Avoiding the Pitfalls of Success

By Christopher Knable -- HOTELS Magazine, 9/1/2005

Does success make us giddy?

Recently I was speaking with a fellow hotelier

in a hot market who said to me, “I don’t think we will ever have a downturn

in this city again.” When I recovered I told him that was impossible.

What is it about burgeoning revenues and profits that makes us take

leave of our senses?

Following are three common mistakes that people make during the good

times that make life difficult when the business cycle turns downward.

“We don’t have enough people!” Hiring now

is not always the answer.

Higher revenues usually come with higher business

volumes and as soon as we see that the trend is solidly positive,

there is the urge to fill all those ‘holes’ in the manning

guide.

Stop! What happens with all these people when times are not as robust?

Particularly if you are operating in a union environment, you should

be very careful about adding staff to avoid painful layoffs later on.

Before you add a lot of new staff, run through all the other options

with your department managers, including part-time labor, overtime

and schedule engineering. Can you cross-train staff in other areas

to maximize productivity? What about interns or welfare training programs

in your area that will allow you to do some good while plugging a gap?

If you do decide to add staff, study the situation very carefully.

Perhaps only hire 25% of the staff you had in mind, let them settle

and see how the situation looks once they are on board. Most operations

are just as well off with less rather than more.

People are your most precious asset, so take

care that you don’t

add talent that you will only have to release later on.

“Now is the time to add that 50,000

gallon fish tank to the lobby!” You would think that hoteliers are all frustrated

designers and architects the way we love to spend capital dollars.

Before you start updating your five-year capital

plan, don’t

forgo the rigorous attention to return on investment (ROI)

that you practiced during the recent downturn.

Try to prioritize your capital plans from ‘A’ to ‘D’ with ‘A’ being

something that needs to be done immediately to ‘D’ being “Don’t

do it.”

After all, capital dollars should in some measurable way increase

revenues, save you money or maintain your standard.

Go through various exercises to pare it down. If your company normally

puts 3% towards CapEx, tell your team this year they only get 2% and

keep that last percent for when you really need it.

“Better spend the money while we have

it!” Of

course, deep down, we know our business is cyclical and sooner or later

the pain will come.

Chances are, over the years you learned a lot of lessons through the

downturns that improved your business acumen and made you a better

manager.

Keep in mind that you probably have many on your team who may not

have experienced a recession or sudden cataclysm that resulted in poor

profits to no profits. Find ways to keep the lessons of the bad days

fresh through constant challenges.

This might include budgeting expenses at prior year or period levels

and then challenging your staff to find creative ways to maintain expenses

at that level. Another way might be to have a business plan in place

that assumes the worst-case scenario and allows you to plan the areas

you would cut. This would have the added benefit of preparing your

team for some type of natural or man-made disaster.

During downturns, we always talk about trimming the fat, but

it is during the good times that we need to exert efforts to keep from

applying that fat.