Consolidation: Adapting Operations to Lower Occupancy

Hotels around the world are faced with the challenge to operate at lower occupancy levels for the foreseeable future.  To contend with this reality, hoteliers need to reset their cost base to create margins that will sustain their operations.  There is an opportunity to expand on an approach that has been employed successfully: centralization.  I encourage a conversation around the question of how many positions in a hotel could be centralized.  By and large, Accounting, IT and Reservations have successfully been centralized by many and laundry operations have been centralized or outsourced in many hotels as well.  Here is a list of positions that I believe can be considered for centralization to optimize costs:

1.      Housekeeping management

2.      Engineering

3. Security monitoring

4.      Night Audit

5.      Sales & Marketing

6.       Front Desk Operations

7. General Management

Historically, centralization beyond Accounting and Reservations has been challenging for several reasons:

1.       Hoteliers and associates can be set in their ways and resistant to change

2.       Owners have trouble understanding the accounting behind clustered operations

3.       Systems do not support clustered operations

4.       Management companies don’t have the logistics set up to handle clustered operations, especially those with a multi-brand portfolio with constraints placed by the multiple brands they operate .

I feel that the first two points are no longer the main roadblocks as the current situation requires everyone to think outside the box to survive.  The other two points require more effort but are definitely possible even though systems to operate hotels have largely been designed to operate within the walls of the facility.  I was involved in the design of HotSOS, the world’s leading hotel service optimization platform, and when we built this as a hosted solution we decided to architect it in a way that would allow the operating lines around a hotel to be redrawn and create clusters.  This has been used quite successfully to centralize guest call centers and cluster hotels when it comes to specialized Engineering trades. HotSOS users should all capitalize on this capability, and more system providers need to consider this as they move to the Cloud.

I am now leading Hapi.  Hapi essentially Cloud-enables and normalizes the API layers provided by PMS vendors.  We help hotel and hotel tech companies build solutions that connect centrally rather than at each hotel.  This is evolving but can be used to create solutions that live above property, enabling centralized versions of some of the roles above.  We encourage all vendors to think like this and frankly use Hapi to accelerate their innovations.

Then, it will be up to the companies that manage hotels to create an operating model that supports these centralized roles, which to be staffed and housed, and the SOPs have to be rewritten.  Culture needs to be carefully considered at every step. This will be hard work that will pay off handsomely.  First, it will make many hotels that are suffering viable and in the long term, it will increase reliance on the management companies for services, in a very positive way.

I hope this gets people’s juices flowing.  I fully expect many people will disagree with some facet of what I propose, and all feedback is welcome.  Ultimately, I am not the one operating hotels.  I am just initiating a conversation that will hopefully bear fruit for the industry at large .

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