Reducing hotel operating costs is one of the hardest challenges for hotel managers worldwide. Why it’s hard is because when you cut down in one area, you tend to make sacrifices in another, and it’s usually quality that falls by the wayside. One thing for sure is that when quality drops, guests are not happy, and sometimes they take their dissatisfaction further by expressing their views on TripAdvisor.
In the end, what started out as one challenge to reduce hotel operating costs suddenly becomes two challenges: 1) reducing costs; 2) maintaining quality.
To solve this problem, I will show you how you can achieve lower hotel operating costs without cutting corners on quality.
Technology Can Help
There is a lot of technology around that can help hotels operate more efficiently. This includes both software and hardware solutions such as property management systems, channel management systems, mobile hospitality apps, electric door locks, and so on. You name it, someone will be offering it. With these innovations, you can rely on their capacity to automate your processes, reducing your workload and saving time. You can also hire fewer staff when the workload is reduced by such technology.
I will give you an example of how hotels can reduce costs using technology. Ping Nakara Hotel in Chiang Mai, Thailand, has practiced this concept and the results are very impressive. They use a property management system to handle general management tasks such as organizing reservations, rooms, housekeeping, front desk, etc. The most obvious benefit from using the system is that the hotel now requires fewer staff than before the system was installed. The staff are also now much more productive as tasks can be completed in less time. Boring, repetitive tasks can be completely eliminated where the system can auto complete the work.
Technology is what we humans have always developed and used in order to make things easier and faster. It works, so why not let your business do the same?
Eliminate Ineffective Marketing Practices
Unfortunately, what used to work today may fail you tomorrow. This also goes for marketing. Marketing is an evolving concept, so its results need to be evaluated from time to time. If things are good, you can keep on doing what you’re doing, but if they’re not, it’s time to change your marketing practices.
For example, in the past, printed hotel directories used to deliver guests to stay at your hotel. Today, the OTAs like Booking.com or Expedia dominate the market when guests search for a hotel. No one uses printed directories anymore. If you’re still spending part of your marketing budget on outdated marketing ideas like this, you need to re-think, and change your approach. Don’t waste your money. Turn your attention to something that’s more effective like online marketing, social media marketing, or even content marketing.
Hospitality suppliers are plentiful today. You can choose the cheapest to go with. They compete by offering the same quality at a cheaper price. This is therefore one way to reduce your hotel costs. Smaller brands are often willing to negotiate with you as they want your order. Choosing a well-known brand may be safe but why not give someone else a try when you can save some money.
A lot of goods, if you track down their origin, may come from the same source, from the same manufacturer. Only the brand label is different. For this reason I think hotels shouldn’t be overly loyal to one particular brand. If another brand offers a lower price for the same quality, there’s no reason why you shouldn’t choose that brand. You can work with your purchasing team by giving them the specifications for your desired supplies, and let them review suppliers constantly to make sure they’re always buying at the lowest possible price.
All in all, this is a strategy that focuses on purchasing at the lowest possible price without worrying too much about the brand name of the supplier. In order for this strategy to work, all your supplier candidates must offer the same quality. The strategy ignores any long term relationships you may have established with your suppliers. The focus is solely on lowering your costs as much as possible. That’s it.
Lay Off Poorly Performing Staff
Ask yourself, why should you keep poorly performing staff? Get rid of them as soon as you identify the problem; don’t let them hang around. The longer they stay, the longer your hotel suffers.
First, however, we need to define exactly how poor the performance actually is. One way to do this is by using Key Performance Indicators, or KPIs. Each staff member is given goals to pursue. Their performance will then be measured quantitatively. For example, if your employees are sales officers, they will be measured in terms of the sales generated for your hotel. If they fall short, it’s better to replace them with staff who can achieve the targets.
Failing to remove an underperforming staff member will not only hurt your hotel’s performance while they are still working for you, but you’ll also miss out on the chance to hire a more talented replacement. Using KPIs you can more easily spot the poor performers. You can then start by removing the weakest in the set because letting them go will hurt your hotel’s performance the least in the short term. Once you do that, you may find that you might not actually need them at all as your hotel operations can still run well without them. At the same time, you can reduce overall staff wages resulting in a more attractive bottom line. You have the choice of whether to replace staff immediately, or to wait before hiring someone only if the vacancy starts to hurt the hotel’s performance.
Cost saving has always been a great business concern. It’s therefore one of the first things to look at if you want to maximize your hotel’s profits. Putting these ideas into practice will help you to lower the operating costs of your hotel without having to make sacrifices in quality.
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