Generating margin at limited-service hotels: it’s not about doing more with less

Limited and select service properties have been uniquely well positioned to offer respite and temporary accommodation throughout the pandemic due to the variety of location, price point, and their existing low-touch guest service model. Whether hosting first responders and front-line essential workers or providing a staycation escape for families, these properties have served the disparate needs for those traveling — regardless of the distance.

Compared to their full-service counterparts, the limited-service model is predicated on providing a consistent quality of accommodation made up of offerings targeted to the common conveniences a traveler would find at home. As a result, layered hand-offs between team members and a reduced physical footprint are hallmarks for the limited-service environment.  While some might characterize this as “doing more with less”, it is the aim of limited-service operators – like all businesses – to align their human and material resources with products and services that their guests’ most value. However, with the broadening of guest type, change in stay patterns, and increase in demand, the opportunity to use this period to further enhance and redefine the operating performance expectations for the limited-service model has never been more fitting in recent history.

In this article we will explore how Carpedia Hospitality’s methodology supports limited-service operators by adding rigor when seeking profit margin enhancements.

Labor Modeling: the special union of data and observation

The need for a consistent approach to how operators both plan labor utilization and monitor attainment is vital for the success of limited-service portfolios. With properties that span across brands in numerous locations and comprising of unique labor guidelines, owners – and their operators – must have real-time visibility to variances as well as  the resources to troubleshoot and react accordingly. The granular nature of Carpedia Hospitality’s methodology allows for a balanced but comprehensive review of all functional areas across a portfolio of properties in an efficient manner. By utilizing both observations and collected data, opportunities and best practices are identified in order to inform the creation and adoption of best-in-class labor standards for each area. From there, the design of daily and weekly tools for forecasting, scheduling, and labor performance review are instrumental to execute changes and drive consistency across the network.

Operating Supplies: the journey from procurement to payment

It is not uncommon to scrutinize each cost line in financial statements as an initial solution when operations experience the unexpected. This can be a successful way to make minor changes in hopes of a larger impact over time. However, uncovering opportunities that reside below the surface requires increased diligence.

Setting guidelines for supply consumption can be a straightforward way to manage the costs associated with operating supplies. A few considerations are essential, such as: 1. how the increased or altered volume impacts established guidelines; 2. what affect do changes to guest type have on consumption behavior, and; 3.  what are the set of simple approaches that an operation will use to drive dynamic decision making to manage variances.  Additionally, a material adjustment to an operating state may warrant a reevaluation of supplier relationships and ordering parameters.  Carpedia Hospitality’s methodology is constructed to take a broad approach when reviewing this business area. By constructing activity analyses and analyzing both property and the portfolio’s procurement through to payment data, the nature of existing costs can be interpreted. The resulting output is a framework to manage short-term improvements and define long-term strategies.

Other Operating Expenses: should changing a lightbulb be really that simple?

The dynamic guest patterns noted above also impact a myriad of other operating expense lines that have traditionally been seamless to forecast as a ratio to revenue or occupancy; however, today’s environment may present novel challenges. To combat, hoteliers have a rare opportunity to implement such things as energy efficient solutions, including automated lighting systems and remote HVAC management, which will gift improvements to profitability by lowering costs generated by unoccupied rooms or spaces. Furthermore, strategically blocking the house can help to manage RevPAR, but also dynamically compresses the footprint of an operation. While often these changes may be considered small, and therefore receive a reduced priority, when analyzed in detail and across a portfolio, the results levied from implementing can be compelling.

Space Utilization: “a place for everything and everything in its place”

Given the limited physical footprint of these operations, maximizing the square foot available to generate revenue is paramount. Exploring guest room inventory categorization, the flexibility of interior and exterior public space to hold revenue-generating events, the duality of guest services that can be offered from a single service location such as the traditional front desk, and the amount and organization of back-of-house spaces should be analyzed. Once again, the construct of Carpedia Hospitality’s methodology enables both detailed and specific decisions to be weighed through modeling in order to aide in defining areas of opportunity and the means to implement solutions.

Conclusion

Stopping to analyze an operation during a period of strength or growth is often discussed, but equally often put aside. Yet doing so will not only identify areas for improvement at peak but also allow for greater variability to be built into the operation for scaling volumes. Identifying many of the points above may seem as easy as moving through a financial checklist; however, identifying the true nature and magnitude of the opportunity, designing and implementing improvement strategies, while continuing to operate a limited-service venue is not commonly a set of tasks that can be equally given the necessary energy by the on-site operators and leadership. Collaborating with Carpedia Hospitality at all stages of a limited-service’s operational lifecycle will provide the expertise and horsepower to improve the profitability expectations for this important asset class.

 

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