Productivity at the Center Stage

(GA, February 2021)

By Giovanni Angelini

(a leadership thing)

The present pandemic crisis has created an imperative for hospitality organizations (hotels included) to reconfigure their operations – and an opportunity to transform them with a clear objective to become much more productive. Remember that things will not be the same – will not return to their previous modes and must prepare for the future as eventually this nasty virus will subside. Travel will come back, it will just take time. (In support to this article, suggest to refer to the 4Hoteliers article of Jan. 25, 2021 “it’s time to recalibrate”)

Maximizing productivity is something all businesses strive for, but measuring it and finding ways to improve it is a challenging task. Increasing productivity has become one of the most important strategies to succeed in business.

Productivity measurement is a required management tool in evaluating and monitoring the efficiency and the continuous performance of a hotel operation or of a corporate office and of course of its leadership and management structure.

What is productivity? and how many in your team can answer this simple question? As the first step, it is critical to define what is productivity as there are a lot of confusing versions out there including:

“Output vs Input”. (objective of maintaining or decreasing input but increasing output).
Quote from the Uniform System of Accounts for Hotels (USALI); “total sales divided by the total of payroll and related expenses”.
“Measuring a company’s net sales relative to employees’ labor hours/costs”.
“Net sales per employee versus wage costs”.
“Hours worked divided by the number of rooms sold in the room division or by the number of covers served in F&B”.

Measuring productivity of the room & housekeeping functions or of a hotel restaurant is relatively easy, so it is the measurement of the RevPAR, the RGI, the TrevPar, the GOPPAR, the EBITDA, and others. But the objective of this document is to highlight and find the best ways to measure the productivity of the whole operating structure of a hotel or of a head-office and of its leadership.

A very useful measurement that should be included in monitoring and measuring the productivity is the Flow-Through and Flex analysis as compared with budget, with previous year or even better with the forecast. Measuring how much revenue is converted to profit over a specific will be of paramount importance. (Flow-Through is defined as the percentage of incremental profit that flows to the bottom line from each incremental dollar of top-line revenue when there is a revenue surplus. Flex is defined on the amount of profit or percentage that is saved, “flexed,” when there is a revenue shortfall).

In the classical model, improving productivity meant increasing the whole organization’s efficiency-performance-profits while keeping the input-costs at the same level or reducing them. This is perhaps the best definition of productivity and for all people in your team to embrace.

Hospitality is an industry built on people-to-people interaction and also involves a huge variety of tasks, skills and expenses. A labor-intensive industry that requires balancing the needs of customers and balancing the high operating costs. This is an industry with many variables to track, many theories for improvements, and many ways to measure results.

What is the best value to accurately define how productive the business is? volume-quantity vs quality, average spend per conversion, how much return business is gained, new business, customer and employee satisfaction, etc. What strategies will work better for you in the future and what exactly it means for you to be more productive? Is there a lean-efficient and qualified team in place? Service consistency and employee turnover? Also, it will be interesting to see how robotics and artificial intelligence develops in hospitality to improve productivity and what management has to do.

An important task for your recalibration is the development–establishment– implementation of easy processes and goals to measure productivity within the organization that everyone understands and participates in. The objective of course is performance, bottom-line results, and continuous growth. Must accept that many management concepts fail because they are too complex and thus not fully understood nor embraced by all, keep it simple as it is a teamwork. Clarity on what it takes and on what it needs to be done to increase revenue-income over previous period and what it takes to maintain or decrease expenses without impacting the quality of the product and of the brand.

Change in the workplace is never easy to make-achieve but when it impacts the performance and the success-failure of the organization, leaders and top management does not have many choices, it has to be done. The importance here is clear and regular communication of what needs to be achieved, how it’s done, and how to get there.

On developing a measurement process for your organization, must take into consideration the contribution of the individual, of the department/division, and of course on the results of the company/hotel. All individuals and all departments must participate. Also, have to incorporate the monthly-quarterly-yearly measurement and achievements of all. Remember that the best companies are built on clear requirements, achievements, rewards, and most importantly on trust. “I trust that you will do your very best to achieve the required results and you will trust me to take care of your progress”.

Of course, it is understood that every hotel-organization is unique and has its own culture and management process but the basics for productivity’s are common and normally consist of; strong leadership-vision-culture, skills-trainings, efficient technology, innovation, teamwork, and clarity on the individual and on the company KPI’s. Those are basics-vital factors when it comes to increasing productivity.