9 Ways to Optimize Hotel Operations and Cut Costs

Today’s hotel environment may be the most challenging ever – growing room inventory and increasing numbers of digital tools for guests to save money often result in shrinking margins.

OpenKey-Blog-9WaysToOptimizeHotel

However, there are measures hotels can take to optimize their operations and workforce in order to reduce costs. From improved labor strategies to smarter purchasing decisions to outside consultation, hotels are finding ways to increase their margins. We’ve detailed nine areas hoteliers can consider exploring.

 

Front Desk Labor

Smartphone technology can bring efficiency before and during guest check-in. Eliminate the front desk’s need to handle and program keycards by offering guests mobile key entry with a solution like OpenKey, the leader in this technology. While removing the use of physical keys alone can reduce check-in times and staffing requirements, there are other advantages as well.

OpenKey’s mobile check-in/out and guest communication will further reduce front desk traffic and staffing needs while increasing levels of customer service. When guests don’t have the need to stop by the front desk, the staff has a reduced workload. Hotels that utilize mobile check-in and mobile key will potentially need less front desk staff.

While it’s easy to see how technologies like OpenKey’s can increase front-desk efficiency and staffing costs, they also have a great impact on the guest experience, as 55% of guests prefer to use their phones to check-in and over 60% prefer to use mobile key. This can give your front desk team more time to spend on guest satisfaction and less on busy work.

 

Cross-Training

Another method to drive efficiency, cross-training allows the hotel flexibility to leverage other department staff to temporarily assist at the front desk during peak times without adding dedicated front desk staff overhead. Or if everyone in housekeeping is busy, employees from other departments can fulfill simple requests from guests until the peak demand on housekeeping has passed. Forbes wrote that cross-training can also benefit hotels by providing:

  • A more versatile staff
  • Trained replacements for employees who leave
  • Promotion tracks for employees
  • A broader perspective of your organization to employees

 

Housekeeping Labor

It’s surprising how little effort it takes hotels to streamline their housekeeping operations. With some data and a scalable workforce, you can adapt to the changes in your occupancy and cash flow.

Try these ideas:

  • Establish precise MPR (Minutes per Room) standards for both light cleanings for stayover rooms and full cleans for check-out rooms
  • Monitor each housekeeper’s performance compared to the appropriate MPR
  • Consider outsourcing this department to a housekeeping service provider if feasible for your hotel’s size

Once those benchmarks are set, it’s a matter of simple arithmetic. For example, for a day with only five check-outs and an MPR of 30, then 2.5 hours of housekeeper time should be allocated for that particular function. Then repeat the formula for your other needs of that day – whether stayover rooms, any deep-cleaning or common areas needs – to total the hours and set the schedule.

Of course, the other key is to have the workforce that can adapt to your changing housekeeping needs and reduce fixed costs when cash flows are down. Again, contracting a housekeeping service provider may be the best solution for your hotel.

 

Operations and Maintenance

Growth in the number of operations and maintenance vendors has made this a buyer’s market. Use that leverage to negotiate contracts to your favor. Remember that it’s more profitable for your current suppliers to keep your business. It may be more advantageous for both of you to negotiate a new contract that is more favorable to you than your current agreement, saving you hundreds every month. And long-term agreements can both even-out your expenses and give you more bargaining power.

The lowest-price repair source may not ultimately be the most affordable solution. Make sure to factor in the reputation of your vendors, whether they were referred and by whom, vendor reviews, how long they’ve been in business, and whether their certifications are current.

Once the right vendors are identified, be sure you’re purchasing to your advantage. Buying in bulk can increase margin by lowering per-unit cost. Items like soap, shampoo, and conditioner are ideal for tasteful bulk dispensing in guest rooms. Using bulk dispensers can save your hotel an estimated $.60 per room per day on average. What’s more, they mean less packaging waste – better for the environment and less trash for your staff to deal with.

Preventative maintenance is crucial to sustaining both equipment and a hotel’s bottom line. Hotel Effectiveness asserts that an air filter in service for more than four months lowers HVAC efficiency, a tremendous cost consideration, by as much as 10%. In addition, an unclean air filter also shortens a system’s life, meaning greater expenses from more frequent replacements.

 

Staffing Strategies

HotelManagement.net reminds us that labor costs are a hotel’s largest single operating expense. Which should be expected for a business that operates every hour of every day.

So having an excellent workforce is imperative. If you have the resources to train new staff, you can hire for intelligence and ambition and forego experience. All in all, this may be the most cost-effective strategy and have the added benefit of a staff that is trained to work exactly the way you prefer.

Also, consider a labor management system (LMS). The Hotel Effectiveness program can provide modules to help you schedule while monitoring employee hours, absenteeism and more to control labor costs. They report that hotels with 25 employees using their LMS typically save more than $20,000 a year; larger hotels of 100+ employees can save more than $80,000 a year.

Guest amenities may be another drain on your hotel’s profits. Do you have shops, salons, restaurants, etc. with operating costs that don’t generate sufficient margins? Contracting with outside operators may be your best solution – your guests can take advantage of those comforts while your hotel enjoys greater profits and fewer staffing and operations issues.

 

Marketing Budget

While the internet has given consumers advantages in bargaining for the best room prices, it has also enabled powerful tools for hotel marketing that are low- or no-cost. Deputize your savvy employees to create content to spread your reputation across social media – Instagram, Facebook, Snapchat, Twitter and more. Your front desk staff may be your best personnel to undertake this task when they are not busy with guests.

Not only can you make your target market aware of what your hotel offers, but you can also deepen their relationships with your property by engaging them in conversation. Other than the payroll cost for the time you devote to presenting content in your social media channels, there’s no expense. See what you can apply from the successful internet campaigns these hotels have used.

Reconsider what you spend in traditional media in light of the options that social media and organic internet search present to you and see how you can employ them to build a following – and an increasing guest count – for your hotel. Consider the internet a free, powerful megaphone for word of mouth, the best kind of advertising.

 

Food & Beverage

F&B can be equally blessing and curse. Guests expect it but it rarely adds to a hotel’s profit. Indeed, Larry Trabulsi, SVP at CHMWarnick, says, “When managing expenses, we usually start out looking at the F&B offerings a hotel has … Over the last couple of years we have spent a fair amount of time making sure these offerings match what customers want. They want more grab-and-go and less traditional dining.”

What’s more, Trabulsi asserts, “Hotels need to consider revising roomservice policies or finding methods of combining these services with other outlets because they remain a drain on resources.”

Michelle Russo, founder and CEO of HotelAVE, also questions unprofitable F&B operations that modify menus by season. While they appeal to chefs, that may not be true of hotel guests, and the unordered food goes to waste. Russo suggests focusing on ingredients with wider menu applications: “Chicken has many uses in a kitchen. Porcini mushrooms, not so much.”

Trabulsi adds that the cost of each meal should be totaled and evaluated for its profit. Observing how much restaurant patrons leave of any given meal on their plates can indicate changes in portion size, unless there’s a food quality problem. Perhaps some items should be completely eliminated; “Quality over quantity is always preferable,” he says.

He suggest that the same scrutiny should be applied to liquor. “Getting the right pour [sizes] is big. In boutique and lifestyle hotels where F&B is a main driver, savings there can be meaningful.”

 

Tax Breaks and Rebates

Trabulsi points out other benefits for which hotels may qualify after undergoing remodeling or changes in operations– tax savings and utilities rebates. “Look into utilities rebates,” Trabulsi said. “They are the largest rebates in terms of moving the needle. In a big hotel they can be substantial, sometimes as much as $40,000 to $50,000.”

 

Watching the Bottom Line May Take Another Set Of Eyes.

In summary, constant vigilance is required for profitable hotel operations. But finding areas to cut cost and increase margin may require an annual review, or even an outside point of view. Consider bringing in experts who can provide an audit and make suggestions that an insider may not see.

The challenge of operating a profitable hotel may be greater than ever, but there are also more tools available now to help achieve it. Be sure you take advantage of all of them. Because, while you’re making your hotel a place for your guests to take it easy, it can’t be that for you. Keep your eyes open and your profits up.

 

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