WHY DO WE STRUCTURE HOTEL MANAGEMENT FOR ACTIVITY NOT PROFITS?
It really is unforgivable that we focus our hotel management efforts to sell our public meeting space for non-profitable events rather than as a means to fill bedrooms where the real profits are?
Hotel Sales Departments control blocks of rooms and are there to sell bedrooms where, coincidentally, hoteliers make their profit.
Hotel Banquet Departments control meeting and convention space and are there to sell food and beverage events which basically lose money.
If you ask a developer or hotel owner why he builds meeting rooms in a hotel, he will tell you that they are there to fill bedrooms. If you then ask the person in charge of those meeting rooms if your group of 50 rooms guests can meet in the meeting room, he insists on a F&B minimum or $3,000.
Since I do not plan a group food event, I then take my 50 rooms (100 room nights) elsewhere to a location where the meeting room is free. The loss to the hotel in this case,
50 rooms at $125 X 2 nights = $12,500
Gross Profit on rooms 80% = $10,000
Then our illustrious Banquet Manager takes a banquet and the rooms go empty,
150 persons at $50 =$7,500
Gross Profit on F & B 30% = $ 2,250
Now this simple piece of arithmetic is not rocket science. However the 'policy' is real and applied in most large hotels today. I know this because we have been contracted to assist a major US corporation plan events in some 120 cities throughout North America throughout 2008.
The simple truth is that we separate the responsibility for selling group rooms from the management and booking of meeting and convention space; and the latter is typically a food and beverage person, more interested in food cost, average banquet check and keeping his banquet staff busy than in the overall profitability of the property.
The booking and sale of a hotel's public space is in fact a learned science. It is a delicate blend of knowing one's market intimately, anticipating the need for the space and the lead-time for its' booking, packaging the meeting space to fill bedrooms, refraining from booking advance weddings that logjam meeting planners with room blocks. All this having a seasonal factor which changes from Summer to Winter and from Monday thru Sunday.
This is the area where 'yield management' and pricing have the most to gain or lose. This is an area where 'profit engineering' is most valuable. However, GMs and Financial Controllers still measure their Banquet Departments with a combination of Public Rooms & F & B Revenue and do not or will not calculate the contribution that a complimentary meeting room will have on bringing in a profitable chunk of rooms business.
If you think that this makes me mad, imagine what the owner would feel if he knew how badly we were screwing up his profit potential!!
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