What really works in the hotel business? - Insights

What really works in the hotel business?

Success formulaDon’t tell me you never worked for a hotel and thought there were so many things in that company which were poorly managed and could be improved. After your initial evaluation, you have a talk with other stakeholders (owning company/management company/staff/union) and suddenly a big discussion erupts on what will work or not and what is best for the company.

Firstly, to get clarity and a sharp focus, let us contrast what really works by looking at the opposite – what often does not work in the hotel business?

When taking a top level/professional business view, executives are often very concerned about strategy.

But honestly, how many leaders and associates across the globe truly know their organizational strategy (or know it, but do not understand, or maybe understand and know it, but do not like it)?

The “know-but-not-understand” group usually has a sub-group that will answer the question whether they have a clear strategy (or not) with something like this:

“YES…sure and we do it every day….”

“We sell more and soon we’ll launch a new special offer to drive more revenue.”

(Is that strategy?)

We also set ourselves apart from others by attempting to stand out. We might present ourselves now as a high tech company. All staff have smart phones so we can communicate and quickly respond to any inquiry or process. Soon we will double our guest base, as they will be impressed that our firm is so high tech. Simultaneously, we will restructure and reduce human resources by implementing multitasking and job merging, which will result in more than 30 percent reduction in payroll, etc.

All these are actions that result in a short term impact, but they have nothing to do with strategy.

Nitin Nohria, William Joyce and Bruce Robertson, the authors of “What really works – the 4+2 formula” may have heard similar responses like the above and that may have prompted them to find out what really works and how professionally managed companies perform better.

In 1996, they started the so-called Evergreen Project that lasted for five years and over 160 companies were surveyed and analyzed.

The result was strikingly simple and clear.

It’s a 4+2 formula, meaning companies that have good Strategy, Execution, Culture and Structure, plus two items in the Talent, Innovation, Leadership, Mergers and Partnerships categories perform better.

Inverted CascadeSo what does that mean? If you manage a hotel, put your property to the test by asking the following questions:

Strategy

  • Do you have a strategy?
  • Is the strategy clear, concise and easy to understand?
  • Do associates know it so well that they could lecture others about the strategy?
  • Do all stakeholders live and breathe this strategy, and if not – why?

Execution

  • How good (and fast) are new systems implemented and new programs rolled out (compared to “speed to market”)?

In a company with a strategy that is embedded as a culture, you will have a highly engaged team that will work very hard to support its leader in rolling our any new program. That can have a huge impact on the company’s performance (e.g. if your HQ just readied a program – new technology that saves the hotel USD 20,000 in laundry operations – you will clearly see the impact if you struggle for three months to get that new program implemented).

Culture

  • Do you have a culture that is embedded and a program to maintain the culture?
  • Do all team members know and practice that culture, and can they easily give examples of how and when they used it during the last four weeks?

Remember Peter Ducker’s quote: “Culture eats strategy for breakfast”!

Structure

  • Does the organization use systems and structures such as SOP/P&P, Training Programs, Career Development, Audits, Weekly/Monthly Operation Reviews, TQM to ensure efficient and consistent operation and performance?

Leaders must be mindful, as the trick is to strike a balance between too much structure and regulation and not enough. A good leader will review and give directions to focus on the core (areas where the company is good and make them even better).

Talent

  • Does your firm have procedures in place on selecting/hiring and criteria for finding the right talent?
  • Are there career planning, development, coaching and personal development frameworks in place and available?
  • Does your firm believe and consistently work towards employee engagement that is coupled with a performance management linked to an incentive program?
  • Is the remuneration and benefit structure transparent and fair?

Linking back to the above, if your strategy is good, your firm’s culture will be attractive to guests and employees. Employees working for other companies (competitors) will be attracted to the hotel, as they want to be part of a great purpose (and a great company).

Do not forget that the above is vital to retain people. Do not forget the value you may lose when good people leave the organization and the investment and effort that must be expended to on-board people that join the company (externals).

Innovation

  • Do you have an employee suggestions program where staff is encouraged to bring forward work/process improvement suggestions (including recognition of their contribution) and is that (silent/potential) knowledge actively managed?
  • Do you have a person (position) that is in charge of those suggestions and are they followed up and administrated (library/open source)?
  • Do you allow and promote time where staff can think or explore the firm’s business and operation to come up with innovative (disruptive) ideas and do you have a structure to skim, evaluate and channel (and hopefully leverage) those ideas?

Leadership

People often think that “managing” and “leading” are interchangeable. A leader will create an enticing future outlook and, by that, inspire and motivate the people around him or her to follow their direction.

Employing a great leader can propel a hotel’s performance significantly, provided there are supporting structures and empowerment provided (e.g. pay, performance scheme, engagement with all levels is welcome; an inspirational managing technique is encouraged). A leader will swiftly surround him/her self with a high performance team and ensure an environment of support and trust that will allow them to succeed.

Good leaders are realistic. They know a company can’t outperform competitors in every area of their operation, so they look at which processes are most important to meet guest needs and focus all energies and resources on making processes as efficient as possible.

Mergers and Partnerships

Enter new business or industries or merge with partners that already operate in that market/sector.

Develop a screening and evaluation structure that will assist you in your decision making process.

Here you need to consider your owning company’s business model and strategy: long term/short term/invest asset heavy/light returns, driven (ROI / dividends) etc.

Now – put your property to the test

Look at your property – even if you perform exceptionally well. You may just ride on the wave, but that can change any minute, and you may also leave another 10 percent on the street. Also, be very cautious not to step in the complacency trap. Scrutinize the four core and start by looking at structure.

  • Do you have a good process and maintenance system in place and are they all running at 100 percent? (Best do live spot checks and be very critical).
  • Do you have the right structure in place? Look at your culture as it links back to structure because many processes and systems are needed (or the actual base) to make culture work. Execution depends highly on structure and a company’s culture (e.g. good structure and good culture = good execution).
  • Now you might ask me (rightfully), why does strategy come last? This inverted cascade model (Figure above) is indicated for an existing/running hotel. For an opening, you use the model with strategy on top. Interestingly, most hotels have a strategy (Vision/Mission) in the first part of their yearly budget and business plan. However, to be honest and realistic, I have seen business plans from many (local and international) hotel companies, and it is mostly carried forward from one year to the next rather than being effectively implemented.
  • Challenge yourself (doesn’t this sound familiar?)

”Our aim is to be the best 5-star hotel in XXX-City” You may hope that works, forgetting that there are about 30 other 5-star hotels in the vicinity that have the exactly same strategy. So how great are the chances that you will be more successful than your competitors? The hardest part is to get the strategy implementation right – not to forget to be very critical and to put great rigor to that process.

With this exercise, we have reversed the cascade model by putting structure first and strategy last. Then you have to select two additional domains. In the hotel business, I highly recommend focus (out of the 4 additional) on Talent and Leadership. We need good people and it is becoming harder and harder to find, retain and develop people with a service mindset and business acumen.

The above sounds like a breeze in theory, but in reality, such is not the case. Many managers will face a hard time to understand, develop and implement something like the above. In my experience, many companies do not know about nor practice that, and very often, the stakeholder commitment is limited or does not exist, which makes it ‘mission impossible’. This is especially true in Asia where most owners will say “do not waste my time and money with such funny stuff  – better go and work hard to deliver the returns”.

(This article is based on the study and findings of Nitin Nohria, William Joyce and Bruce Robertson – What really works – the 4+2 formula HBR – 2003)

About the author

Christoph Voegeli Christoph Voegeli, born in Klauserslautern, Germany, is a hospitality management veteran with over 25 years of experience and exposure including significant experience in guest speaking and lecturing.

Graduating from Hotelfachschule Sudliche Weinstrasse (Germany) in Hotel Management, he furthered his studies with RMIT- Melbourne earning an Executive MBA.

During his extensive career in hospitality, he has worked for international, regional and local companies across the globe in Europe, Asia and also on the sea.

His interest specializes in Sales and Marketing (including revenue and e-commerce), Leadership (including a cross-cultural perspective), Organization Restructuring/Transformation, and People Development.

 

 

 

 

 

 

 

 

 

 

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