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Why Do Hotels Underperform?


When the market is normal all enterprises are expected to do well. If your enterprise is not doing well or under-performing, you have a reason to worry. But worrying will not help; it is an indication that somewhere something is drastically wrong within your system. The sooner you detect and fix it, the better it is for you, the hotel and its team. Here are a few from the many possible areas to look at.

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									Why Do Hotels


Worried about the performance of your
Every tried to analyze the causes for your
hotel to perform below the market
benchmarks in an otherwise well performing

We discuss here the possible reasons and
causes that could be the culprits for your
hotels under performance and your worry. It
is well understood that you invested in the
venture as a pure business proposition,
expecting returns that are at least at par with
the market, if that is not happening it is the
first symptom of the presence of system
malignancy. The sooner you cure or remove
it the better it is for you, the hotel and its
team. I have found one or many of the
following reasons that may have attributed
to this stage of performance.
You and Your Team

Analyze if you are the right person to lead
the management or operating team. No
doubt you are the owner, but do you have
the knowledge or experience of operating a
hotel in today’s competitive environment.
Remember that as an investor you have a
much larger role and different role in the
organization. Is your team qualified and
experienced to support the demands of hotel
operations and marketing, its guests and the
market? While doing so one would be well
served to keep the head and the heart at a
distance and to take a very impassionate
view to remove all emotional and personal
There are only two possibilities, a “Yes” or
a “No”, and you would know what to do in
either case if you do not wish to bleed any
further. ACT! Make whatever changes that
the situation demands. Now here is a word
of advice. Take the help from a profession
consultant before you start trimming and
sifting the team. While it just takes a second
to fire someone, it takes tremendous amount
of time and effort to find a replacement and
to make him or her part of the team.

Your Product and Services

For every owner or team leader, there is no
product like his. The best in the market, no
one can compete with my product, we
command the premium are some of the
terms that one generally hears. But stop for a
moment; think what the guests think about
your hotel, its food, its services and its staff.
Are they happy or are they coming to you as
a last resort. An indication of this would be
your number of walk-ins. If the walk in
percentage is high, that reflects that you
were the last choice or that people know that
they can get a room at your place in any
case. I have come across many General
Managers who are very proud of the fact
that they get over 50% of their occupancy
through walk-ins, totally unaware of the fact
that walk-ins are not stable customers.
Remember that there is no substitute to
sending back a happy and satisfied guest so
that he becomes your spokes person,
promoting you. This requires a well kept
product supported by implacable quality
service delivered by well trained and
groomed staff. Absence of this would spell
disaster for the performance of the hotel.

Your Systems

An excellent product, led by an able and
result oriented leader can do nothing in the
absence of a proven hotel management
system in place. I have felt very sorry for
owners who spend millions on the hotel
project but feel shy to spend money to buy
the best suited operating system for the
hotel. This results in a number of things. The
operations become a free for all game. Each
department carves out its own operating
system and style creating a total mess. You
get operating results in form and style that is
not comparable with the industry norms
making it virtually impossible to compare
the performance with that of your
competitive set. In fact I have even seen
month end reports that hide more than what
they reveal, yet the ownership gets the report
that has over fifty odd pages, instead of a
simple and meaningful top sheet.

Your                            Goals,
Targets                         and

A very                          important
aspect for the hotel to underperform is the
absence of targets for each operating area or
having unrealistic targets. In such case, the
team and leadership feel directionless. It is a
fact that if one does not know what he is
supposed to deliver, whatever he delivers is
right. The question is if that is right for the
business or the hotel? I have recently come
across a case study where the General
Manager did not believe in the term
“Budgets” or “Business Plan”. The results,
though shocking, were not surprising. A
brand new hotel was bleeding month after
month. I hope, wish and prey that you and
your hotel follows a well planned budget
system where targets are set after taking
market realities.

Your Marketing

Do you have a qualified and experienced
marketing and sales team? Do you have a
solid and interactive online presence? Are
you hooked to the popular GDS systems and
does your local sales team cover the market
in a way that the presence of your hotel is
felt in the market? These are some important
factors that one must think over to ensure
that your hotel performs to the expected
levels of performance and that your hotel
gets a major market share and command a
leadership position in its segment in the
location and city.

We have discussed a few important factors
that need attention to ensure that your hotel
does not underperform. It must be
remembered that we are dealing with a
product that is highly susceptible to fashion
and trends, moods and attitudes and above
all highly perishable in nature. If the
leadership and the team are not reactive to
the market dynamics, guest’s preferences
and state of the art technology,
underperformance should be staring in your
face, don’t get surprised or shocked. You
have asked for it!

Ram Gupta is a professional hotelier with over four decades of experience in
India, Far East, Middle East and Europe. He has completed his hotel management
studies from The Institute of Hotel Management Catering & Nutrition, Pusa, New
Delhi and has done higher studies from Germany. A Member of Institute of
Hospitality, U.K., he is also a Certified Hotel Administrator from U.S.A. He has
worked for some of the best hotel chains and was associated with over two dozen
hotel projects in varying capacities. He has served on a number of trade bodies
and boards of various companies. He is now an independent consultant in the
Industry. His web site can be viewed at www.bcgglobal.com and can be contacted
at ramgupta@bcgglobal.com


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