The difference between expense and investment - Insights
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The difference between expense and investment

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Expense vs investmentIn the hotel business we need to be relevant and on top of the key issues that make our venture successful and ultimately sustainable in the long run.

This piece is about how we can differentiate between expenses and investments to make sure we recognize the difference and make the best decisions for the ongoing health of our enterprise. Especially now that we are sidelined and looking for a new normal.

What lesson can we learn from how we operated in the past? How will we operate in the future that is more sustainable and healthier?

“Toilet paper is an expense.” – David Lund

“An investment in knowledge pays the best interest.” – Benjamin Franklin

When I first started in the hotel business many years ago one of my first bosses told me to never run out of beer or toilet paper. What he did not tell me was the difference between the two. Quite simply toilet paper is an expense and beer is an investment. You may be asking why? Well, we flush toilet paper and that is the end of the story whereas with beer we buy it then sell it for more than we paid for it and make a profit. Therefore, beer is an investment. I believe beyond the beer and other things just like it, there is a much more important thing we need to invest in.

Our business is full of expenses and many times we think of everything as an expense and overlook the opportunity to make an investment that will give us a return just like the beer does but also elevate that investment to a much more solid and continuous return. We miss this distinction because we do not truly see the ongoing need to continuously improve. We confuse the idea of saving cash, reducing expenses and investing in our future because we are caught up in survival mode. Just like most of us are right now. I get it and for many it is just what you are going to do. But for some of you – you see what Ben Franklin saw.

Remember how busy you were for the last 10 years? Remember how easy it was to make money when the phone just kept ringing and the rates kept going every month and year? Do you also remember telling yourself that you will get to the other “things” when it slows down? I am willing to bet you do. Where is the lesson in all of that?

The lesson lies in compounding. Just like we all know a savings plan for retirement works best when we put aside some money every paycheck and just give it up. When we know that in the long run it is simply good housekeeping to never stop saving because the effects of the compounding will take the edge off any bumps in the road. For your business it is precisely the same. Investing in your business continually is the best way to plan for retirement or, in the case of your hotel, it is the best way to plan for maximum value and/or the time to exit.

So how do we invest in our hotel, so it compounds and provides a shield to the bumps in the road that we know are going to happen? Well, I think the answer is right in front of us, or at least it was a few weeks ago. What do we say is the most important asset we have? What do we tell our associates and leaders we value the most? What do we tell our customers that we will provide them with? We tell everyone that it is our people.

We need to invest in our people

That’s it. Period. Full stop.

People today more than ever want to work for employers, companies and teams that invest in them. Even when it is not so convenient to do so. Why? They want to work in an environment that provides growth and opportunities. They want to be in it for the long haul. But that flies in the face of our throwaway society, for our need to make more profits this year than last. Is this the opportunity to change that way of thinking?

I hope for most of you that when the people start to travel again you can find the associates and leaders you need. We all know that our track record in hospitality is this: We are first to get the cold and the last to recover. I also hope that when we come out of this mess can we make the kind of change that will really result in an ongoing investment in our people. To educate and develop them so our industry can become truly much more professional at all levels.

If we can see our way to continually invest in what we say we value most, our people will produce more, the results they create will be of a higher quality and our return on that investment will be superior.

That is the real difference between an expense and an investment.

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