Why financial leadership is vital to your hotel’s success.
By David Lund
The business of managing hotel finances is not terribly technical or complicated. What makes it challenging is that it’s usually a very large job involving many people. In a 500-room hotel, you can easily have more than 20 forecast contributors. The communication system in the hotel is the key to both smooth management and predictive financial results. This is the “how to.”
If hotel finances are not a complicated matter, then why is it such a challenge in so many hotels? The answer lies in finding the “want to.”
Most leaders don’t naturally want to be managing numbers. They typically didn’t get into the hotel business with the idea that they would be business people with forecasts and budgets to run. They’re “people’s people” – artists and creators. We all know stories of those who fell in love with hospitality. But most of your non-financial leaders landed in hospitality for a short stay and decided to move in. Now, years later, they find themselves in roles with responsibilities to get the numbers done, and they don’t like it.
They don’t like it for a few reasons:
1: They are often responsible for numbers that are created by someone else – someone who expects that leader to own the numbers. If you’re cooking up the numbers in your hotel and giving them to your department managers, then stop! This is a complete waste of time, as they will not take any ownership with these targets. Simply because they’re yours, not theirs. Know that the other leaders are quietly thumbing their finger at you when you do this. You’re placing a huge expectation on them, and they don’t like it one little bit.
2: They don’t have a good financial communication system to use when dealing with numbers. Non-financial leaders need a strong schedule and constant communication around numbers. It’s not enough to publish daily reports and expect that the managers will read and use them. You need the numbers to be an integral part of the hotel’s daily communication system, not just arrivals and departures, VIPs, outlet hours and groups in-house at your daily meetings. Shine a light on yesterday’s revenues, month-to-date revenues and the variance to forecast. Every day, your leaders should know whether they’re on track to make their top line and divisional revenues. If not, then how will they be able to react and adjust labor and spending to compensate and effect the flow?
3: They don’t take the time necessary to properly manage the numbers. Your leaders will always treat numbers as secondary unless you show them that numbers are just as important as the guests and their colleagues. How do you do that? It’s simple: Make the numbers real, and treat leaders as adults who have financial power. Invite them into the captain’s lounge, and show them the respect you have for their role. Be supportive and helpful when things are not going well, and celebrate and encourage them when times are good. We all know business has its ups and downs and is cyclical in nature. Be the kind of leader who knows things are not always easy, and have respect for challenges.
Creating a desire
Let’s be realistic for a moment. If leaders really wanted to manage their expenses and know how much they spent, they could figure it out.
So how do we increase their “want to”?
We show our leaders what is possible with good financial communication by investing in financial leadership in our hotel. Leaders realize very quickly that it’s not so complicated, and mastering the numbers is 100 percent doable. Your leaders really want to be responsible for their numbers. It’s important, however, to first understand the distinction between “how to” and “want to.”
A couple of years ago, our daughter moved in with my wife, Johanne, and I while we were living in San Francisco. She had finished college and came to start her career and get on her feet. One thing developed that we were not anticipating: She was a messy housekeeper, and her room was a disaster. I asked her several times to clean it up, and somehow this just wasn’t working. I wasn’t going to send her to a class to learn how to clean her room or buy her the latest book on how to clean your room. She knew how to clean her room! But what was missing? She didn’t want to clean her room. I knew that if I were to have any impact on this situation, I would need to operate in the realm of increasing the “want to.” Once someone has an increase in their “want to,” the “how to” expands accordingly.
Cultivating the right environment
Increasing the “want to” is always the answer. What’s in it for the leaders? What will be better in their lives that will make them motivated to do the tasks at hand? With financial leadership in your hotel, there are lots of areas in which you can cultivate the “want to.”
Financial leadership skills are extremely valuable tools for your non-financial leaders. In today’s competitive world, it’s not enough just to be great with guests and colleagues. Leaders need financial skills to advance. All your leaders want to move ahead; they all want to lead. When you present these as opportunities, your leaders will happily step up. Remember, the only place your leaders can get these skills is from you. They need you to create this environment; the environment that nurtures these skills. Your leaders can see more dollars in their pockets, and rightly so. With these skills, they are much more valuable.
Your leaders all want to have an impact. Once you show your team what happens with their numbers, how numbers directly affect the business and that all stakeholders are directly impacted by their efforts, they will naturally want to get on board. Abraham Maslow’s 1943 psychological theory, the “hierarchy of needs,” observed the human desire for respect and purpose. When framed properly, it is incredibly powerful. Self-esteem and self-actualization are direct byproducts of having financial leadership skills and responsibilities. But this comes with a warning label: Make responsibilities a positive attribute, not negative. Management by embarrassment will backfire every time. The financial leadership in your hotel needs to be packaged with love and never fear. If we put fear and money in the same boat, we sink.
Taking the time to learn
When you train and invest in financial leadership, slow things down with the financial piece and your managers will see that it’s not complicated. Getting your leaders in the same room to study the profit and loss margin and how things come together financially in different departments is magic. The curtain falls, and your team will stop believing it’s a difficult subject. When a chef explains his labor and sales, and managers talk about their expenses, the whole room has a new window into the story.
How many of you have regular, or even irregular, classes on learning and understanding financials? None of this can be accomplished without slowing down and taking the time to learn. Just as with service training or engagement, we must invest in what we want to grow. Regular, ongoing creative training around the financials drives the “want to.”
The last part of the “want to” is my favorite. Why would I want a financially engaged team in my hotel? Don’t forget to check in on your “want to,” as well as your leaders.’ I “want to” have a financially engaged team, because I’m committed to having my team be as successful as possible. I am personally committed to my leaders and their individual prosperity.
By definition, “Prosperity is the state of flourishing, thriving, good fortune or successful social status. Prosperity often encompasses wealth but also includes other factors that can be independent of wealth to varying degrees, such as happiness and health.” When I have this kind of commitment to my team, I am making a real difference in their lives, which is priceless. By the way – your team will love you for being the one who leads the way; the one who gave them the biggest gift: learning. ■
David Lund, CHAE, “The Financial Hotel Coach,” is an international hospitality financial leadership expert who has held positions as a regional financial controller, corporate director and hotel manager with an international brand for 30 years. Lund authored an award-winning workshop and two books on hospitality financial leadership, coaches hospitality executives and delivers his financial leadership training worldwide. To learn more, visit www.hotelcoachdavid.com.