The business of managing the hotel finances is not terribly technical or complicated. What makes it challenging is that it’s usually a large job involving many people. The communication system in the hotel is the key to both smooth management and predictive financial results. This is the how to. So if the hotel finances are not a complicated matter, why is it such a challenge in so many hotels? The answer lies in the want to.
Most leaders in the hotel don’t want to be managing numbers. They typically didn’t get into the hotel business with the idea that they would be business people with forecasts and budgets. They’re “people people”; artists and creators. They now find themselves in roles with responsibilities to get the numbers done and they don’t like it.
They don’t like it for a few reasons:
1. They are often responsible for numbers that are created by someone else; someone who expects that leader to own the numbers. This rarely happens.
2. They don’t have a good financial communication system to use when dealing with the numbers.
3. They don’t take the time necessary to properly manage the numbers.
The want to do this in all of these areas is low. Let’s be realistic for a moment and ask ourselves: “If they really wanted to manage their expenses and know how much they spent” they could figure it out. So how do we increase the want to? We show them what is possible with good financial communication by investing in financial leadership in our hotel. Leaders realize very quickly that it’s not so complicated, and mastering the numbers part is the express elevator to career advancement.
One last thought on the want to. If you’re controller really wanted to bring this type of financial leadership model into your hotel he or she would already be doing just that. Controllers in large don’t want to lead financially; they’re just not comfortable doing this. If they were they would already be doing it. When I created the first financial leadership workshop over 8 years ago, I did so kicking and screaming. I was kicking and screaming because I didn’t want to get up in front of a group of leaders and talk about the finances. I was scared, I was pretty sure people would laugh at me and my workshop. But you know something magical happened that day. I realized this financial leadership workshop solved my biggest challenge. The challenge of getting department managers and leaders to give me what I needed to do the; forecast, month end, the budget, you name it. The financial leadership training gave the leaders much needed information; they needed to know what all this information was for. They were pretty sure I was just making their lives miserable by asking for so much from them on a schedule every month! Once the leaders realized it’s all connected, not so complicated, they got in the game. Overnight my biggest challenge was gone. That’s the power of the want to. Once your leadership embraces the want to, the how to is everywhere.
8) Many Hands
One of my mother’s favorite sayings was “many hands make light work.” With financial leadership, we want as many people involved in the “monthly financial circle” process as we have involved in preparing work schedules or preparing purchase orders, “consuming the hotel’s resources,” plus the people who forecast its revenues. The hotel must adopt a culture that stands for “every line needs an owner.”
In the past in many hotels, the financial information was not shared with many leaders. It was considered to be secret and private. Most hotels today share financial performance information with leaders. What financial leadership hotels do is match the resources, consumers and revenue producers with the appropriate lines in the profit-and-loss statement, and literally every line has an owner. The owners forecast, track and report on their lines every day and every month. With a system that encompasses the entire statement, we ensure that all facets of our business are being managed. This promotes more communication and better decision-making because someone is actually taking active responsibility for every line.
From a monitoring and review point, we can clearly see what areas are working and which ones are not, and we can then take the appropriate action with the right individual. If we attempt to manage the numbers by area or department, we are missing a huge opportunity to really hold the business up with many hands.
9) It’s A Circle
The financial window in a hotel opens and closes every month.
It’s both a curse and a blessing.
It’s a curse because it seems like we just finished with one month and another is upon us; it’s relentless, and like the tide, it never stops.
The blessing can be hard to see but it’s there—it is the blessing of practice of mastery.
We get to start all over again and practice every month. Every month is an opportunity to re-set; to start over; to learn from what worked last month; to improve what didn’t, and get better and better at this game.
The month is a circle that we move through. We can use the circle to organize, practice and master this process:
- The circle starts with the forecast, and each person prepares his or her individual part. The forecast is zero-based in all areas and is consolidated. Changes are made to the zero-based numbers and each area has a plan to execute to achieve the desired result.
- The circle continues into the month and each area monitors the revenues, payroll, and expenses daily.
- The hotel uses a system of distant early warning to ensure that revenues are materializing as planned, or if not, that adjustments in spending and payroll are made. They do not wait until the middle of the month to see how things are shaping up; this is done daily.
- The circle continues into the month-end closing process in which each area receives and reviews the general ledger listing and financial statement for the areas they forecasted and monitored.
- Errors are found before the books are closed. Then, in turn, each person who forecasted, monitored and reviewed his or her section writes the commentary for their part and the commentary is consolidated and edited.
- The process starts over again and the circle is back where it started with the forecast preparation.
10) There Is No One Coming To Save You
Let’s face it: We all have superhero fantasies. When the landscape is in flames, and the bad guys have launched another plot to vanquish Gotham City, we would really love for Batman to swoop in and save the day. In the hotel world, people expect controllers to put out a lot of fires and rescue the masses. I hear over and over again from GMs that a good controller should be able to get the numbers and the people with the numbers organized, and if only he or she would step up, things would be just fine.
The controller could be a rock star—or Batman for that matter—and it’s not enough. That financial savior you’re looking for is not coming anytime soon. It is simply too big of a job for one person to manage every detail, and he or she relies on the many people doing their financial part to support the bigger picture.
So, what is the solution? What’s the way to master this process?
You, the GM, and the executive team, are the answer. Leading financially means you ensure that every leader is working effectively financially in the same way that you do by ensuring your leaders are being of good service to your guests, and engaging positively with other leaders and colleagues.
You would not have a leader on your team who falls flat with guests or with colleagues, so why put up with weak financial performance?We do so because we have not yet created an effective communication process to lead financially. But all that can change. We can lead financially by embracing the necessary processes that put the proper focus and effort on finances every day in your hotel. Get your team moving together financially, pull the right triggers and don’t accept half measures anymore.
Know that you can create the outstanding financial environment you want by doing the following:
- Hold your team accountable for the efforts and the results at every level.
- Get leaders plugged into their part by using the strategies in this list.
- Give them the training and resources to lead financially.
- Create a “financial leadership machine” in your hotel. Your team is the machine and you hold the key.
There is no one coming to do this for you. However, there is help available if you look in the right place.
So there you have it, a process to follow to grow your hotel’s financial leadership. This financial leadership is my passion and my mission in my professional life. My mission is to equip you with the tools and the process to use to master your hotels/brands financial leadership.
If you enjoyed David’s blog series, be sure to register for his webinar on Thursday, October 15 from 2 – 3 p.m. CST.
David Lund is an international hospitality financial leadership expert. He has held positions as a Regional Financial Controller, Corporate Director and Hotel Manager with Fairmont Hotels & Resorts. He authored an award winning workshop on hospitality financial leadership. David coaches hospitality executives, leads group facilitations with hospitality teams and delivers his Financial Leadership Training workshop throughout the world. He earned his CHAE from HFTP in 2006, and he is a Certified Professional Coach.