One of the hospitality industry’s most interesting aspects is its diversity. There are many different hotels in numerous countries and the job of hotel manager varies substantially throughout the different regions of the world.
Productivity and Quality
A critical challenge of hotel management, especially in high labour cost areas such as Western Europe, Northern America and Japan is the simultaneous combination of productivity management and quality management. While the term productivity is most often associated with the goods-producing-industries, it is critically important to monitor and manage this aspect of performance in the service sector as well. Productivity is a ratio between input and output at a given quality level. It can be calculated for specific shifts, for individual jobs, departments, or for a property as a whole. Productivity levels can be measured for all factors of production, including labour. In the hospitality industry, there are many possible input and output units which may be used for productivity management purposes. For a specific hotel and its departments, the most meaningful ones need to be agreed upon beforehand. Input units can be measured in terms of worked hours (per day, per week, per month, …), payroll expenses, etc … . Output units on the other hand can be monitored in terms of revenue, covers served, number of rooms cleaned, the number of check-ins/check-outs, etc … .
Keeping it Simple
One very important issue in productivity management is the trade-off between accuracy and simplicity. There are many factors which influence productivity results. While it does make sense to account for the very large ones (see average rate discussion for front office productivity below), for most factors it is more useful not to filter them out of the calculations but rather evaluate the magnitude of their impact once productivity results are analysed. This makes the system more practical and its internal links easier to understand to all involved, this will positively impact its acceptance by the different organizational levels. For example: If a department’s worked hours are used as the basis for its productivity calculations, this department’s scores will tend to decline on days when many worked hours are spent on training. However while the time spent on training has an immediate negative effect on productivity, its long-term benefits are undeniable. Training time could be deducted in productivity calculations, however this practice would complicate the concept and new questions would arise. For instance: Are short practical training sessions held before a shift, also to be filtered out? How about the monthly departmental meetings; is this time to be deducted from productivity calculations? A similar situation occurs when employees help out for an hour or two in another department due to short-term volume peaks. This happens when front office staff assists out in the banquet department during peak coffee break hours. In theory, the time spent helping another department could be deducted from the originating area and charged to the receiving department. However, although it would make overall results more accurate, this would be impractical if such departmental shifts happen for short periods of time on a regular basis. I suggest accounting for these shifts only if they are planned in advance on the work rotas and if the time spent in the other department is higher than two hours. In general, it would be too time consuming to adjust every day’s working hours for the small impacts which usually have a negligible effect on monthly results. The marginal accuracy gained does usually not justify the effort required to account for it and the resulting loss of simplicity.
Measuring Productivity
For a hotel’s productivity, I suggest using a global measure such as total revenue per worked hour, which will be monitored on a daily, weekly and monthly basis. With this indicator, one has to keep in mind that results will be affected by such impacts as the ADR of the day, the number of departmental meetings held, etc … . These issues must be considered when the results are analysed. Each operational department should also use one to two productivity measures. In the restaurant for example, revenue per worked hour or covers served per worked hours should be the most meaningful. Whether this is done per meal period (breakfast, lunch, dinner) or for whole days depends on how accurate the result are needed to be. But again, the trade-off between accuracy and simplicity needs to be considered. It is much better to have a simpler, slightly less accurate but still meaningful system, which everyone understands and follows rather than a highly accurate but complicated concept, which nobody really uses. Many management concepts fail because they are too complex and thus not fully understood by all organizational levels. If a separate productivity figure for the kitchen team is required, one may use food revenue per worked hour. This figure will tend to be higher when the F&B business mix shifts towards banquets instead of à la carte. If there are separate kitchen crews for restaurants and banquets, two such scores specific to each team can be used. Again the accuracy versus simplicity trade-off applies. For Front Office, one meaningful measure is movements per worked hour (a movement being defined as a check-in or a check-out). Movements should be used as output figure instead of the rooms department revenues, since ADR fluctuations will have an overwhelming impact on the scores, therefore in this case it is sensible to factor them out. The check-in of a leisure guest on a Saturday will use approximately as much time as the check-in of a corporate guest on a Wednesday, who may pay a three times higher room rate. However when reviewing the results, it should be remembered that a 20 person group check-in takes much less time than 20 individual check-ins and will thus have a positive effect on productivity measured as movements per worked hour. While this effect should average out in most months, in certain periods heavily biased towards groups business (i.e. summer months) the scores may be strongly affected. In housekeeping, one obvious productivity measure can be rooms cleaned per worked hour.
Which Hours to Include
One important decision which must be made beforehand is which employees to include in the calculations. For example should the concierge’s working hours be included in the productivity figures? I suggest doing so, if the concierge does check-ins and check-outs. How about the night auditors, guest relations agents and the front office manager? Similar questions arise in other departments with regards to restaurant supervisors, greeters and the Executive Chef. The question of who to include in the productivity measures is not as important as the commitment to remain consistent after the decision has been made. Once it has been decided which positions to include in the calculations, one should stick with this decision in order to allow for future like for like comparisons.
Benchmarking
Productivity benchmarks should be set for every operational department. They can be used as performance objectives for department heads and as a basis to budget labour costs, derived from expected revenues.
It should be noted that it is difficult to compare different hotels with each other in terms of productivity levels. Even hotels belonging to the same company and located in the same country are not easy to compare. The reason is that many specificities influence productivity levels. For example the overall average rate of a hotel (revenue per worked hour) and its business mix (individual check-ins versus group/airline crew check-ins) impact scores. In terms of F&B productivity, results are highly affected by the restaurant concept (buffet versus à la carte, type of service), the physical structure of the restaurant (location of service bar, length of way to the kitchen, whether the restaurant team also handles room service or whether it is a separate unit, …). Therefore, the most meaningful exercises are those, which compare and benchmark a hotel or a department with itself (i.e. with its past productivity levels) and monitor trends.
Productivity can be effectively increased through careful forecasting of business volumes, thoughtful planning of work rotas, higher inter-departmental flexibility to cope with peak and slow periods within a hotel, and the creation of a productivity oriented culture. In most cases, labour cost should be considered variable instead of fix. Whenever worktime accounts allow the compensation of overtime with undertime, payroll figures should reflect the actual number of hours worked. Everyone in a property should be aware of the average cost of a worked hour including related expenses to the hotel. This will ensure that supervisors and employees operate with figures which are meaningful to them.
Outsourcing and Productivity
Outsourcing is a two edged sword in the context of productivity management. If overall hotel productivity is measured through revenue per worked hours, simply outsourcing certain service departments will boost productivity, as the absolute number of hours worked within a hotel’s team will decrease. However it can very well be that outsourcing increases the cost base of the hotel, which will outweigh the benefits of the increased productivity. Only if the company to which the services are outsourced can deliver the services in a more effective manner than hotel employees (usually due specialization), and these increases in efficiency are partly reflected in the prices charged to the hotel, will the net benefits to the hotel be positive.
Introducing a Productivity Management System
My recommendation is that hotels and their departments concentrate on a few meaningful measures which are regularly communicated throughout the operation and well understood by all concerned. Less is sometimes more! Often, productivity management programmes are developed by businesses but are never really successful due to their lack of acceptance and follow-up. One common reason is the exaggerated complexity, which makes them impractical. A productivity system must be understood by all and easy to maintain.
One final, important issue is that productivity management programmes should be gradually introduced in order to gain the backing of the hotel team. A property may start with an overall hotel measure and follow with departmental figures several months later, once the concept has been accepted. This step-by-step process will ensure that the level of understanding within the team follows the pace of the deployment. Concerns about potential lay-offs resulting from the productivity management programme should also be addressed. Productivity management is mostly about adjusting resources to business volumes as accurately as possible. Furthermore, turnover levels in our industry are usually quite high, so that even when a team’s size needs to be reduced in order to increase overall productivity, this can be done quickly by using the existing attrition and not replacing leavers. There is usually no need to lay-off. It is also very important that the teams receive much regular feedback in terms of results.
The Next Step
An advanced step in productivity management, after the input/output ratios have been implemented, well understood by all, consistently monitored and analysed, is to measure the correlation between the input and output units. The productivity scores by themselves only crudely measure how good the overall ratio between input and output is. Correlation on the other hand indicates how closely both factors are related to each other. It gives a much better idea of how well resources are deployed throughout a time period, based on volume levels. This has a strong impact on operational quality. For example: A front office team could achieve decent productivity scores in a given month by being overstaffed in weak periods and highly understaffed in strong periods. Despite the superior productivity level achieved, guest complaints will certainly follow as waiting times will increase and guest attention decrease in high volume periods. In such scenario, the correlation between worked hours and movements would be very low. The same productivity level could be achieved by decreasing resources during slow periods and increasing them in stronger times. The correlation and perceived quality would then increase. Correlation monitors the ability to adjust resources to volume on a continuous basis over a specific time period. While the calculations are slightly more difficult, programmes such as Microsoft Excel will easily spell out correlation figures.
