated differently for tax purposes, but they are! By the way the toilet paper would probably be exempt from sales tax both at time of purchase and sale if it were noted separately on the folio. Some states have been successful in convincing their legislatures that a hotel's consumable items are actually resold in a package rate (the room rate) but none has challenged their status in Minnesota although it would save us considerable sums.

Supplies for repair or redecorating are taxable if they are purchased without installation. So have the UPS delivery person slide those ACs right into that sleeve and save sales tax. Seriously, you may realize a savings buying items installed by the vendor or a contractor. On the other hand, postage and shipping charges separately stated on an invoice are not taxable. Handling charges, whatever that really is, are taxable! If your vendor calls the shipping charge "shipping and handling" even it really is just shipping, then that entire line item is taxable. As you can see none of this is easy to follow, let alone get vendors from various states to do properly for your state as their state laws may tax them differently.

Here are a few items for which no sales tax needs to be charged: missing or damaged items; coat check; meeting room or hall rental; valet service (I'm not sure how this is different from laundry and dry cleaning service which some hotels call valet service which is taxable); and rented space (such as restaurants, barber shop or car rental booths) except for the use of the equipment in it.

What about the exempt status of government agencies and non-profits? One of the items we didn't do as well in as we thought we should because we had worked on it so hard was tax exempt certificates from various charities and government agencies. Sure, we knew the federal government was only tax exempt when it was billed directly with a government credit card. Well, it isn't so simple. It is tax exempt if it is the I.M.P.A.C. Visa card. If it is a federal government Amex card its first four digits will be 3783. Now here is the trick - If the fifth digit is a 7 or 8 charge sales tax but if it is 9 do not. If the fifth digit is anything else I'm not sure what you do! And, try getting a hurried and harried Guest Service Agent to comply with these rules.

Sales billed to and paid directly by tribal governments are sales tax exempt. If someone tells you to bill the tribal government and then pays you with a personal check you probably must pay the sales tax out of your receipts. My interpretation of this is that if a management company is handling the tribe's money it is not sales tax exempt as the information states, "paid by tribal government", there is no reference to their agents. Of course if it is a local occupancy tax that the state does not handle, then the state doesn't care.

State and local governments of all kinds must pay sales taxes. Local governments are not required to pay local general sales taxes but may be required to pay other special restaurant, liquor or lodging taxes imposed by local governments. My theory is, if in doubt collect it and pay it to the state rather than get in trouble.

Lodging is taxable when sold to non-profit organizations and school districts or their personnel, even when billed directly to the school or non-profit organization. A Certificate Of Exempt Status, Form ST-17, cannot be used to purchase lodging exempt from sales tax. And, representatives of these organizations, thinking they are entitled to tax exemption will be very "forceful" with you staff.

Foreign Consular Officials receive special cards from the U.S. Department of State's Office of Foreign Missions. The cards have the diplomat's picture and other identification and clearly state on the back what exemptions they are to receive. Read those and if they qualify note the I.D. number of the folio.

Now just to make sure you're on top of this, here is the test question. If a hotel in Minneapolis buys supplies outside of Minneapolis, such as a hardware store in Hennepin or Ramsey Counties, what is the sales tax impact on the hotel? The hotel must keep track of all those purchases and remit 0.5% use tax to make up for the higher sales tax in Minneapolis! Keeping detailed records of these purchases is no small burden on a hotel. Trust me, the auditor found every 0.5% owing for three years! Another example is if the owner of the hotel visits New Hampshire which has no sales tax and buys a lovely decorative item for his hotel on his credit card, thereafter getting reimbursed by the hotel for this expense, the hotel must remit the 6.5% or 7.0% to the state.

So, what happened as a result of our audit? The auditor stated that their goal was more one of education rather than collection and punishment or, as he put it, it is a "kinder, gentler Revenue Department". While all our rentals for more than 30 days were audited and found to be lacking a satisfactory lease agreement, they offered us a deal. If we agreed not to appeal the amounts in the audit they would charge us sales tax for only three of the 36 months on those 30 day rentals. We agreed and they picked the highest ones! We were still ahead. In addition, of course, we were charged all the unpaid sales and use taxes on purchases that were found (no deal there) and they found them all because every single invoice we paid for three years was examined. We were charged interest but no penalties because it was apparent that there was no intent to defraud the state. Or as one of our office humorists said, "We were just stupid."

For more accurate information in Minnesota call 800-657-3777 and ask for Sales Tax Fact Sheet 141. Another excellent source of information regarding government regulations which impact the hotel and restaurant industry is the Minnesota Hotel & Lodging Association and Minnesota Restaurant Association. Both can be reached at 612-222-7401. The information, well laid out and prepared by General Manager Judy Hewes, is only available to members but it is worth the membership dues in savings alone! Please don't construe this article as legal or tax advice and in other states call your tax authorities for applicable details as many are different.

A Way To Account For Trade-Outs or Barters

By Kirby D. Payne, CHA

There is a common arrangement in the hotel business where the hotel receives goods and/or services in exchange for rooms, food, and/or beverages. Overwhelmingly, trade-out is used to purchase advertising. For this reason, and this article will discuss this arrangement, but the purchased product is irrelevant.

Important Trade Out Terms

Keep in mind the following points when doing trade-outs:

The hotel is still the buyer and the advertising source is still the vendor. The only difference is the method of payment for the advertising. Instead of money, you are paying with goods and services.

The contract should include the provision that the vendor is not to receive any portion of the rooms, food, or beverage until that amount of advertising has already been received. This is not barter; the hotel has purchased advertising and should not pay for anything it has not received.

There should be an expiration date for the validity of the trade out (usually six to nine months). Clearly, the shorter, the better.

The contract should exclude certain dates from availability, both for rooms, food, and beverage. Clearly, blackout all possible or close to sellout dates for rooms, among others. Also, exclude high traffic holidays from food and beverage such as Mothers Day, Valentine's Day, etc.

The contract should specify the exact dollar value for each room, food, and beverage which they will receive, each good and service itemized. In addition, it is important to consider not giving dollar for dollar exchanges.

Frequently $100 (retail price) of food is exchanged for $200 of advertising, particularly if it is food which is traded out.

Make Exchanges Equal

The Director of Sales, in conjunction with Accounting, should determine the actual cost of what the hotel is exchanging for the advertising as the required analysis into whether or not to execute this arrangement.

For instance, the cost of providing one room night with a rack rate of $100.00 is different than the cost of providing one dinner priced at $100.00. Faced with costs of 25% in the Rooms Department versus 85% in the Food Department, the actual cost of giving them away is dramatically different. This analysis should be done prior to the execution of the contract.

Always separate the proportion of rooms, food, and beverage being exchanged and allocate a cost to each.

It is best to look at the average of the prior three months' expenses in each department, bearing in mind the time of year in which the vendor will be consuming the services to adjust these costs appropriately.

After the contract has been executed, Accounting should be given a copy of the cost calculations attached to a copy of the contract.

Invoicing and Record-keeping

When Accounting receives an "invoice" for the advertising which has run, it is essential not to enter this into Accounts Payable.

Some vendors issue an actual invoice for the retail price of the advertising and those invoices can accidentally get entered into Accounts Payable. Because we have received the advertising, we have incurred a liability, but not a cash liability. The vendor is now free to consume rooms, food, or beverage according to the terms of the contract.

However, this liability does not belong in Accounts Payable and it is essential to keep all trade-out balances in a separate account which can be monitored separately from other payables.

Accounting should retrieve the contract from the files and determine the cost of the advertising which has been received on the basis of the proportion of rooms, food, and beverage in the arrangement. Assign a dollar amount of actual cost for the invoice to be written down to. The amount of advertising received must be determined either from the vendor or from the contract in order to assign the hotel's cost.

The first entry at the left illustrates how to enter the invoice easily and correctly.

Accounting

When the vendor has consumed the rooms, food or beverage, the vendor should sign for the services on the folio or check and it should be treated as other receivables. However, during the night audit or reconciliation process, this revenue and the settlement need to be adjusted off.

The steps for this depend upon your accounting system; that applies to the final entry necessary to complete this transaction, as illustrated in the second entry in the gray box.

Of course, the final entry depends on exactly what was consumed by the vendor in order to determine the allocation to the departments.

The foregoing entry provides both for the Accounting Department to ensure proper allocation and accounting of this transaction and for the relevant department incurring the actual cost of the advertising to be relieved of the costs and their impact on the departmental profit and percentages. If the departments are not receiving any revenue from these guests or patrons, they should be credited with the associated costs. This transaction is to reduce advertising expense and Sales & Marketing should incur the total cost of this transaction.

A final and very important point: consult with your Certified Public Accountant, lawyer or other competent professional before implementing any procedure like this. Tax laws change frequently and taxes, particularly sales taxes, may be impacted. Neither the author nor this publication assume any responsibility for the consequences of using these procedures and do not intend to set policies and/or procedures for individual properties or the hotel industry.

That said, trade away; it will help you leverage your dollars into more advertising or purchases of supplies.

Banks and Credit Companies as Hotel Owners

by Kirby D. Payne, CHA

One of the most unwilling and therefore unhappy hotel owners is a bank or credit company which has a hotel in its real estate owned (REO) portfolio, while it tries to work its way out of the problem loan.

Lenders in this situation have two primary goals. The lender's first goal is to stop loosing money. The easiest way to accomplish this goal is to quit putting money into the hotel. Their second goal is to put the hotel on the market and sell it as quickly as possible. These are not unreasonable goals. Whoever the lender may hire to act on its behalf as management will only keep its assignment and get additional assignments if these goals are understood.

The issue of putting additional money into the hotel may be a moot point if the business was not covering capital costs but was generating sufficient cash to pay real estate taxes and insurance . If there is insufficient business volume to cover normal operating expenses several issues need to be addressed. One is to reduce expenses from normal to painfully low without having a negative impact on income. Any idea which will produce additional income must be considered. Finally, the lender (owner in this case) must be asked for additional funds by means of a cash flow forecast and business plan. This effort assumes that the lender realizes a hotel sells quicker and for a higher price when it is operating as opposed to closed.

Reducing expenses to minimal levels takes a great deal of care. All business owners aspire to this goal, however, none intentionally try to go to the very edge and most try to keep a long term outlook.

For a lender there is no long term, only the time from when the hotel was acquired until it is sold. A hotel will sell more quickly and for a higher price if its physical appearance is good and sales are showing an upward trend. A sophisticated lender will work with management to find a balance regarding expenses.

It takes money to make money is a cliche which has merit. Coming up with ideas to increase sales in a hotel is not difficult. The difficulty lies in singling out a number of very cost effective ideas which the market will react to quickly. Lowering room rates usually does not work. Insuring fundamentals such as room cleanliness, employee training and attitudes, maintenance and the quality of guest supplies are competitive will go a long way towards maintaining the current customer base.

Once these things are done, consideration should be given to actually raising room rates and developing a more sophisticated pricing strategy. Making quality outside sales calls always results in improved sales. Nothing produces better results than going out, identifying potential sources of business, meeting their needs and subsequently asking for the business. Giving up a few dollars of income to increase the price value perception is usually worthwhile because often these hotels already suffer from a poor image. Free local phone calls appeals to commercial guests. Free breakfast appeals to all and may contribute to lowering losses if the hotel has a restaurant which is loosing money while trying to serve a full breakfast menu.

Helping the lender and their real estate agents sell the property is a key function of independent management. The role of hotel management in this case is to insure that the hotel shows well and is an extension of the subjects previously discussed. Working with the hotel's employees during this period to help them understand the situation and its potential impact on them ,usually very little, is critical. Another area where management can help is in pricing the property for sale and in developing a marketing strategy. If competent management is retained they should have an understanding of hotel values under a variety of circumstances. Additionally, they should know how to explain the hotel's potential better than the lender or the Realtor and they may be the most credible sales representative available.

Working together, assuming there are no lengthy legal delays, the lender and the management company can get the hotel off the lenders REO portfolio in a reasonable amount of time.

Fixed Expenses Aren't Really Fixed!

Kirby D. Payne, CHA

Somewhere on most hotel financial statements, usually towards the bottom, is a major heading called Fixed Expenses. I firmly believe that General Managers and Comptrollers created this title for two reasons. Either owners handled the items bundled in there or General Manger and Comptrollers didn't want to assume responsibility for the items they placed there.

Fixed Expenses usually includes items such as rent, real estate taxes, personal property taxes, building and contents insurance, interest expense, depreciation and amortization.

Other items which might appear there are equipment leases, cable TV and who knows what else occasionally. While not classified as fixed expenses, payroll taxes, unemployment insurance and other benefits - both those discretionary to the operation and those which are mandated by government regulation - are thought of as fixed expenses by many hoteliers.

I don't believe there is a fixed expense in a hotel. There are simply some expenses which take longer to reduce than others! Many of these are the same ones that can be controlled by planning and negotiation when the acquisition or development is planned.

General Managers and Comptrollers (management) should not divorce themselves from these issues any more than an owner would. One way an owner can enhance these key employees' interest in these expenses is to make their incentive pay tied to his or her real profitability. This is also t rue of management company incentive fees.

Real Estate Taxes

Management can help the owner in a number of ways with these different expenses in addition to increasing revenues to cover them. An an example, real estate taxes are usually considered outside of the control of management.

Real estate tax assessments, their calculations and their payment are a matter of public record. By research other hotels' tax rates at the county offices and understanding their calculations, management can begin to ascertain whether the taxes assessed their particular hotel are relatively fair or not.

If they appear to be unfairly high relative to the competition and the hotel's circumstances, management can, at a minimum, sit down with the tax assessor and discuss the issue. S/he will answer questions, ask for more information and possibly lower the taxes. In areas where there are personal property taxes, the system works much the same way.

If the taxes are apparently unfairly high and the assessor does not agree, management, with the owner's approval, can begin the appeals process. In a simple case, much of the work can be done by management. There are lawyers who specialize in this area of the law. They can be retained on a fee or contingency basis. Real estate taxes should be examined every three or four years, depending upon local circumstances.

Workers Compensation

Workers compensation insurance can be attacked from several directions. The most obvious is to in sure that all employees are properly classified because different classifications have difference insurance rates applied to them.

Next, management should insure that workers compensation insurance is being bought from the least expensive source available to a particular hotel.

Another factor affecting workers compensation insurance is a particular location's injury experience. Records of previous losses must be reviewed and action taken, either through staff training, physical changes in the hotel or in methods of accomplishing tasks.

Remember, even an injury sustained while walking out to their car can result in an accepted workers compensation claim. We had one workers compensation claim for an employee who tripped over a cat on the way to her car.

In Minnesota, the law and regulations promulgated based on that law have created a burdensome system. The limits are high, the definition of injuries, the time limits and the bureaucracy all contribute to one of the highest expenses in the Midwest. By lobbying together and making legislatures and the administration aware of the problem, management can contribute to reducing this expense.

Minimum Wage

Minimum wage is also a "fixed expense" by acting as a baseline for wages. At the state and national levels, one must participate in the process of government to affect change.

With both the Minnesota Legislature and the U.S. Congress, at President Clinton's insistence, contemplating increases, we must be doubly careful. Remember, when there are two different laws on the same subject, the one most beneficial to the employee, not the employer, is the one that applies.

Other than managing your labor force more efficiently, reducing staff and lowering service to your guests, the only control management has over this expense is through joining with others in the hospitality industry through our state and national hospitality associations.

Interest and Lease Expenses

Getting your interest and lease expenses reduced may be as difficult as reducing government-mandated expenses. Interest and lease expenses are negotiable at the time the agreements are entered into. Many times they can be reduced simply by asking at a later time.

The hammer management has is the lender/lessor knowing that you can go out and g get a new loan, buy out the lease or do business in the future with another lender or leasing company.

It is a difficult and time consuming task, but a worthwhile one. Given the recent increase in interest rates, deals made in the most recent few years may be as good as they can be for the foreseeable future.Work with your owner and network with your local banks. You should at least be able to g get their rooms, meeting and party business!

When considering new loans or leases, remember that the items or equipment you are purchasing are a separate transaction from the loan or lease. Just like soap and toilet paper are commodities, so is money. No lender or leasing company is doing you a favor by giving you access to money. You are a customer helping them reach a sales budget. Shop for the best deal. The leasing company suggested by the vendor m may not necessarily offer the best deal.

Insurance Cost Is Controllable

Insurance of all types is a completely controllable expense within certain limits. Deductibles, co-payments and proper valuation of the building and furniture, fixtures and equipment replacement cost are all components of the insurance premium. The hotel's loss record enters into the calculation also. Changes in any or all of these items will affect your premium cost.

Different insurance companies charge different rates for insuring hotels based on their loss experience and appetite for hotel insurance risk at a particular time.

Work with your in insurance agent to understand what and where s/he has been shopping for your insurance. Are the companies (agencies refer to insurance companies as "markets") your agency has been considering regular insurers of hotels? Ask your agent why s/he doesn't investigate other markets. Use two agencies and have the second agency shop other markets. Look for agencies which have several other hotel clients and experience handling hotel claims. If you have the financial stature to do so, give serious consideration to self-insurance.

Cable and satellite TV expense are also manageable. Reducing premium channels offerings is a quick way to reduce cable expense. Don't let cable companies fool you with their claims of regulations and community controlled tariffs. Usually those only apply to residential consumers.

Look into pay-per-view providers such as SpectraVision and satellite companies now so you will be prepared when the current cable contract expires. In many cases, pay-per-view can be layered on top of the cable system so the hotel can earn some offsetting revenues.

In summary, look at fixed expenses just as you would any other expense. You can often make a greater impact on the bottomline through these items than by reducing food cost and they are not as difficult to maintain.

The Cost of Capital and its Impact

By: Kirby D. Payne, CHA - July, 1997

Never having had enough capital to take advantage of all the various opportunities to grow that have presented themselves, I am very conscious of the cost of capital. The less you have, the costlier it is and the harder it is to get.

Capital for hotel ventures typically consists of two components, debt and equity. Their costs are the interest on the debt, the investors' expected return on equity and the cost of obtaining the capital itself. Some of the cost of raising capital can initially be folded back into the debt or equity but in the end it is paid for with additional interest or less profit distribution.

The cost of debt actually includes several different components. Among the possible components are mortgage origination fees, mortgage brokerage commissions, points, prepayment penalties (if one prepays later in order to obtain better terms from another source), legal fees (the borrower's and the lender's), appraisal fee, environmental study fee, and finally interest. The component with the most impact over time is interest.

Interest rates charged for commercial mortgages are impacted by a number of factors. These might include, but are not limited to, the term of the loan, whether the interest rate is variable or fixed, the basis on which the variable interest moves and the amount it can fluctuate in any one period, interest rates at the time the loan commitment is made, the actual source of the funds the lender will be using to make the mortgage loan and a lot of issues that are purely subjective..

These subjective items include the lender's perception of these items: the risk of the hotel project relative to the other loans that could be made; the ultimate value of the collateral; the financial stability of the borrowing entity and its principals; quality of management; and if the project "fits" in the lender's loan portfolio relative to the type of project it is. Where the lender stands relative to achieving their lending goals for the time period and the political strength of the particular person carrying the loan through the underwriting process are also major factors.

Aside from looking at debt coverage ratios and loan to value ratios the lender is going to consider all these other factors at some level. They will all ultimately affect the amount of the loan and the terms. Every aspect of the terms has a relative cost to the borrower.

For instance a lender may make the borrower escrow funds to complete certain required improvements in the hotel. Distribution of those funds will not be done until they receive all documentation that the improvements are completed, paid for and lien releases obtained. This means the borrower has to come up with the funds from other sources until the lender releases the funds. There is a cost to those additional funds, either additional interest or opportunity cost because they are not invested elsewhere.

If the escrow agreement is written so that the bank will pay for the improvements from the escrow fund as they are completed the borrower may not have to come up with as much extra money. The lender, however, is now assuming some risk that the projects will, in fact, be completed. For this to work efficiently for the lender, borrower and contractors, the escrow agreements and contracts for construction all have to be coordinated to all parties' satisfaction.

The cost of coordinating these items will show up as time, legal fees and probably higher prices from the contractor. The point here is that a hotel developer with sufficient capital does not have to do these things or bear these costs. This savings increases the return on the investment as compared to a developer with less capital.

If the lender perceives one borrower and his or her project to be less risky than another's they may grant more favorable terms in the loan in the form of slightly lower interest. On the surface the impact of this may not be significant but the reality is quite different. For instance on a $10,000,000 project with a $7,500,000 mortgage for 20 years the difference between an interest rate of 8.5% and 8.25% is $14,184 in principal and interest payments. If one disregards the tax implications of this and only evaluates the cash on cash return on equity the difference is just over a half a percentage point.

If the investors were going to receive an average cash on cash return on equity from operations of 19.65% with the 8.5% percent interest rate they will now receive one of 20.217%. Which developer will have the easier time raising equity capital? Among other things easier means less costly. And less costly also translates into even higher returns on equity.

While one doesn't usually think of equity as having a cost it does. In the simplest terms an individual investor has choices as to where s/he might invest. These alternatives all have different levels of expected return and risk. The higher the perceived risk the higher the expected return. If this investor could have invested in a government backed security and had a return of 6.0% without risk then their perceived cost is at least that amount. If they are going to take the risk of investing in something they know nothing about, have no control over and which has no liquidity they are going to have a much higher expectation for their investment return. The developer is probably going to have to forego some return until the investors' expectations are met. This is a cost of capital to the developer.

Another example might be when the developer is larger and decides to go to the public for the equity. Whether the approach is through a registered private placement memorandum or a small stock offering there will be significant legal, accounting and other fees associated with the fund raising project. Depending on the planned source of funds, the size of the fund raising has to be greater than a certain amount to justify these methods.

On the other hand a major publicly traded REIT (Real Estate Investment Trust) or C corporation has already gone to this expense. So much money, hundreds of millions or more, has been raised that the cost of the funds is relatively low relative to interest rates. Such a company will simply buy a hotel for cash from their cash reserves or credit lines in a very short process and if appropriate get a mortgage at their leisure on very favorable terms.

Because they were able to act quickly and pay all cash to the seller this buyer probably obtained much more favorable terms on the purchase. As a further point, because their cost of capital was so much lower their earnings expectations do not need to be as high as the smaller entity with the higher cost of capital. It is this relationship to the cost of capital that makes these companies appear to overpay for existing hotels as viewed from the smaller entities' perspective.

By driving up the price of existing hotels, these companies lower the achievable returns of the smaller companies when both are seeking the same types of hotels. This is one reason smaller companies seek out hotels to buy that the larger companies may not pursue for one reason or another.

The smaller company needs to deal with sellers who are patient and wait while the capital for the purchase is raised. The seller will wait because they have been unable to sell it to another buyer or because the price is higher. In either case the return will be lower or the risk is higher for the buyer. After all, why wouldn't anyone else buy the hotel?

In the end, the company with less capital cannot afford to make mistakes and has to maximize cash flow by being a very good hotel marketer and operator. The company with more capital and higher returns can, of course, afford to pay premium wages to its key executives and other staff.

The cost and availability of capital affects every aspect of competition in the hotel industry in very fundamental ways.

Graphing Help Visualize Data

by Kirby D. Payne, CHA

In the process of managing hotels there are a tremendous amount of data that owners and management need to analyze, interpret and act on. Graphing some of those data can ease the process.

Graphs present numerical information in a way that makes it easy to study and understand. They can be used to summarize information in order to convey a specific message to the user. The relationships that are clarified by a graph can also give fresh insight into the analysis of data.

Graphing is an effective way to analyze revenue components and market data in order to make yield management and marketing strategy decisions. Expenses and their relationships to revenue and units of sale can be easily graphed so that the facts can be more easily visualized by supervisors who are weak with apparently abstract numbers.

The following two graphs detail Average Daily Rate (ADR) and Occupancy (OCC%) over the last two years for a hotel we have been involved with since February 1995.

The ADR graph clearly shows months of May and beyond have been fairly flat and show only very modest movement over the years. January, however, is very interesting and shows wide fluctuation between 1995 and 1996 where ADR was $54.00 and $73.85 respectively. It should be carefully compared to the OCC% graph for the same periods. Note January 1995 and 1996 occupancies were 96.1% and 70.7%.

Now look at the Room Revenue graph (RRG$) which follows and note that the revenues for January 1995 and 1996 is almost equal. The revenue in 1995 was $164,121 and 1996 it was $165,094. As a result of this ADR strategy carrying through to February in 1996 revenues were up about $23,000 on the same occupancy as the year before.

As a sage pointed out to me many years ago, "ADR is profit - Occupancy is expense!" Clearly in 1996 the Rooms Department profit was higher than it was the previous year because less rooms were cleaned to achieve the same revenue.

The graphs also show a small occupancy peak each July and November. Neither of those months show a significant ADR increase. This would indicate that there are some ADR opportunities on peak days if they can be anticipated. An examination of daily and weekly occupancy, reservations and walk-in patterns would help implement a yield management plan which contribute to a revenue increase those two months.

The graphs also show the staff what the ADR and Occupancy goals are for 1996 relative to how the hotel did the previous year, 1996. By seeing that the increases are not drastic they can be motivated to work towards them because they appear achievable. Behind the front desk, where all our GSAs can see them, are bar graphs, like United Way thermometers, showing the staff how close they are to achieving that month's goals.

We also graph market penetration data and yield data so the General Managers of the hotels and our corporate staff can visualize the trends more clearly. An upward curve on a graph can engender very positive feelings.

Graphs of laundry, cleaning and guest supply usage or room attendant minutes per occupied room also serve a purpose. In the case of the supplies, when they are expensed directly, the graph will show when excessive amounts of supplies have been purchased in addition to expense trends. Excessive amounts means money is tied up in inventories that could be used for other purposes.

Caution needs to be taken when graphing items which may not fluctuate as anticipated. Administrative and General Expenses, for instance, include significant items that do not fluctuate with occupied rooms or revenues. Thus, graphing this item as a percentage of revenues or per available room would not be meaningful. It would only be meaningful if graphed in dollars and compared to previous years or budget.

It may be useful to graph some items as year to date by month. This would take out major monthly fluctuations while showing trends.

If you are not using spread sheets on a personal computer to analyze your operation I encourage you to do it. You'll be surprised at the insights it gives you, especially when the graphing features are used. Besides the analysis mentioned here they also assist in market planning, business and market plan presentations and loan applications.

Here is a list of a few different types of graphs and what you might use them for:

• Bar Graphs are good for depicting revenues compared to the same period the previous year or comparing things to budget when visual continuity from period to period the same year is not important.
• Line Graphs are most useful when the point of the graph is to demonstrate trends or when the amount of data makes a bar graph impractical.
• Area Graphs are good when you want to demonstrate both trends and the idea of an accumulation of volume or mass.
• Pie Graphs represent proportions very well. This might include the allocation of major expense items or market mix, for instance.
• There are about 15 additional types of graphs which are more technical in nature and one is unlikely to use them except in unusual circumstances. For instance a hi-low graph which is used to plot stock prices could be used to track ADRs for a special analysis.

Any book store will have books on the subject which will be helpful. Happy graphing and don't get addicted!

Let's Talk About Cost Controls

By Kirby D. Payne, CHA

Managing expenses is among the most important things a manager does. (I never say it is the most important because everyone knows, "Nothing happens until somebody sells something." But, it is close!) The most central elements of effective expense management are proactive rather than reactive.

The first step in expense management is budgeting, and zero-based budgeting is best. Sure, one can look at many historical expenses, anticipate what they are likely to be in the future and put that in the budget.

While that gets the budget done, it does not actually help manage the expense. One needs to look at the historical expense, analyze what its components are, decide how it can be improved and finally, implement those changes.

The cost of guest room cleaning supplies and laundry supplies do not consist solely of the purchase price.

The cost actually includes theft, loss, spillage, improper dilution and dispensing, and improper use. Improper use of laundry supplies might include running less than full loads in a washer or having it set for the wrong fabric. In the case of room cleaning supplies, it might include overuse of chemicals or not truly wearing out a sponge before it is discarded.

Clearly then, as part of the budgeting process, each component of an expense needs to be examined with an eye on how it can be reduced. In many cases, individual steps can be changed, while in other cases, it may be a common thread through an entire department. These may be attitudinal, process, training or physical layout issues.

In most cases, individual items, once they are identified, are easily correctable. One can simply rebid recommendations.

Process and training issues are sometimes more difficult and time consuming to identify and address. A good example of a process issue may be the number of minutes per occupied room it may take Room Attendants to clean rooms.

First, one needs to insure that they are measuring accurately and that the goal is achievable.

I know of a hotel manager that swears his room cleaning time is 35 minutes but the calculations all come out to just under 60. The problem was that they were including the time to clean extensive public spaces and wash banquet linen. Nothing else is included in the calculation. If we have a hotel which is spread out, very old or all-suite, we add several minutes to the standard.

The next step is to examine the process by which Room Attendants start their day, take breaks and finish their day along with how cleaning supplies and linen are stocked.

In a 150 room hotel (R) with 60% occupancy (O) with an average housekeeping wage of $5.00 (W) per hour plus 25% for mandatory and discretionary benefits (B) a minute of Room Attendant time per occupied room is worth $3,422 per year. (The formula is R x O x 365 x W x 1.B / 60). Clearly saving five or ten minutes can add up to a lot of money, so why not examine every step a Room Attendant makes?

Why not have the linen folded in the laundry so it fits on the carts without refolding? Why not have the supplies delivered directly to the carts while the Room Attendants are at lunch and again at the end of the day?

One person or a team can stock all the carts identically much more quickly than a group of individuals doing it their own way at their own way at their own pace, including returning for forgotten items after standing around chatting for a minute or two.

In many cases, supplies are being delivered to linen closets and shelved. Subsequently, the items have to be moved from the shelf to the cart. Let's eliminate a step.

When the Room Attendant finally gets to a room, every step should be carefully scripted and wasted motion eliminated. Why not dust the headboard, art work, bedside tables and lights while the bed spread is being adjusted around the pillows? Simply keep a dust rag in their pocket. Every step and motion should be examined with input from the Housekeeper and several of the hotel's best Room Attendants.

As the budget is developed, various plans evolve for every department from Front Office to Engineering.

If part of the budget assumptions are that the Average Daily Rate (ADR) is going to be in-creased by upselling and suggestive selling, then a training plan has to be created for the employees who will be making the sales effort.

If HVAC maintenance costs can be reduced by doing more of the work on this equipment by the hotel staff rather than contractors, then somebody either needs to be trained or additional staff hired and trained.

The important thing is that the budget must be detailed in its assumptions and in its implementation. If certain staffing assumptions are used for a restaurant, then the person doing the staff scheduling for that restaurant must be verified that those assumptions are being applied each week when the restaurant's schedule is prepared.

As a Resident Manager about 20 years ago, I worked for a General Manager who had an interesting system to insure that he did not go over budget on many items which were not inventoried.

He would simply keep track on a pad of paper how much he was spending during the month for each budget item as he purchased it. At the top of each column he recorded the budget for the month. He would never allow himself to spend more than 80% of budget until he was certain he was going to achieve the revenue goals associated with that expense.

Then, before he purchased any more he would double check to see if we still needed it at all. Usually, we didn't! Computerized accounting and inventory systems would now make this system easy.

Practices which can have a negative impact on expenses include standing orders and allowing sales people from food suppliers to have access to your store rooms.

Other expense areas that are generally overlooked are the ones management does not feel it can change easily and sometimes consider Fixed Expenses.

As an example, a hotel we manage in the Twin Cities area had four local metered trunks (about $0.11 a local call) and four long distance trunks (about $25.00). We simply had the L.D. trunks converted to local, thus eliminating a $100 a month expense and decreasing the likelihood of callers (in or out) getting a busy signal.

Other expenses, sometimes considered fixed by managers, are credit card agreements. Don't just consider the discount rate, but also chargeback and authorization fees. Review service contracts, insurance policies (coverage, deductibles and basis), bank charges, data processing expense, waste removal and anything having remotely to do with energy.

Review your real estate taxes and those of other area properties, particularly in the same county, each year. Look for openings where other properties' assessments were reduced.

In summary, when you are talking expense management, no detail should be considered too small.