The International Network of Hospitality Consulting Professionals

10 Questions to Ask Before The Next Travel Recession Strikes

Have you thought about the next travel recession or are you just enjoying the good times?

Get Your Contingency Plan Ready For a Crisis

We know the hotel business is cyclical, so why are we always surprised when it is upon us? How many hotel recessions have you been through? Personally, I have lost count.

While putting a contingency plan for hotels in place it may seem like a daunting task. However, the consequences of not having a plan in place can be devastating. You need to be ready for the inevitable whether the downturn is caused by a catastrophic event or self-inflicted by our insistence to keep building new product until our market is oversupplied. But we never are – we wait for the s**t to hit the fan, jump into reactive mode and make time-sensitive bad decisions with a short term perspective.

Sound familiar?

Contingency Planning for the “what if’s”

It should come as no surprise to you that there are tourism industry trends. We all know this “stuff happens”. Plan for the “what if’s”.

Make contingency planning part of the annual budget process or the next step after your budget has been approved.

Ask yourself what you would do if suddenly your hospitality business declined by 5%, 10%, 15%, etc.

This will happen as the result of normal tourism business cycles. Let’s say during the next great travel recession that you lose a major client and have a significant mix shift or new competition just opening at the start of a downturn. What will you do?

I can’t tell you how many times that has happened to one of our hotels. This could also involve a catastrophic event such as:A hotel that is on fire with fireman trying to put it out.

 

A Bottom Up Approach to Contingency Planning

Contingency planning must be a bottom up approach. Each department is asked to develop department contingency plans focusing on staffing levels (management & hourly), guest services, amenities, pricing, what are we giving away that needs to be eliminated.

Questions each department should consider:

10 Questions to Ask When Planning for a Travel Recession

  • How can we reduce our operating costs and maintain the same or similar operating margins?
  • Should we just cut costs across the board or are there areas where we should continue to spend? Cutting costs across the board is the easy answer and is often hurts the bottom line in the long term.
  • Should we cut direct sales and advertising expenses when we need them the most?
  • What service reductions will our customers understand due to the travel recession?
  • Do we continue to provide the extras to our loyal customers?
  • Can we treat our loyalty segment differently?
  • What concessions can we negotiate from our vendors?
  • What opportunity/alternative markets in the tourism industry could we solicit to fill the holes?
  • What is the right balance between prudent cost management and maintaining guest service levels that will pay long term dividends?
  • What is our recovery plan? Equally as important as the contingency plan.
  • How do we phase back in services and staffing?

Tip: Create Travel Recession Category Levels

Develop plans for the next travel recession in category levels similar to hurricane ratings, from level 1 to 5.

Category 1 means shelter in place with minimal disruptions and Category 5 means full scale evacuation.

Depending on Department Head experience levels there may be a need for some coaching prior to beginning the exercise.

Developing a Contingency Plan

Once the department plans are drafted for the next travel recession and recovery, Department Heads then present their draft plans to the Executive Committee for review and approval.

Consider having a joint staff meeting attended by all Department Heads so each department can get a sense of what others are considering during the tourism recession. Take advantage of cross department learning.

The Executive Committee focus is on consistent approaches across all departments and the right mix of cost management and guest services. Targets should be set by departments for acceptable department margins and acceptable guest services scores.

Recovery plans should have a similar focus. Department Heads then finalize their plans based on Executive Committee input. Don’t forget to address the Undistributed Expenses as these aren’t fixed costs – A&G, IT, S&M, HL&P, R&M – before you finalize your contingency plan.

How Often Should You Update your Contingency Plan?

Update your travel recession contingency plan on an annual basis – once you go through the initial process you will only need to tweak your plan based on more current information.

The key is to have a plan to effectively manage what you control regardless of market conditions and that includes everything down to the Gross Operating Profit line.

Plan to manage the plan implementation through weekly or monthly reviews. Tweak the plan as necessary and set aside some money to celebrate success.

Results of an Effective Travel Recession Plan

The end result of the bottoms up approach vs. a top down mandate will be a hotel crisis management plan with total buy in. Because you have done advance travel recession planning and aren’t being reactionary, additional benefits include:

  • Smoother execution
  • More effective results
  • Less impact on customers and staff
  • Less damage to brand/property integrity and a simpler and shorter recovery period

All stakeholders will be pleased that you have a contingency plan – your owners, your brand, your hotel team, and your customers. Everyone knows that “stuff happens” and your stakeholders will be thrilled that you handled things better than others during an travel recession.  

 


Chuck is a Partner with Cayuga Hospitality consultants a network of independent consultants specializing in hospitality/lodging. He spent 32 years with Marriott International, beginning as an Assistant Restaurant Manager and worked his way up to Executive Vice President responsible for Marriott’s Caribbean/Latin America Region. Along the way he held positions as Director of Restaurants, Director of Marketing, Regional Director of Sales and Marketing, General Manager and Country Manager Australia. A graduate of the University of Hawaii, with a BS in Travel and Tourism Management. He is an active member of the Baptist Health South International Advisory Board and previously served as Chairman of the Caribbean Hotel and Airline Forum for the Caribbean Hotel and Tourism Association. He served with distinction in the US Army in Vietnam having earned a Purple Heart and Bronze Star for valor in combat.

8 Reasons Why Hotels Should Offer Valet Parking

If you are a hotel owner or manager you might be faced with a difficult question, should my hotel business offer valet parking?

It All Comes Down To Revenue, Revenue and Revenue

When reading the 8 reasons why your hotel should offer valet parking below, keep in mind that it all comes down to one thing, revenue.

Hotel revenue through your valet department can be a highly profitable part of your hotel that attracts additional customers and improves your customer satisfaction.

So, why should hotels have valet parking? The 8 benefits of valet in a hotel are:

  1. Increased parking capacity for your hotel
  2. Greater flexibility and control of your hotel’s garage and/or lot
  3. Less stress about car accidents
  4. Safer hotel environment
  5. Better access and revenue for conferences, groups and meetings
  6. Increased convenience for urban hotel customers
  7. Extra service and capacity for airport hotel guests
  8. Additional revenue for beach hotels

#1 Increase Parking Capacity with Valet

How does hotel parking work for an increase in capacity?

Valet parking can create a minimum 10-15% extra capacity in your existing lot by enabling you to stack cars one behind the other in parking spaces and to park cars in non-parking spaces.

If you’re looking for an even greater vehicle capacity, consider any nearby off-property space to park cars.

#2 Greater Flexibility and Control of Your Hotel’s Garage and/or Lot

For more efficient access to your guests’ cars, valet parking gives you greater flexibility and control of your garage or lot.

Consider the three examples below.

Long Term Vs. Short Term Guests

You can easily separate your hourly customers from your overnight guests based on demand, rather than having to designate specific areas for each.

Flexibility For Specific Situations

You have flexibility regarding where to park cars for specific situations, such as construction, periodic maintenance and cleaning.

When The Weather Turns Bad

In addition, if a storm is approaching, you can park cars where they will be the safest (even offsite if necessary). Don’t let vehicles get caught in a hail storm.A car with a dented hood from a hail storm.

Before a snowstorm, if you park all your cars in one section of your lot you can more easily remove snow after the storm has passed by clearing the empty section, moving the cars and then clearing the rest of your lot.

#3 Less Stress About Accidents

With valet parking for your hospitality business you can restrict guest access to your lot so you no longer need to worry about guests falling or getting hit by other cars while walking through your lot.

You also do not have to worry about guests smashing into other cars with their cars.A car with bent in hood from a fender bender in a parking lot.

#4 Safer Environment

Valet parking can provide a safer environment in two ways:

  • With restricted pedestrian access, there will be less worry about strangers roaming your lot and stealing from cars and other people (or worse)
  • You can also cut down on air pollution from guests sitting in their cars while their cars are idling

#5 Better Access and Revenue for Conferences, Groups and Meetings

For groups and meetings, you can park attendees’ cars together based on their group or meeting to enable easier access during the meeting and a quicker exit at the end.  

You can also increase revenue by charging for valet parking at a reduced rate, rather than offering complimentary (free) parking, and still provide a group benefit.

More on pricing for valet parking below.

#6 Increased Convenience for Urban Hotel Customers

With valet parking, you can provide parking for your guests even if you do not have your own lot.  

You can also increase revenue by promoting valet parking as a benefit for local customers who do not want to spend time driving around in search of a space or would rather wait inside your hotel instead of outside or in a garage when picking up their car.

#7 Extra Capacity and Services for Airport Hotel Guests

Valet parking enables you to increase your capacity for your hospitality business by using off-site lots for extra parking, plus provide a variety of extra services, including:

  • Curbside pickup of your guest’s car at the airport departure area and delivery to them at baggage claim upon their arrival
  • Park & fly or park, stay & fly for customers who will be away for an extended period or need to take an early flight
  • Provide a hotel car service for guests who would rather not use your van service but do not want to wait in a taxi line or get dirty looks from taxi or car service drivers

#8 Additional Revenue for Beach Hotels

For beachfront and nearby hotels, valet parking can provide the capability for you to offer combination parking/beach access packages to generate extra revenue during slow periods.

Valet parking staff can also help you control access of non-guests who try to use your hotel and beach without parking at your hotel.

Pricing – How Much Should a Hotel Charge for Valet Parking?

Attractive pricing for valet parking is critical to help increase your revenue, profit and customer satisfaction.

Two pricing keys to make valet parking work best:

  1. Keep the incremental price of your valet parking vs. self-parking reasonable. Ideally, $5 or less above hourly self-parking options, $5/day above overnight and weekly self-parking rates.
  2. Provide at least three or four hourly pricing options (0-2 hours, 3-4 hours, etc.) at prices competitive with nearby lots, net of the valet increment.

Do some number crunching to find out how profitable valet will be at your hotel.

Conclusion

After reading this article you now know of 8 reasons why hotel owners or managers should offer valet parking.

Again, it all comes back to revenue, and valet parking can become an extremely profitable part of your hotel’s operations.

Expanding your valet parking can help you increase your hotel’s parking revenue, profit and customer satisfaction, plus improve your operations, without major investment, especially if you have access to a third-party valet service or to temporary parking help (college students, etc.).


Peter Van Allen

Mr. Van Allen served for 5-1/2 years as global leader for Non-Room Pricing for all Hilton brands, developing tools & processes globally for hotels to price non-room products and services, including food & beverage, meetings, parking and spas.  Van Allen Associates provides marketing, pricing and business strategy to the hospitality industry.  Van Allen Associates can also work with you in the way that is best for you, from up-front analysis, to recommending revised pricing, to ongoing tracking and price revisions. For more details and tools to help you revise your pricing to increase revenue, profit and customer satisfaction, go to www.vanallenassociates.com.

 Restaurant and Hotel Safety: Preventing and Managing Accidents and Incidents

The pressure to run a successful hospitality operation is greater than ever.  Between rising labor, food and rent costs and an intensely competitive marketplace, owners are finding it tougher to reach a profitable bottom line.  Now add to this the fact that the industry is a popular target in the legal arena with wage, discrimination, harassment and accident lawsuits, which can often add up to significant expense for the operator.  For owners to successfully manage this difficult environment, they must operate at a very high and professional level and become proactive in addressing the threats to their business.  In terms of preventing and managing accidents and incidents, this means developing and implementing a system of safeguards that minimize exposure. This article will focus on accidents and incidents due to slips and falls, cuts and burns and foreign objects found in food.  The following are keys to creating a system for restaurant and hotel safety:

Preventing Accidents and Incidents

  1. Owner’s Attitude: Nothing of consequence will be developed unless the owner takes prevention seriously and passes on their concern to the rest of the staff in an effective and organized way. Focused attention needs to be paid to smart procedures.  Ownership needs to be fully engaged and supportive.  A “culture of safety” needs to be developed where staff recognizes and acts upon the importance of methods to minimize accidents and incidents.
  2. Specific Written Guidelines: The culture of safety needs to be translated into a written set of specific guidelines that are understood and followed by staff. This can also include videos and online training tools.  Ownership may want to bring in an outside consultant to help set this up or do the research themselves to apply best practices.
  3. Training and Reinforcement: Choose designated leaders to carry out training and reinforcement. First aid and possibly CPR training should be provided.  Use staff meetings as reminders of various safety issues.  Update training materials when necessary.  Have the proper supplies organized in designated areas.

Guidelines for preventing slips and falls, cuts and burns and preventing foreign objects from getting in food should include:

Slips and Falls

  • Do a full risk assessment of the operation. For example, if there are steps in the dining room leading to a basement, make sure there is proper lighting, signage and safe flooring. Make sure chairs are secure and repaired. Assess all potential areas of concern and address them with clear action steps.
  • Make sure floor surfaces in the front and back of the house and all stairs have acceptable traction to prevent slippage and high-quality mats that are not curled up are used where necessary.
  • Have a specific cleaning and mopping procedure in place for the kitchen and dining room. When possible seek out sustainable cleaning products as they pose less toxic threat to those who come in contact with them.
  • Make sure staff has proper shoes.
  • Keep all handrails secure and make sure all wiring is set up to avoid trips and slips.
  • Repair all uneven floor surfaces.
  • Make sure all drains are cleared.
  • Have specific procedures for when it rains: i.e. The use of mats and umbrella stands by the front door.
  • Designate specific staff with assigned tasks related to prevention.

Cuts and Burns

  • Ensure proper knife skills are taught and practiced by all kitchen staff.
  • Have staff always use the proper tool for the job.
  • Have knives sharpened on a regular basis.
  • Provide appropriate safety gear when needed such as glasses and gloves.
  • Make sure staff is fully aware of potential burn hazards.
  • Understand the use and potential hazards of all chemicals used in the operation. Look to replace standard highly toxic cleaning chemicals with effective low or non-toxic alternatives.
  • Make sure all equipment operates properly and is secured in a safe place to use.
  • Have a complete and updated first aid kit.
  • Have proper lighting in all prep and service kitchen areas.
  • Make sure all electrical equipment is grounded and outlets are properly secured.

Foreign Objects Found in Food

  • Use only reputable suppliers for food product.
  • Have clear and thorough procedures for the cleaning of food product.
  • Have no foreign objects within the vicinity of food prep.

Managing Accidents and Incidents

  1. Have Staff React Quickly and Efficiently: Staff needs to understand instantly what they are to do and carry out their responsibility. They have to quickly assess priorities and act on them. For example, in a slip and fall, first priority needs to be towards the guest or employee who has fallen and to make sure they are as safe as possible. Staff needs to immediately understand what they can and can’t do from a safety and medical standpoint, such as how to move an injured person, if at all. If there is a burn or cut, trained staff should immediately get necessary supplies and apply them. Be prepared to follow all proper procedures in handling any burns, including chemical. Calling for emergency help always has to be considered and acted upon quickly. Owner or other management should immediately take charge and direct other staff.
  2. Secure the Area: There needs to be a system in place to efficiently secure the area of the accident so the injured party stays safe and no other complications occur. For example, the use of bright colored cones and wet floor signs need to be placed in specific strategic areas. It also is important that the rest of the customers or staff is kept away from the incident area.
  3. Accident and Incident Reports: A written report should be thorough and completed as soon as possible when memory is fresh and witnesses are available. If a statement from a witness cannot be objectively verified, don’t take it as fact and phrases such as “witness alleges” or “witness claims” should be the preferred language. It may be helpful to create diagrams and take photos to enhance the clarity of the report. If appropriate, reports should be provided to the insurance company immediately.
  4. Accident and Incident Feedback Loop: No matter how well the operation is prepared, accidents and incidents will occur. It is critical to always get better and learn from any incident that takes place and share the evaluation with the rest of the staff. Management should do a thorough analysis of the incident with feedback given to the staff. Lessons learned should be discussed with an emphasis on improvement.

The hospitality entrepreneur needs to wear a multitude of hats in carrying out their business.  The prevention and management of accidents and incidents has become an area that operators more than ever must seriously pay attention to as they go about running their establishments.  Having a clear set of guidelines and procedures that are ingrained in a “culture” of restaurant and hotel safety is a most valuable insurance policy to carry.

Alan SomeckAlan is a 30-year operator of high volume restaurants, in which he has managed all facets of the business. His experience and expertise have led him to develop a well-regarded expert witness practice. In his consulting practice, he has worked with many clients to create and establish their concepts. In addition, Alan has worked on assignments to develop food products for market such as protein bars, cookies, and brownies. He has also directed 7 EPA grants to train operators in Green sustainable practices. He has created an extensive network of industry professional who he works with on a regular basis. Throughout his career, Alan has supported the success of entrepreneurs through executive coaching and training. For the past 10 years, Alan also has taught at the Institute for Culinary Education in NYC and at NYIT where he has taught all aspects of the restaurant business. His students have opened fast casual restaurants, cafes, bakeries, and fine dining operations.

The Challenges Restaurants Face in Going Green and What to Do

In the fast changing dynamics of the restaurant industry today, the mission of food service entrepreneurs is going through a significant transformation.  Not only is there more pressure than ever to deliver a high quality consistent product in a hospitable and attentive atmosphere, operators have begun to realize they have a greater responsibility to give back to their local community and in particular become proactive stewards of our precious environment.

Over the past decade, the call to adopt restaurant sustainable practices has continued to grow.  These practices in many cases have become integral parts of the restaurants vision and contribution to their community.  In particular, there’s been a significant increase in an understanding of strategies restaurants could utilize in the areas of energy and water efficiency, the use of low or non-toxic cleaning and pest control products and the utilization of waste management practices to counter the enormous waste that occurs in restaurant operations. These strategies have often proven to also be a profit bonus to operators who use them intelligently.

Innovative technologies in the area of monitoring waste have become as easy to use as pressing a few buttons on a smart phone. Chefs have become more motivated to come up with creative uses for once thrown away product.  Local governments and utility companies have provided financial and equipment incentives to restaurant operators who agree to install energy or water efficient equipment or incorporate other sustainable practices.  Surveys have shown that the consumer looks more favorably upon restaurants who promote green practices.  (Effects of Restaurant Green Practices, Jeong and Jang, 2010).

In addition it has been found, that a business that adopts sustainable practices is more likely to retain staff and have staff operate at a higher level of productivity.  So with all this positive reinforcement to go green, why is it that restaurants have been so slow as an industry to more fully incorporate green practices in their day to day operations?

There are several key reasons for restaurants resisting restaurant sustainable practices.  For one, most small independent restaurant operators are overwhelmed with the day to day pressures of running their businesses.  To them, the impact of an overdue produce bill, a sudden drop in brunch business or a sump pump seizing up and dying are all problems that appear much more tangible and immediate.

Those challenges are much easier to grasp than the impact of buying energy efficient equipment and seeing savings over time or noticing the impact of non-toxic cleaning chemicals or good waste management practices over time.  Most operators tend to think in terms of short term solutions to short term problems.  Cash flow is invariably a constant daily issue that influences what an operator thinks about as they go through their day.

Secondly, there is a common misconception that restaurant sustainable practices cost more.  This is often due to a lack of understanding.  Again, that understanding takes time which most operators never seem to have and the tangible results from that understanding are not as immediate as the other issues they face.

Thirdly, sustainable practices don’t appear to be what their core restaurant business is supposed to be about which to many of them is just serving good consistent food in a pleasant and friendly atmosphere.

So given the above scenario, how do green organizations looking to make significant inroads into the restaurant sustainable practices break through these challenges?  For the past 5 years, the Green Hospitality Initiative (GHI), a project funded by the EPA to the New York State Restaurant Association Educational Foundation, has faced this issue in attempting to educate and train operators in sustainable green practices.  Here are three conclusions that have been reached as potential roadmaps to achieving success:

  1. The owner and driving force behind the business needs to believe that green practices are a key part of the business model and purpose of the restaurant and not just a side project. They need to see the value and importance of operating sustainably and commit to it over the long term.  Education, consumer demand and the growing awareness of green practices can help support that change in operator thinking.
  2. If the belief is there on the part of the operator, they need to have the ability and commitment to instill that belief throughout the culture of the restaurant. Through educating and training staff and hiring people who already have beliefs in sustainable practices, the culture and actions of the restaurant will begin to reflect these values.
  3. There needs to be a go to green advocate in the restaurant who essentially has green practices as part of their job description. It would be up to them to continually show how green strategies could be used for the benefit of the restaurant and introduce new techniques and technology to the operation.  They would be the catalyst to helping overcome the daily challenges mentioned above that press upon all restaurant operators.

The transformation of the restaurant business model to incorporate sustainable practices has not and will not be an easy one.  Momentum has been building over this past decade but it is clear much more needs to happen.  It is up to committed green organizations and forward thinking restaurant operators to lead the way and demonstrate that it is possible and highly beneficial to the restaurant and community to adopt a more sustainable way of operating a food business.


About the Author:

Alan SomeckAlan is a 30 year operator of high volume restaurants, in which he has managed all facets of the business. His experience and expertise has led to him develop a well regarded expert witness practice. In his consulting practice, he has worked with many clients to create and establish their concepts. In addition, Alan has worked on assignments to develop food products for market such as protein bars, cookies and brownies. He has also directed 7 EPA grants to train operators in Green sustainable practices. He has created an extensive network of industry professional who he works with on a regular basis. Throughout his career, Alan has supported the success of entrepreneurs through executive coaching and training. For the past 10 years, Alan also has taught at the Institute for Culinary Education in NYC and at NYIT where he has taught all aspects of the restaurant business. His students have opened fast casual restaurants, cafes, bakeries and fine dining operations.

 

Concentrating on Restaurant Expense Loss

Restaurant Expense Loss reviews variances between money that is currently unsystematically expensed on product, services, or equipment and the amount expensed upon a review and implementation of practical methods of spending behavior. Expense Loss occurs when behavior is disorganized and money is expensed without regard to the benefits of considering alternatives, along with possible long term repercussions of your decisions.

If you are in any business you are expensing money on equipment, maintenance, repairs, sell-able product, food and beverage, fertilizer, chemicals, water, oil, electricity, and other material goods. Expense Loss occurs for many reasons and often because staff, manager, or owner is busy concentrating on building and running the business and the payment of invoices and doing business as usual becomes routine without a thought to other options. Failure to maintain a constant review and evaluation of expenses will always have a negative effect on profits and result in what I coined as, Expense Loss. I have included ten examples of Expense Loss along with solutions in the coming pages. An evaluation of operations helps alert you to the risks to your business solvency by determining areas causing such risk. With a proper assessment the results can provide a program for reducing and minimizing Expense Loss, and offers improved profits going forward. This is achieved without reducing internal service or product quality, and delivers a higher return on both.

While payroll can be a big contributor to Expense Loss I suggest keeping scheduling and the costs associated with this as a separate review process, for reasons that are manifold. Payroll is a fluctuating cost that can produce more profits even when high, and destroy profits even when low. Managing payroll is not like other costs that can be evaluated by reviewing invoices or comparing costs across a sample of goods or proposals, or by changing simple processes. There is much more to payroll costs than just reducing them. Alongside payroll is competency of each individual, the affect change has on product, service, cleanliness, and other factors, and to evaluate payroll costs properly the ability of each individual versus their performance, return benefits, and other factors must also must be part of the analysis. Therefore, I always recommend keeping this a separate review process.

People have said the following for as long as I can remember, “Get the customers in the door and expenses take care of themselves”. From my perspective if you are more diligent with your expenses your chances of succeeding greatly improve, however a change in mind set may be necessary for this to occur. Even if you are managing a successful business and you are earning good profits there are always overlooked opportunities, and if you think you have achieved all you can, look again. I have met with business owners telling me they are running a tight ship and at the same moment I am observing a 12 count alcohol pour at their bar, or a plate of served food that has an obvious cost close to or higher than the menu price, or signing an invoice for a product delivery that is out back and not inspected upon arrival. Also look to see if an employee has a higher amount of voids over all other employees, as this may be a red flag. Looking at all operations, food and beverage, pool, golf, tennis, facility management, receiving, repair and maintenance, and the accounting department, there are Expense Loss variances to be improved across all departments.

We all want the best price and quality product when we make purchases, but most locations are not doing everything they can to meet this goal, and certainly not across all departments. Very common responses to my encounters are; not having enough time, not having the knowledge, this is the way we have always done it, or I use the same companies to make my job easier. These are all excuses that will shorten the lifespan of your company.

Try and argue that it does not make any sense to learn new ways of lowering expenses. If you think about it, you could certainly have someone randomly watch over expenses if the results were continually positive. Having a weekly or bi-monthly review should be an acceptable method to consider, and a great way to maintain cost versus results on a long range plan. No one likes to spend money without assurance, although the carelessness that occurs in many business operations is much more devastating than spending money on someone to help you. Having a professional review your business can offer long term results, as long as the evaluation turns up a scenario of positive changes(s) that offer the return of the professional’s expenses, and an ongoing additional profit to the business going forward. A solid evaluation will provide a positive result because there are always ways to improve. Additionally, a proper evaluation should be performed by someone not associated directly with the business. Family members helping to run the business are great, but an outsider evaluating operations offers an impartial assessment with an open mind to differences that can be rewarding.

If you could take all of your expenses for the month, every month, and reduce them by three percent across departments, the decision to have someone evaluate your business is made easier. Most businesses achieve this modest result without any difficulty, and I have evidenced much greater results with only a little effort. On $30,000 of purchases per month (product, equipment repairs, and maintenance cost reductions) or procedures that reduce waste (receiving, storage, and inventory) this translates to $10,800/year in additional profits when achieving a 3% Expense Loss reduction.

Stop paying for something just because you have been handed an invoice, told an amount, or this is how you learned how to operate. Every dollar that you do not spend on expenses is profits, because if you did not spend it, the money is still in your bank account.

Here are some examples of where Expense Loss can occur, with an example solution on each topic. A short list, but it provides a range of what businesses encounter and some of the reasons why they may have burdening costs or even fail over time. A proper evaluation and training is always the best method for results.

  1. Equipment Expense Loss
    Equipment breaks down and a quick call to the mainstay vendor for repairs to get this off your mind. Not including emergencies, an immediate acceptance on costs, therefore not taking the time to research the part(s) and labor to determine if there is an alternative option. In many cases the invoice for repairs is received one to three months after the work is performed, hindering your recollection of what transpired.
    Reducing Equipment Expense Loss
    Take the time to evaluate the reasons for the breakdown before you call for repairs, ie: preventative maintenance or staff not keeping equipment clean, obstruction from other equipment or airflow, abuse, review of maintenance vendor performance over time. Review internal training procedures to determine if repair can be performed in house. Check if equipment remains under warranty. Request signatures and an invoice at the time the repair is made. Initiate an internal and external Repair & Maintenance Log to support repair or replacement decisions, and to document the occurrence.
  2. Delivery Expense Loss
    Deliveries are not properly received, weights not verified, product not opened and checked, and signatures and shorts or variances not provided on receiving invoice, therefore you are unable to determine if you are losing money on the product you purchased, who checked it in, or what was ordered actually arrived. If you are not following effective receiving procedures, you will experience significant Expense Loss.
    Reducing Delivery Expense Loss
    Have a verifiable receiving procedure on all goods. Open all boxes and containers, count and weigh all products, record all deficiencies directly on the invoice. Maintain a significant communication practice between receiving and accounts payable, and build a reliable set of procedures that communicate damage, shorts, and other variances to reduce and eliminate costly accounts payable processing.
  3. Food Purchase Expense Loss
    Individual cuts of protein are purchased for portion control (steaks, fish, & chicken) and the quoted or purchased price per lb. is used in the menu price calculation creating a miscalculation in the figures.
    Reducing Food Purchase Expense Loss
    Calculate cuts of protein using individual product cost extensions off invoice divided by number of portions received to achieve actual portion cost. Using quoted price per pound results in an incorrect price per piece assumption because the weights of each portion vary slightly.
  4. Cooking Yields Expense Loss
    Cooking yields are not taken into account when calculating menu costs for items that are cooked in their bulk weights and portioned after cooking. ie: Prime Rib, Roast Sirloin, and Roast Turkey as examples. This is especially true for caterers, and cuts of meat with the fat cover in place, or when the bones are removed.
    Reducing Cooking Yields Expense Loss
    Dividing uncooked bulk weight into purchase price or using the quoted price per pound delivers a false assumption of cost. Weigh bulk product before and after cooking for recording yields (the yield is the variance between the uncooked weight and the cooked weight) and apply to purchase costs for correct cost analysis. A 20lb Prime Rib can lose 10%-15% or more in its’ initial weight during cooking, thus delivering less portions than anticipated if assumed using the full bulk raw weight. Over time an average assumption can be used in forecasting costs.
  5. Low Menu Price Expense Loss
    A menu price on an item is too low because you did not assume all costs, so you are not earning the amount of profit expected. This is not about loss leaders and pricing decided specifically for specials or on purpose, however if you create arbitrary menu pricing the results are always undesirable.
    Reducing Low Menu Price Expense Loss
    Evaluate all ingredients into the menu mix by weight, yield or portion, and current price. Maintain an ongoing review of pricing fluctuations in ingredient costs and adjust menu costs and prices accordingly. Adjust for substitution of ingredients into menu mix with unavailable product, as this can have negative effects on results if not accounted for.
  6. High Menu Price Expense Loss
    A menu price on an item is too high, or is not selling, and you are experiencing product spoilage.
    Reducing High Expense Loss
    Evaluate why a product may not be selling to determine price adjustment or removal off menu. Change recipe based on customer requests to revive the item.
  7. Same Vendor Expense Loss
    There is a practice to use the same vendor for a particular product, piece of equipment, chemicals or fertilizer, a service or goods, or due to proprietary reasons, and you do not question their price, or you have never researched market pricing for the product, goods, or service.
    Reducing Same Vendor Expense Loss
    Initiate procedures for price evaluations on all products, goods, and services from competitive vendors, and associated or like businesses. Evaluate further when the need to purchase a specific product, good, or service from only one vendor due to quality or specialty needs of the item, and/or if available elsewhere ask for price reduction and maintain same vendor relationship. While I support consistency in vendor relationships, the association must be equally beneficial.
  8. Warranty Expense Loss
    A repair is paid for without realizing there remains a warranty on the equipment.
    Reducing Warranty Expense Loss
    Review internal procedures for tracking the accounting of equipment under warranty. Initiate an internal and external Repair & Maintenance Log. Review and determine why the vendor did not alert you to this information.
  9. Inventory Expense Loss
    Inventory is not immediately stored or kept under lock and key with limitations and accountability on access.
    Reducing Inventory Expense Loss
    Immediately remedy inventory control issues when product remains at receiving for too long, is not refrigerated, locked up or guarded, and initiate space allocation and the placement of caging and security measures if available. Being carefree about your inventory translates into early spoilage, breakage, theft, improper HACCP, and can violate Health Department Regulations.
  10. Oil Heating Expense Loss
    You purchase heating oil from the same company that services your boiler. This is common, and while most vendors are reliable and honest, this is a red flag. Heating equipment can be adjusted to burn more fuel than necessary, and running but poorly maintained is not good either.
    Reducing Oil Heating Expense Loss
    Verify nozzle size on oil burners is within manufacturer specs. Have an independent evaluation of your equipment performed to check that nozzles, pumps, pressure and pressure reducing valves, expansion tank, heat exchanger, and all other parts are operating as required. (An outside review allows confidence in a decision to continue using same company for both).

If you are having any similar circumstances, or would like someone to come in and train your team in improved Expense Loss practices, reach out to me. I am in the New York region, but I will travel to your location if you are serious about improving your profits.


About the Author:

Jim LopolitoJim is president of Lopolito Hospitality Consultants and a veteran of the restaurant, country club and catering industries offering expert operational review, club management consulting, foodservice training, and team development. His consulting services include his proprietary “Expense Loss Review” program. The ELR program reviews variances between money that is currently unsystematically expensed on product, services, or equipment and the amount expensed upon our review and implementation of practical methods of spending behavior. Jim has worked in virtually every position in foodservice, from executive chef to general manager in restaurants, country clubs, and catering in well-known organizations throughout New York. His background includes 12 years in restaurants, 19 years in private clubs, and 10 years in high-end catering and concert production.

Take Your Guest Reservations Back Offline

 

Remember 20+ years ago, when your hotel guests could only book direct via phone, your brand’s 1-800 number, the brand website and your own website. Ahhhh…The good old days when you got to keep 100% of the rate.  (Except when a Travel Agent booked for the guest and then you simply had to a pay a bargain 10% commission.)

Then, the OTA’s came into the picture around 1996-97 claiming anywhere from 15-30% commissions.

Allow me to run through the brief history of how the marriage or shall I say dysfunctional marriage between hoteliers and OTA’s has transpired.  In my many years of hotel sales and marketing experience, I have personally observed this landscape change and continually transform.

In the beginning, I remember being a Front Office Manager and being fined by my brand franchisor for violations of lowest rate guarantee.  It was a learning curve as we Hoteliers were trying to navigate around this new technology of its time.  Rate Parity Policies and its related processes have certainly become more streamlined.  Online Travel Agencies have come and gone, yet most have been merged to form a few powerhouses.

There is really no need to look back on additional historic points as to how we arrived on the scene today; both OTA’s and Hotels are here to stay.  The real question is how we can co-exist and how can we as hoteliers drive more guests to book direct which is our most profitable booking channel.  The OTA’s of the world are becoming ever so much more clever at grabbing the attention of the guests we eventually host.  OTA Loyalty programs are just one example.  Another would be the Millions of Dollars spent on advertising to lure our potential guests into using their services.

One strategy that absolutely confuses consumers is Google AdWords Campaigns that populate an OTA over a Branded Website.  Here is one example:  A guest googles “Brand X in City Y” and a listing pulls up in the #1 spot.  They proceed to call the 1-800 attached, or book direct online thinking they are working directly with the property when in fact they are booking through an OTA.

In my hotel operations experience, I have seen this happening several times each week.  Guests will swear that they called the hotel direct and booked their room.  Now why can’t they cancel with the hotel directly?  Why did they not get the specific room type they thought they would get?

There are three specific strategies that I think we as Hoteliers should implement in order to pull our guests back offline and back to booking with us direct:

  1. Re-train our front desk staff or reservation agents to become more inquisitive when speaking with an incoming caller.  Prior to calling your hotel, a guest has most likely been searching various OTA’s regarding your hotel and some are online at the time they call your hotel.  With specific training, your agents can book those guests right then and there and avoid a customer booking on an OTA.
  2. We need to advocate that our National and International Brands run a joint and entire industry campaign to educate consumers as to the benefits and pitfalls of booking with an OTA versus Booking Direct.  A campaign that is not brand specific, yet more of like a Public Service Announcement in form.  Note, I did say there are some benefits for some consumers with booking with an OTA.  i.e. convenience of booking hotel, air and car is one of them.
  3. Continue to educate our customers who booked on an OTA, that upon their return visit to book direct.  Inform them that they can get the best rate by calling direct and they also have more control over reservation changes and/or cancellations.

The relationship that we as Hoteliers and OTA’s have isn’t the perfect marriage made in heaven, but we can make the best of it by taking even a small percentage of our guests back Offline and back to booking with us direct.  It is time that us hoteliers put more money back into our own pockets! Figure out how many rooms you should dedicate to OTA’s.

If you have any questions or concerns, feel free to contact us!


About the Author:

Jay Hartz is a former member of Cayuga Hospitality Consultants.

Why Do You Need a Hotel Quality Assurance Audit?

Why Hire a Hotel Quality Assurance Consultant?

The first question is why? Why do we need a Hotel Quality Assurance Audit? Don’t we know how our hotel operation is performing? Our customers complete our guest satisfaction reviews and we compile the data. We speak to our customers every day and they aren’t shy about telling us what works and what doesn’t. TripAdvisor and other social media sites provide us with daily feedback.

All this is true, but it isn’t always a good idea to grade your own paper – especially if you want the real answer. Often guest satisfaction reviews, social media posts and direct customer feedback is like listening to the loud voices and missing the overall opinion.

Customers who fill in your surveys or take the time to give you direct feedback are often the customers who had a particularly bad or good experience. Of course this allows you to address a specific customer issue, solve a problem and/or reward your staff for a job well done. But are you really getting the feedback you need from your everyday customer?

An objective, non-biased third party perspective will provide the candor you need to take your operation to the next level. Or the competitive environment is changing and you need to adapt. Or you may be launching a new product or service and you want to focus on specific issues.

A hotel quality assurance audit will provide a wealth of information you may only be guessing at or it may simply confirm your direction. Yes, there is a cost involved, but if you are truly open to candid feedback and willing to put the effort into the follow up it is worth the investment. Just remember it is your responsibility to use the information and get the return.

Determining Who To Hire to Perform Your Hotel Quality Audit

The next question is who? Who does this kind of work and how much will it cost me. If you Google hotel quality assurance audits you will get a list of providers who all have glowing things to say about themselves – “mystery shopping data delivers hotel operations with precise feedback”, “customer experience measurement that helps you identify and measure the moments of truth”, “we will be your eyes and ears to ensure your service delivery matches your brand promise”, “a concise audit consisting of over 1000 touch points”, and so forth.

These services provide an objective point in time front of house guest perspective that is typically data focused. You have the responsibility to analyze the data, develop appropriate action plans and execute your plan – similar to what you do every day, but now you have additional data. The typical price range for a one-time inspection of this type of service is from approximately $600 to $1800 depending on the size and complexity of your operation. However, the real value of this service is in frequent inspections that allow you to measure progress over time against an established baseline.

If the thought of analyzing data from over 1000 touch points seems a little daunting, there are also services that are conducted by hotel industry professionals that provide both a front of house guest perspective and a back of house employee perspective. In addition to the quality assurance review, these services typically include an operations analysis of your property’s operations strengths and opportunities, probable root cause and recommended solutions. In other words, rather than provide a data-focused checklist that requires your analysis, these services take it a step further assisting with the analysis and defining solutions.

This is possible because a hotel industry professional is conducting the review and analysis rather than “Joe Guest” completing the Mystery Shopping Checklist. Obviously, this alternative is more expensive and pricing is dependent on the size and complexity of your operation and the scope of the review you agree to. Pricing can be more reasonable if you agree up front to contract with the firm to assist you with the ongoing execution of your improvement plan.

Thoroughly confused? It isn’t really as complicated as it may sound. A little time on the various provider websites and some phone calls will clear things up. Most providers will want to thoroughly qualify your needs and expectations before proposing a service and pricing. The services are typically customizable and providers have an interest in delivering what you want the first time in hopes of developing a longer term relationship. The key is to determine what works best for your property and your current situation.

If you’re considering hiring a hotel quality audit consultant, contact Cayuga Hospitality Consultants today. We can answer any questions that you may have!


About the Author:

Chuck KelleyChuck Kelley is a Partner with Cayuga Hospitality Consultants a network of independent consultants specializing in hospitality/lodging. He spent 32 years with Marriott International, beginning as an Assistant Restaurant Manager and worked his way up to Executive Vice President responsible for Marriott’s Caribbean/Latin America Region. Along the way he held positions as Director of Restaurants, Director of Marketing, Regional Director of Sales and Marketing, General Manager and Country Manager Australia. A graduate of the University of Hawaii, with a BS in Travel and Tourism Management. He is an active member of the Baptist Health South International Advisory Board and previously served as Chairman of the Caribbean Hotel and Airline Forum for the Caribbean Hotel and Tourism Association. He served with distinction in the US Army in Vietnam having earned a Purple Heart and Bronze Star for valor in combat.

Cayuga Hospitality Consultants Announces New Services Division – Hotel Quality Assurance and Hotel Operations Analysis

With each of our consulting professionals possessing an average of 30 years of hands-on experience, Cayuga Hospitality Consultants excels in providing owners, operators and lenders expert insight and guidance through its new Hotel Quality Assurance and Hotel Operations Analysis programs.

The first question many will ask is simply “why do I need this type of service,” and the answer is for several reasons. You may think you gather all the customer satisfaction data from your internal surveys, from TripAdvisor and other social media. However, this information can be less than objective as the respondents may have personal reasons for completing the surveys or commenting in the public eye.

In addition, new competition may have recently entered the market, if so, the competitive environment has changed and you need an objective opinion on how this may have changed your position. You may be launching a new product or service and need a quick read on how it is perceived. And perhaps most importantly, the Hotel Operations Analysis will provide a professional opinion on service delivery from an employee or back of house perspective – something a standard quality assurance audit does not include.

Most Hotel Quality Assurance audits are performed using a standardized checklist and completed by hired hands often with little or no actual hotel experience. A guest centric view can be helpful, but operator results are presented in data format and usually just for public areas and guest rooms.

Using experienced hotel operations professionals in a mystery shopper role measures the entire landscape of customer service, employee performance, organizational perspectives, cleanliness, operational evaluation and post-stay engagement.

Cayuga’s Hotel Operations Analysis goes beyond a simple worksheet account of a single visit, our consultant’s focus identifies not just front-end issues and successes, it also explores back-end root causes to challenges and strategizes a plan to help owners and operators fix their breakdowns in service and facilities.

Division chair, Chuck Kelley, noted that, “A number of the calls that I receive looking for hotel operations evaluations are from owners and operators seeking help in figuring out what to do with a traditional data based report.” From there he determined that a void existed in the market, and working with several of the Cayuga Consultants created this new division that he says, “Offers an expert and thorough front- and back-of-house assessment, and also qualified recommendations that will make a difference.”

With a Cayuga Hospitality Consultant’s Hotel Quality Assurance findings report and Hotel Operations Analysis, our professionals complete their assignment with a webinar for clients to review their findings and recommendations and assist with developing next steps to promote sustainable improvement.

Cayuga’s consultants have performed in executive roles in all tiers within the hotel industry from select service to luxury full service. Every Hotel Quality Assurance and Hotel Operations Analysis assignment is tailored to meet the unique needs of each hotel and managed to work within a client’s specific budget requirements.

For more information on Hotel Quality Assurance and Hotel Operations Analysis or to present your complex challenge requiring an expert hospitality consultant or team of professionals, contact Chuck Kelley HERE or call 866.386.4020.

Service, Profit or Both? It’s All About the Balance

Prioritizing Service Excellence, Profit, or Both? 

Here’s how to balance that fine line between customer satisfaction and making money.

Most commentary on hotel service excellence expresses some or all of these themes: Exceeding customer expectations, anticipating guests’ needs, being responsive, creating the impression that someone cares, memorable moments, the difference is service, and so on. I couldn’t agree more, but it is very difficult to measure the impact of these themes in a vacuum. Yet at times it seems that it is all about the service and that other priorities will take care of themselves.

In the past, I discussed service expectations vary by hotel and customer as well as by other conflicting priorities. Let’s examine a few facts regarding hotel types and available resources:

  • Select-Service: A rooms product with limited F&B and other amenities. These properties typically operate with .5 of a Full-Time Equivalent (FTE) per available room and a handful of managers/supervisors.
  • Full-Service Commercial: Guestrooms, restaurants, lounges, function space and so on. These properties typically operate with .8 to 1.0 FTEs per available room and, depending on size, 20 to 30 managers/supervisors.
  • Resort: Depending on the level of amenities – mainly F&B, Golf and Spa – these properties will typically operate with 1.2 to 1.4 FTEs per available room and 30 to 40 managers/supervisors.
  • Luxury: Potentially all of the above plus a Guest Services Department with management staff. These properties will typically operate with 1.5 or more FTEs per available room and 40 to 50 managers/supervisors.

(Please don’t hold me to the numbers or exacting product descriptions, but for the purposes of this discussion they are in the ball park.)

The other reality is the level of experience and seniority of the personnel at these different types of properties. The higher you go up the food chain the more seasoned and capable the team is. The point is you simply can’t deliver similar styles and levels of service across all hotel types. Nor do you want to; you simply won’t have the same resources or experience levels.

Secondly, in this asset-light environment the operator is charged with balancing the priorities of the brand and the ownership, which in simple terms are:

  1. Brand: The brand company wants to maintain the integrity of the brand, maintain loyalty of the brand’s customers, maximize their fees and continue growth.
  2. Ownership: Ownership is more interested in cash flow from operations and return on investment. The question is: do they want sustained profitability or a short-term boost so they can flip the asset?

To be successful, the operator must understand his or her customer expectations, consistently meeting and slightly exceeding those expectations – never below and never too high. Operators must balance the conflicting goals of ownership and the brand by providing just the right level of service so guests continue to come back and provide good cash flow to ownership, which should therein encourage owner’s to reinvest in the property and the brand.

Picture the select-service hotel that decides to add room service to compete with the full-service hotel down the block. How about the full-service hotel that cuts back on the bell staff to improve short-term profitability? Or the luxury-tier operator who is so focused on being an ‘hotelier’ that they miss the profit motive.

In the early days of brand segmentation, this type of behavior was prevalent and it still exists today, though in more subtle forms. This is also why an up-and-coming manager in a full-service hotel may not transition well to a select-service hotel or vice versa – at times they have difficulty leaving the values they learned growing up behind.

The reality is the customer you brought over from the select-service to the full-service model by manipulating service offerings and reducing prices is not really your customer. Sooner rather than later you will need to go back to the status quo and you will quickly lose that customer who was there on false promises that weren’t true to the brand. You are far better off focusing on the consumer segment attracted to your hotel type, building a strong foundation of loyal customers as a result of consistently staying true to the brand promise and meeting expectations.

No matter what type of hotel we operate, we have to deliver the basics well and add to the service delivery relative to the customer expectation and brand promise. You really can’t expect the select-service staff to anticipate guest needs or create memorable moments – just the basics please. At the full-service commercial hotel, you have a few more facilities available, but in reality your prime customer – likely the business traveler – wants the basics and responsiveness to special requests. At a resort or luxury-tier hotel, customized service delivery to individual needs and making the customer feel special are the factors that will create value.

We all need to remember we are running a business. For the business to run successfully over the long-term and for you to stay employed, you need to meet customer expectations, keep the brand integrity in line and maintain strong cash flow to ownership. The operator’s job is the most difficult; it’s a balancing act and it can be a steep drop in either direction if you step the wrong way. Service excellence is an integral part of your success and it can be the differentiating factor. The point is that you can’t win with service alone; you have to get the other parts right as well.

This article originally appeared in Hotel Interactive

Chuck KelleyChuck Kelley is a Partner with Cayuga Hospitality Consultants a network of independent consultants specializing in hospitality/lodging https://cayugahospitality.com/consultants/chuck-kelley/. He spent 32 years with Marriott International, beginning as an Assistant Restaurant Manager and worked his way up to Executive Vice President responsible for Marriott’s Caribbean/Latin America Region. Along the way he held positions as Director of Restaurants, Director of Marketing, Regional Director of Sales and Marketing, General Manager and Country Manager Australia. A graduate of the University of Hawaii, with a BS in Travel and Tourism Management. He is an active member of the Baptist Health South International Advisory Board and previously served as Chairman of the Caribbean Hotel and Airline Forum for the Caribbean Hotel and Tourism Association. He served with distinction in the US Army in Vietnam having earned a Purple Heart and Bronze Star for valor in combat.

Control the Process to Get the Best Deal on Hotel Insurance

A common question for hotel and restaurant operators is: How do I get insurance that effectively covers my operation for the lowest price available? While insurance is a complex topic with many intricate layers, the answer to this specific question is fairly simple – control the process.

When you ask for a certain grade of steak or a set of linens with a defined thread count or a specific piece of equipment, you can compare ‘apples to apples’ and make a decision based on price, delivery, installation and so on. But insurance does not work this way.

Why not? Well, the ‘playing field’ is hardly level. Typically, you do not have the knowledge that your ‘vendor’ is bringing to the table. Do you know how to read a ‘quote’ when the various ISO forms are listed as part of the policy? Do you even know what an ISO form is? Be honest with yourself; understanding insurance is not for the faint of heart.

You’ll often start the process by asking three insurance agents or brokers to give you a quote (I use agent / broker interchangeably because, for all intents and purposes, they are the same for your purposes). What do you give the agent to get you this quote? Is it a copy of the current policy or the last ‘proposal’ that you purchased? Most agents will jump at the chance to work with this limited information and run to the insurance marketplace with your account to see what is available.

And why would they jump at this opportunity? As insane as it sounds, any agent with an application can submit your account for a quote – whether you sanctioned it or not, whether the details are correct or not and whether the submission is complete or not. Once the insurance company receives the submission from an agent, that insurance company is precluded from offering a proposal to any other agent.

Yes, you read that correct. This is called ‘blocking the market’ and it makes sure the agent submitting your account ‘locks up’ the insurance companies with his or her submission. It doesn’t matter if the submission is accurate or complete; you are simply tied to that agent for the bidding process. Some agents have no problem rushing to the marketplace to ‘block’ the insurance companies. This isn’t necessarily good for you, but incentivizes the agent.

Your main recourse to prevent any trauma is to control the process.

Create detailed bid specifications that are in underwriting terms – insurance speak – and are applicable to any insurance company. This means a ‘statement of values’ reflecting all of the data needed to understand the buildings to be insured, the revenue streams to be insured and the employees to be insured. Many insurance companies require not only the standard ‘Acord forms’ but also detailed supplemental applications. You can and should have a very detailed supplemental application already completed that answers every question an underwriter can think to ask before they ask it.

To help with your understanding and the development of these bid specifications, there are three legs to the stool of insurance that you should know. First, what is the exposure? That is answered by the generic Acord forms and the supplemental that answers every question an underwriter can ask. Second, what are you paying for the insurance now, in details by line of coverage? Not sharing the current cost is detrimental to the effort. What you are paying now is combined with the third leg, which pertains to what has been paid out on your behalf in terms of claims?

If you can explain how your account can be profitable to the insurance underwriters, you can get the best deal because you can show the underwriter how much the insurance company will be able to charge, the exposure they are insuring, and the ‘payout’ from prior insurance companies for the same risk.

Remove one leg from the stool and it wobbles. Too many buyers think they are able to get a better deal by not sharing all three legs of critical information. They won’t share the current premiums; they have no idea of the true exposure; or they cannot provide hard copy results of the losses paid out on the account (called ‘loss runs’). In this sense, controlling the process means arming yourself with as much information as is possible.

Lastly, think about broker selection as a concept. Create an RFP for your insurance needs. Ask agents to review your three legs and provide the approach they will take to soliciting your account to the insurance marketplace. Interview as many as you wish, just make sure you clarify what you want in the RFP. Only then should you pick the best one based upon your internal criteria, and let that particular agent run the marketplace.

When I am in control of an account, I have the luxury of bidding to the insurance world, knowing that I control who gets the final order based on your criteria and my relationships. The analogy is the hiring of a real estate agent to sell your home. They control the process and get you the price you desire based on what you have to sell and what you want. Make the process simple so that you can control it and so you can get the best deal possible.

(Article by Tom Cleary, originally published in eHotelier on June 15, 2016)


About the Author

tom_cleary

Tom Cleary is an Equity Partner with the Sihle Insurance Group in Clearwater Florida and a member of Cayuga Hospitality Consultants. Based in Florida for his entire career, Tom has expertise in commercial insurance with a focus on hospitality and real estate as well as flood and wind exposures. Products offered include property, liability, automobile, crime, umbrella and workers’ compensation throughout the United States and the Caribbean. Tom also serves as a regional director for The Cornell Society, has been a board member and longtime member of the Florida Restaurant and Lodging Association, and serves in an advisory capacity to the Resort Hotel Association.