How to Avoid the Big Miss
5/1/2012 | Strategic Leadership
As I was recently reading legendary golf instructor Hank Haney’s much anticipated memoir on his time with Tiger Woods, I was struck by the book’s title, “The Big Miss” and how those three words apply to the hotel industry.
One quote in Haney’s book from Hall of Fame professional golfer/instructor John Jacobs especially caught my eye: “In competitive golf, it’s not so much where the good ones go. It’s where the bad ones go. You’ve got to build a swing that will eliminate the big miss.”
In similar fashion, whether it’s managing an asset as a third party, acquiring an existing hotel, or ground-up development, smart hoteliers implement steps and create procedures to eliminate that Big Miss.
On average, 90 percent of investments will not deviate more than 5 percent from the investment thesis, unless there is a ‘Black Swan’ event like the 2008 meltdown or a faulty investment thesis. It’s that other 10 percent that keeps us up at night because that’s where the Big Miss may be lurking.
Following are key measures to track and trend to maximize cash flow through revenue enhancement and expense control initiatives to help avoid that Big Miss. Please keep in mind that I am speaking in generalities:
Hotel Market Depth
- What is the strength of the local market? What are the local demand generators and what has their growth been historically?
- The ability of the local market to generate demand through various sources (e.g. tax breaks, convention center, etc.) has a trickle-down effect on everything else.
Monitor Competitive Set
- What is the current condition of the competitive set? What is the seasonality in the market?
- What have the historical Occupancy and ADR trends been?
RevPAR Index Growth
- 100 percent RevPAR Index sounds good, but what is the true potential of the property compared to its competitive set?
- Even if the property is well above 100 percent RevPAR Index, what was the growth in its RevPAR Index? Is the competitive set catching up to your asset?
Guest Satisfaction Scores and QA
- What are the guests and the franchisor saying about the property?
- Which one is better, a revenue increase of $50k but a House Profit increase of $15k or a revenue increase of $40k but a House Profit increase of $20k?
- Most Flex/Flow calculations are done vs. the budget but what about last year?
Revenue and Expense Forecasts
-How is the hotel trending to budget but more importantly, how is it trending to the last forecast?
eCommerce and Revenue Management
- Is the hotel being represented appropriately on all channels?
- Are you making the most of that exposure or leaving something at the table?
By carefully tracking these measures, you can minimize the possibility of falling victim to the Big Miss.
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