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January 25, 2017, In Fairmas Blog

Are you ready for the future? – Strategies and instruments for hoteliers

”May you live in interesting times”. Seldom before has this old adage been as relevant as today. For some, it is almost a curse, as ‘interesting times’ brought constant change and development; and for decades now, the once effective tools and processes are no longer able to provide the expected results. Given this, one of the biggest challenges that hoteliers face today is how to cope with the ever-changing environment of the business.

How forward-looking is your style of management?

The traditional way of looking back into the past in order to foresee the future is no longer enough. In times of globalization, some economic conditions dramatically change so quickly that it hardly helps to just look at historical periods and old, proven solutions. Proactive hotel management requires detailed forecasts for revenues and cost development more than ever. Future-oriented planning forms the basis for revenue enhancement and cost optimization.

The compilation of an operational budget for every company department is a vital cornerstone for forward-looking management. However, fast-changing conditions in particular do call for short-term course corrections. It is not enough to simply draw up an annual budget. Regular forecasts and a monthly comparison with the actual figures are equally important tools if you want to manage proactively. This way, it will become clear if your actions have been successful, know where opportunities abound identify risks that lurk in everyday operations.

How does it work?

The first step in the regular forecasting process is to create a revenue forecast. Active revenue management offers not just the opportunities to increase revenues by adjusting the price and occupancy strategy. Dynamic channel management and changes in the channel mix also have a direct influence on your distribution costs, and therefore on profitability. At the same time, it is always necessary to keep an eye on the market and the direct competitors in revenue management; benchmarking and rate shopping are the instruments of choice.

The next step is to optimize costs. A large part of the costs involved in the hospitality industry are directly or indirectly dependent on your revenues. Regular forecasts put you in a position to act before any problems occur. This applies especially to personnel costs. If a period of low revenue growth can be foreseen, measures will need to be taken in good time. Adjustments in work scheduling and vacation planning, as well as the review of possible recruitments or dismissals are the proven instruments in the area of staff costs. Changing the investment planning is another component of the cost optimization. The decision to make or defer investments often becomes obvious when regular forecasts are employed.

A third step is active cash flow planning, based on forecasting revenues and costs. Through forward planning, your incomes and expenses, as well as any possible bottlenecks in liquidity can be identified and countermeasures can be taken in advance. ”Flow through” analysis may be another approach. In other words, you can identify which percentage of your revenues is converted into profit and how this ratio will develop in the future.

How does all this affect everyday business?

The compilation of regular forecasts need not be expensive. The question of whether the importance of cyclical forecasts is recognized and implemented is rather a question of management philosophy and the self-perception of the hotelier. In this context, software applications enormously simplify the processes and reduce time-consuming manual work.