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.