PHOENIX—Cost-cutting continues to be crucial to owners in the fallout of the Great Recession.
At a Lodging Conference panel titled “Owners Talk About Operational Issues,” hotel owners discussed recession-driven ideas such as eliminating room service and daily housekeeping. The perennial issues of brand-owner conflict were also a topic of conversation.
Centralizing services is a key part of the process. “The general manager has no checkbook—only petty cash,” he said. “That way, he can spend more time on the floor and dealing with employees. Our GMs have glass doors on their offices so they can be accessible.”
Roedel, whose company owns a handful of hotels with 125 rooms or less, said, “We have little hotels and little problems.”
His company examines each “little” cost, which can mean big savings. “We look at it as though we were manufacturers and that we manufacture a room for one night,” he said.
Several owners saw the economic downturn as a way to rethink traditional hotel services. “We have just got to stop room service; everyone wants to get rid of it. At best, you are going to break even,” said Ken Wilson, CEO of Capital Hotel Management.
One owner went out on a limb in relation to food and beverage. “I would get rid of F&B responsibility in full-service (hotels),” said Jim O’Shaughnessy, senior VP of Cornerstone Real Estate Advisers. “Dealing with food is an art and science and leased restaurants are a better idea than hotel operators running restaurants.”
Wilson said operating is increasingly becoming about revenue management. Revenue managers, and they are now as important as sales and marketing managers. “Our revenue managers keep track of so many channels in an effort to maximize dollars from every single guest.”
Housekeeping was also viewed by owners as a potential money saver. O’Shaughnessy said new software that tracks employee patterns enables hotels to increase rooms serviced by a housekeeper from 12.5 to 13 a day, which, he said, “makes a big difference.”
Wilson said one of his hotels offered a US$50 discount on meals between 4 p.m. and 7 p.m. in exchange for guests not having their rooms cleaned. “The union complained,” Reynolds said, “and we had to back off. But it’s ridiculous to wash all the linens every night. It’s a waste of time and energy.”
New costs
William Reynolds, panel moderator and principal with Hospitality Capital Professionals, asked if new costs—like those that will emerge with health care reform—would encourage more limited-service hotels.
Wilson said there might be a wave of breaking up “big box” hotels into three limited-service brands—closing F&B and other public spaces. “It’s better to offer a free breakfast that costs us (US)$1.86 per guest than to have restaurants,” Wilson said.
Owners agreed brands relaxed standards to some extent during the recession, but meeting the requirements continue to be challenging. “We are always battling with brands over their requirements … they are overreaching,” O’Shaughnessy said.
One brand recently told his company to convert every tub in the property into a shower.
“There’s no ROI from that,” he said. “We have to be more creative in what we spend money on.”
“It’s easy for people who don’t have to sign for loans to tell us what to do,” Roedel said. “We would rather ask if a customer wants it.”
Looking ahead to a continuing recovery, Wilson said, “We will soon be needing to spend money on (capital expenditures) and salary increases, and will need to see rates go up by 20% to cover those expenses.”
“My attitude is that we should raise rate until someone screams,” Wilson said.
Asked about the wave of hotel “collections” like Marriott’s Autograph, owners expressed reservations. O’Shaughnessy saw Autograph as “a brilliant move by Marriott,” but said Autograph properties “would have an impact on nearby Marriott-branded hotels.”
And Wilson said his company tried to rebrand a Renaissance (a Marriott brand) as an Autograph “because it’s cheaper, but we were turned down.”