Hospitality Financial Leadership in a Time of Crisis by David Lund 20 <strong>InnFocus</strong>
We have just completed a year that has been unprecedented. It has re-written the goalposts for so many things, especially for the hotel and other service industries where people are the main ingredient in what we offer. This article is about the lessons we should take from the past 12 months and how we can go forward with better tools and insight. Our business is built on three pillars. They are the guests, the colleagues, and the money, or as some would call the third pillar the financials, or even the owner. When we think about pillars, we naturally incorporate the idea that they are even and capable of holding their own share of the burden and the success of our hospitality enterprise. I am going to explore how the three pillars fared in the last year, how they may recover, and how they can be stronger in the future. Pillar 1 – The Guests First and foremost, let us start with the guests. Without guests, our business is a non-starter, and it goes without saying that we are ready to welcome them back so long as we can all do it safely. How we welcome them back is the question and at what price? Average rates have fallen by 30% on average and occupancy by over 50% compared to the pre-COVID norms in Canada. That is a whopping 70% when expressed as RevPAR. When guests start to return in significant numbers, what will they pay? Some forecasts put occupancy at above 50% for the full year of <strong>2021</strong> and average rates off by 15-20% from 2019’s stabilized range. In BC in 2019, we had a record year with an ADR of just under $200 and occupancy of 70%, equaling a RevPAR of $139. If we use this as a base and apply the forecasted occupancy and rate reduction, we’re looking at <strong>2021</strong> RevPAR in the $80 - $90 range. This is obviously an average and many will fare better mainly because of location and business mix. None the less that means our collective measure of what guests pay us will take a 40% haircut from 2019 levels. We all know that getting a strong room rate and occupancy takes time, momentum, and a healthy market. Losing it happens literally overnight. Now more than ever it’s critical to have solid revenue management intelligence Investing in and developing our people is what hospitality is all about. and practices in place. Relying on experience and market knowledge is a serious gamble with very unattractive odds this time around. If you don’t have a credible revenue management strategy in play with the proper tools, you’re going to come up short-changed. Penny-wise perhaps, but definitely pound-foolish. Pillar 2 – The Colleagues The second pillar is the colleagues. I think we have really shot ourselves in the foot with this one. Investing in and developing our people is what hospitality is all about. Our industry trades long days and hard work for recognition and advancement. How many people reading this article can say they came to the hotel business because they wanted and planned to. If you are like me and most, you came for a summer and stayed a lifetime—managers, leaders, and colleagues alike. What we have done this time around is really going to cost us dearly in the long run. Letting go, furloughing, and laying off our employees at every level for more than a year means they are gone. They have left the stage, and who can blame them? If we did not do all we could to keep them and help them during the last year, then shame on us. I know for many of you, this stings and that would have been a luxury, but I think it all comes down to choice and priorities. Mortgages and debts can be renegotiated. I have been working with an independent hotel in Western Canada for the past three years. During the initial part of the pandemic, revenues fell by 75% and that meant negative profits for many months. But their commitment to their staff was the number 1 priority. Why? Because the business will come back. We can rebuild our markets and some think relatively quickly because of demand (it’s still there). We cannot do the same with people because the supply available to hospitality is extremely limited. The labour supply was already on empty in many markets because of legislation and demographics. Now with COVID, we will have even fewer candidates to choose from. But <strong>InnFocus</strong> 21
Change language