How can you forecast for meetings, business conferences, weddings and special holiday gatherings like those that take place at Christmas when you have no solid idea what restrictions the future holds? How can you accurately build your budget assumptions if you are not sure when regular business and leisure travel will resume to drive up occupancy rates?
These are some of the challenges currently faced by chief financial officers in Europe and throughout the world. In the latest HFTP Europe Hangout, the focus was on finance, as well as on the challenges being faced by CFOs in the current environment. Paul Nisbett, finance director at Valor Hospitality Partners, moderated the session and gave his advice on what hoteliers can do to maintain clear, consistent, transparent communication with investors, owners and banks in the face of an unclear, unknown future.
When you have to make forecast assumptions, you must have the foundation in place to communicate effectively with investors. Include your risks and opportunities in the forecast assumptions. Highlight what you would normally do, what has been budgeted, and what your forecast assumes. As changes happen, such as mandated lockdowns or curfews, you can update your assumptions and feed that to your investors and owners to keep them updated. The total “unknown” has obviously been the biggest challenge. So, the more you can guide your assumptions and relay them back to your investors, owners and banks, the more they can understand the swings that are happening. So many changes occur on a day-by-day basis that affect your ability to forecast, so you need guiding principles to help you adjust your forecast constantly and stay close to what is occurring within the industry.
Cash flows should also be evaluated and updated constantly. You can update your 90-day cash flow as much as three times per week and use it to guide your long-term forecast, where you project out 12 and 24 months, that you provide to your investors.
During the past several months, governments have introduced new policies regarding contact and social distancing. This has recently translated into new investments in technologies like mobile apps for food ordering, digital keys and self-service check-in. Some properties have been reluctant up to this point in time to introduce these technologies at the risk of restricting or impersonalizing the guest experience. However, CFOs may experience renewed pressure to invest in these technologies to streamline operations and reduce contact points. These previously self-imposed barriers from the brands preventing implementation of contactless technologies are now being broken down to allow for the development of technology to meet new health and safety guidelines.
Additional investments should be made in risk management. Most hospitality businesses have experienced a reduction of staff as a result of the current climate. With fewer staff working with less resources, you may now require stronger control mechanisms to mitigate potential risks such as fraud, which has been documented to be on the rise. These mechanisms could include a stronger internal audit function and additional risk management functions for finance, operations and human resources.
It can be a very valuable time while business is quieter to assess your risk profiles, ensure your data is protected and the proper cybersecurity controls are in place, and evaluate your compliance to existing data regulations. Also use this time to examine your current controls, understand your checks and balances, and determine any current processes that can be automated.
If you have had to furlough a significant portion of your staff, take the time to develop a clear and detailed training process for when they return. Many workers have been off the job for several months and should receive the support and tools they need before they are expected to fully return to their responsibilities.
These were just some of the challenges that Nisbett addressed during his session. View the complete session online. HFTP Europe Hangouts are free to attend and continue Wednesday, October 21 at 15:00 UK with “The Future of Wireless in Hospitality.” Learn more by visiting the HFTP website and register today.