Post by Jay Molitor, Vice President of Operations, Hospitality Ventures Management Group
It’s no secret that profit essentially boils down to two things at a hotel: maximizing revenue and minimizing expenses. And while they may appear separate from each other at first glance, revenue and expenses are entwined to such an extent that they must be viewed and managed holistically.
In fact, the key to controlling your labor expenses—the largest single expense at any hotel—is accurately forecasting and managing your revenue stream. Here’s why.
Accurate revenue forecasting = effective labor needs scheduling
Successful GMs never take their eyes off business forecasts. They analyze the experiences of previous years and current trends with the goal of keeping revenues within a 3 percent margin of error.
They enlist their sales team, department heads, regional revenue managers, and others who can help them accurately determine levels of business on a quarterly, monthly, weekly and daily basis. They hold daily meetings and take creative looks under every stone to forecast revenue and build labor needs schedules that maximize productivity and avoid the one word every GM dreads—overtime.
What are the latest numbers for tomorrow’s chamber of commerce breakfast meeting or evening awards banquet? Have the final head counts changed to a level that will require adjustments to the work schedule? Will the early-morning meeting allow some food service associates to be sent home earlier than on most days? They question everything and make necessary adjustments based on the findings.
Successful GMs foster an environment where changes in business levels (and subsequently labor needs) are expected, anticipated, and communicated effectively. They hold department heads accountable for accurate forecasting, and they offer incentives to these managers and even line-level associates who find ways to boost productivity and keep labor expenses under control. They make adjustments on the fly when necessary and they always take the time to look back, evaluate their performance, and learn from experience so they don’t repeat mistakes in the future.
Bottom line: You’ve got to stay on top of revenue forecasting and labor scheduling. It can get out of whack very quickly if you don’t pay attention and give it top priority. There are no shortcuts in the process, but it’s worth the time and effort because effectively managing labor expense controls can spell the difference between turning a profit and suffering a loss.