Why do Hotels Underperform

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When the market is normal all enterprises are expected to do well. If your enterprise is not doing well or under-performing, you have a reason to worry. But worrying will not help; it is an indication …

When the market is normal all enterprises are expected to do well. If your enterprise is not doing well or under-performing, you have a reason to worry. But worrying will not help; it is an indication that somewhere something is drastically wrong within your system. The sooner you detect and fix it, the better it is for you, the hotel and its team. Here are a few from the many possible areas to look at.

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  • 1. Why Do HotelsUnderperform?BY: RAM GUPTAWorried about the performance of yourhotel?
  • 2. Every tried to analyze the causes for yourhotel to perform below the marketbenchmarks in an otherwise well performingmarket?We discuss here the possible reasons andcauses that could be the culprits for yourhotels under performance and your worry. Itis well understood that you invested in theventure as a pure business proposition,expecting returns that are at least at par withthe market, if that is not happening it is thefirst symptom of the presence of systemmalignancy. The sooner you cure or removeit the better it is for you, the hotel and itsteam. I have found one or many of thefollowing reasons that may have attributedto this stage of performance.
  • 3. You and Your TeamAnalyze if you are the right person to leadthe management or operating team. Nodoubt you are the owner, but do you havethe knowledge or experience of operating ahotel in today’s competitive environment.Remember that as an investor you have amuch larger role and different role in theorganization. Is your team qualified andexperienced to support the demands of hoteloperations and marketing, its guests and themarket? While doing so one would be wellserved to keep the head and the heart at adistance and to take a very impassionateview to remove all emotional and personalbiases.
  • 4. There are only two possibilities, a “Yes” ora “No”, and you would know what to do ineither case if you do not wish to bleed anyfurther. ACT! Make whatever changes thatthe situation demands. Now here is a wordof advice. Take the help from a professionconsultant before you start trimming andsifting the team. While it just takes a secondto fire someone, it takes tremendous amountof time and effort to find a replacement andto make him or her part of the team.Your Product and ServicesFor every owner or team leader, there is noproduct like his. The best in the market, noone can compete with my product, wecommand the premium are some of the
  • 5. terms that one generally hears. But stop for amoment; think what the guests think aboutyour hotel, its food, its services and its staff.Are they happy or are they coming to you asa last resort. An indication of this would beyour number of walk-ins. If the walk inpercentage is high, that reflects that youwere the last choice or that people know thatthey can get a room at your place in anycase. I have come across many GeneralManagers who are very proud of the factthat they get over 50% of their occupancythrough walk-ins, totally unaware of the factthat walk-ins are not stable customers.Remember that there is no substitute tosending back a happy and satisfied guest sothat he becomes your spokes person,promoting you. This requires a well keptproduct supported by implacable qualityservice delivered by well trained and
  • 6. groomed staff. Absence of this would spelldisaster for the performance of the hotel.Your SystemsAn excellent product, led by an able andresult oriented leader can do nothing in theabsence of a proven hotel managementsystem in place. I have felt very sorry forowners who spend millions on the hotelproject but feel shy to spend money to buythe best suited operating system for thehotel. This results in a number of things. Theoperations become a free for all game. Eachdepartment carves out its own operatingsystem and style creating a total mess. Youget operating results in form and style that isnot comparable with the industry normsmaking it virtually impossible to compare
  • 7. the performance with that of yourcompetitive set. In fact I have even seenmonth end reports that hide more than whatthey reveal, yet the ownership gets the reportthat has over fifty odd pages, instead of asimple and meaningful top sheet.Your Goals,Targets andBudgetsA very importantaspect for the hotel to underperform is theabsence of targets for each operating area orhaving unrealistic targets. In such case, theteam and leadership feel directionless. It is afact that if one does not know what he issupposed to deliver, whatever he delivers is
  • 8. right. The question is if that is right for thebusiness or the hotel? I have recently comeacross a case study where the GeneralManager did not believe in the term“Budgets” or “Business Plan”. The results,though shocking, were not surprising. Abrand new hotel was bleeding month aftermonth. I hope, wish and prey that you andyour hotel follows a well planned budgetsystem where targets are set after takingmarket realities.Your MarketingDo you have a qualified and experiencedmarketing and sales team? Do you have asolid and interactive online presence? Areyou hooked to the popular GDS systems anddoes your local sales team cover the market
  • 9. in a way that the presence of your hotel isfelt in the market? These are some importantfactors that one must think over to ensurethat your hotel performs to the expectedlevels of performance and that your hotelgets a major market share and command aleadership position in its segment in thelocation and city.We have discussed a few important factorsthat need attention to ensure that your hoteldoes not underperform. It must beremembered that we are dealing with aproduct that is highly susceptible to fashionand trends, moods and attitudes and aboveall highly perishable in nature. If theleadership and the team are not reactive tothe market dynamics, guest’s preferencesand state of the art technology,underperformance should be staring in your
  • 10. face, don’t get surprised or shocked. Youhave asked for it!Ram Gupta is a professional hotelier with over four decades of experience inIndia, Far East, Middle East and Europe. He has completed his hotel managementstudies from The Institute of Hotel Management Catering & Nutrition, Pusa, NewDelhi and has done higher studies from Germany. A Member of Institute ofHospitality, U.K., he is also a Certified Hotel Administrator from U.S.A. He hasworked for some of the best hotel chains and was associated with over two dozenhotel projects in varying capacities. He has served on a number of trade bodiesand boards of various companies. He is now an independent consultant in theIndustry. His web site can be viewed at www.bcgglobal.com and can be contactedat ramgupta@bcgglobal.com http://www.bcgglobal.com SEPTEMBER, 2012 © BUSINESS CONSULTING GROUP GLOBAL