How to develop more financial leadership

By Guest Contributor on 8/16/2016

As a hotel owner you’re pretty sure there is more that your hotel management team could do to leverage your asset and get you a greater return. You question the quality and the organization of the financial information. The hotel management team talks a good game but you question the results. When you dive into the details of the statement, many lines have big variances to the budget and forecast, why? When you ask you get a myriad of excuses but not a lot of meaningful information and certainly nothing to give you confidence that the future will be any different. Why is this happening and what can you do about it.

The answer is there is a lack of financial leadership at your hotel. The business is complex in that there are many departments and people consuming your resources and generating your revenues. The executive team tries to provide meaningful budgets and forecasts but they cannot because the real information is not coming to the surface.

Well, you have the ability to create an environment that has your managers working together on the “business” of running your hotel, and here is how you do it.

The third pillar

 In our business we have three pillars—guests, colleagues and dollars (the owner).

We manage guest interaction with an understanding and belief that we’re all invested in good guest service.

With colleague engagement it’s the same: We’re all implicated in managing teams that have high-colleague engagement.

So why are dollars different? Not so long ago it was considered taboo to discuss the finances. So naturally, many leaders and managers didn’t know what was going on financially. Now we find ourselves in a different world—one in which we want managers and leaders to get in the game.

Brands sell expertise to owners. Brands need to wake up and realize the key to mastering the third pillar starts with investing in financial leadership. Sure we have audits and systems for the accounting function, but we have nothing for a standard or a way of measuring how we lead financially.

The brand with the best financial leadership model would be very attractive to owners. Brands mandate standards and owners pay to have these in place. What are brands waiting for?

The paper can’t talk

Why is financial leadership in hotels so un-evolved? The answer is somewhat hidden. When we look at what we charge our leaders in hotels with doing, it’s three things: Looking after 1) the guests, 2) the colleagues and 3) the money.

The simple fact is this: The guests and the colleagues can talk. They can speak their mind, ask for help, and demand our attention in ever-increasing cultural and socially responsible ways.

The paper, the reports, the forecast, the budget…all of these instruments don’t have a voice. We need to give them a voice that everyone can hear.

That’s financially evolved leadership: Make the financial piece as important as the other two pillars in how we communicate.

It’s a circle

The financial window in a hotel opens and closes every month. It’s both a curse and a blessing. It’s a curse because it seems like we just finished with one month and another is upon us; it’s relentless, and like the tide, it never stops.

The blessing can be hard to see but it’s there—it is the blessing of practice of mastery.

We get to start all over again and practice every month. Every month is an opportunity to re-set; to start over; to learn from what worked last month; to improve what didn’t, and get better and better at this game.

  • The circle starts with the forecast, and each person prepares his or her individual part. The forecast is zero-based in all areas and is consolidated. Changes are made to the zero-based numbers and each area has a plan to execute to achieve the desired result.
  • The circle continues into the month and each area monitors the revenues, payroll, and expenses daily.
  • The hotel uses a system of distant early warning to ensure that revenues are materializing as planned, or if not, that adjustments in spending and payroll are made. Do not wait until the middle of the month to see how things are shaping up; this is done daily.
  • The circle continues into the month-end closing process in which each area receives and reviews the general ledger listing and financial statement for the areas they forecasted and monitored.
  • Errors are found before the books are closed. Then, in turn, each person who forecasted, monitored and reviewed his or her section writes the commentary for that part and the commentary is consolidated.

The process starts over again and the circle is back where it started with the forecast preparation.

Many hands

With financial leadership, we want as many people involved in the “monthly financial circle” as we have involved in preparing work schedules or preparing purchase orders, plus the people who forecast its revenues. The hotel must adopt a culture that stands for “every line needs an owner.”

In the past in many hotels, the financial information was not shared with many leaders. It was considered to be secret and private.

Most hotels today share financial performance information with leaders. What financial leadership hotels do is match the resources, consumers and revenue producers with the appropriate lines in the profit-and-loss statement, and literally every line has an owner.

The owners forecast, track and report on their lines every day and every month. With a system that encompasses the entire statement, we ensure that all facets of our business are being managed.

This promotes more communication and better decision-making because someone is actually taking active responsibility for every line.

From a monitoring and review point, we can clearly see what areas are working and which ones are not, and we can then take the appropriate action with the right individual.

If we attempt to manage the numbers by area or department, we are missing a huge opportunity to really hold the business up with many hands.

Start with the end in mind

The picture you want is that of a leadership team that knows what is happening financially. The appropriate leaders all participate in the financial management, and forecasts and budgets are completed with detailed input from all areas of the hotel.

  1. When forecast and budget changes need to be made to achieve overriding goals, leaders on the ground make these changes on line items, and they know what items are included in their final budgets and forecasts and which ones are not. There are no executive level changes to forecast numbers at the 11th hour.
  2. Each leader knows and agrees to financially managing his or her piece of the operation and they happily take responsibility for what happens in their area.
  3. Schedules and timelines for forecasts, budgets and month-end close are adhered to.
  4. Regular communication on the numbers is thoughtful, complete and informative.
  5. Department managers and leaders all know their revenue, payroll and expense lines. They monitor the progress for their area daily throughout the month, and make adjustments to schedules and purchases to reflect the realized and adjusted business volumes.
  6. New leaders are selected, trained and properly supported to evolve financially, as well as providing service and colleague engagement.
  7. Leaders evolve financially in this environment because the hotel has created great bench strength.
  8. Leaders from this hotel are desired by other hotels for promotions because of their many capabilities, especially their ability to lead financially.  

So there you have it, a process to follow to grow your hotel’s financial leadership.


Contributed by David Lund, The Hotel Financial Coach, Corona del Mar, California

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