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Strategies for Turning Around a Sinking Hotel

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					Strategies for
Turning
Around a Sinking Hotel

BY: RAM GUPTA




More than anything else, the
recent economic crises has left
many industries crippled.

Hospitality is no exception.
With companies tightening their
purses, corporate travel has
suffered a major reduction. The
scenario on leisure travel is
worst since the spendable
surplus income with individuals
has shrunk drastically. Luxury
has taken a back seat in
individual and family lives. The
buzz word seems to be savings
and hedging your capital as
much as you can.

The overall negative
environment has left many
independent as well as branded
hotels in red. Unable to pay
their debt or even meet their
daily expenses, the hotels are
desperately looking for expert
consultants and advisors to help
them remain afloat. The
situation is really grim for those
who have already slipped down
the line.

Here are a few tips that you
could follow to make a
turnaround for your hotel.
While these tips have helped
many, you have to evaluate
them to find which of these will
be applicable to your
operations. Since the
profitability of the hotel is
dependent on factors
influencing sales and costs,
these strategies are mainly
directed towards efficiencies in
these two areas.
Revenue Improvement
and Customer Retention
Needless to say that the sales
in a hotel is generated when a
guest checks in, when people
visit the restaurants, when
conferences and events take
place, when your health club
gets membership and so on. The
final thing being that when you
get foot falls in the hotel your
cash machine gets active. The
biggest issue therefore is to find
how to get customers and get an
ever increasing number of them.

The first thing that attracts
your customers to you is your
brand image in the local and
destination market. Hotels have
to spend money and efforts to
create a positive brand image in
the market. For an effective
turnaround strategy the hotel
has to focus its efforts to
establish an image that is not
only positive but also better and
preferred than that of a
competitive hotel.

In creating its brand image,
today the hotel can not only use
the conventional methods but
also include the latest
technological tools which are
not only more effective but also
have a very vast reach, very
fast.

It is a known fact that hotel
prices get revised each year to
meet the cost escalation due to
inflationary pressures on the
material costs. In other words, it
also means that the hotel
becomes out of reach for those
who cannot afford it due to their
budget constraints. It is
therefore important that the
hotel adds on new customers to
its user list to make good this
loss. It is like a pyramid. If the
height of the peak increases,
you have to add balancing
width to the base to maintain
the equilibrium. In a slowing
economy however, this effort
assumes far greater importance
as both the height and the base
of the pyramid shrink due to
extraneous factors over which
the hotel has no control. The
marketing team has to come out
with such innovative ideas,
schemes and packages that will
in the first instance insulate the
hotel clientele from getting
influenced with these factors
but in the ultimate analysis,
ensure a continuous growth in
the capacity utilization.

The above can be successfully
achieved by hotel if it utilizes
the various marketing tools
available to it including but not
limited to competitive offers,
packages, on line marketing,
loyalty schemes, special events
and many more.
Cost Rationalization
The most important aspect of
operating economies in distress
times is absolute control over its
operating costs. If a hotel allows
the costs to slip, the bottom line
will also slip away. The issue
that most hotels and especially,
the independent hotels face is
the quality of their MIS. You
can control your costs only if
you know what your actual
costs are and how do they
compare with the industry norm
or with your competitive set
hotels. If you management
information system does not
generate true numbers, you
would fail in your cost control
efforts.



Let us assume that you have a
perfect system. You have your
month end report with you. For
effective cost control my advice
to my industry colleagues is to
go line by line, check each cost,
and check its behavior over
months in absolute as well as
percentage to sales terms. Look
for any abnormal increase or
even decrease; analyze the
reasons for variances unless you
are totally satisfied with the
numbers.
Ultimately it all boils down to
a simple equation and that is
that Profits equal to revenue
minus costs. Have a control
              over these two
              factors and you will
              be able to chalk out
              a turnaround
              strategy for your
hotel. From the point of view of
pure financial survival, factors
influencing sales and cost
economies play the most
important in the revival of a
financially sinking enterprise,
the importance of people,
product quality and delivery of
top rate service cannot be
ignored. All have to go hand in
hand.



While everyone can boost of
operating a hotel profitably in
normal market environment
only those with proven
management skills, strong
determination and complete
dedication can turn a distressed
hotel into a profitable venture.
Ram Gupta is a professional hotelier with over
four decades of experience in India, Far East,
Middle East and Europe. 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



        http://www.bcgglobal.com
        OCTOBER, 2012 © BUSINESS CONSULTING GROUP GLOBAL

				
DOCUMENT INFO
Description: While economic slowdown has generally brought gloom over the business environment, it has also bestowed an opportunity for those who know their job and know how to carve out a successful turnabout strategy in times of distress. In these testing times only the fittest will survive. Here are a few tips on how to remain afloat.