A Needed Step in Productivity: A workshop at IHIF 2016

EHL Faculty | 21 Mar, 2016

Hotel profitability has steadily increased over the last 20 years, but is that sustainable? Owners, management, and corporate offices become more and more demanding while business plans are increasingly aggressive. How can we continue to maintain and increase profitability?

EHL Professor Jonathan Humphries and Effco Co-founder Philippe Rogiest suggested potential solutions during an interactive workshop at the International Hotel Investment Forum 2016 in Berlin.

Maintaining an increase in profitability is only possible if hotels become more efficient, which can be attained by reevaluating the whole business model on-site. One solution is to take everything that is not customer-facing and moving it off-site. Finance, Human Ressources, reservations, marketing and other departments can easily be relocated and centralized to cut costs and run each aspect of the business from a distance. How can this be achieved? By hiring on-site staff based on personality and motivation, with a focus on quality rather than quantity, and by training employees so that they are empowered and knowledgeable in all aspects of a hotel, limiting the amount of supervision needed.

Take this recent experience: A guest books a room for an extended stay in a hotel with only two employees and automated check-in desks. Due to the quick and precise service coupled with the friendly attitudes of the personnel, the service level is not diminished at all. Rather, it fits the expectations of the current day traveler. The two employees are trained to understand the hotel as a whole and thus prepared to tackle any problem that may arise, eradicating the need for more administrative staff and supervisors.

So, where do we imagine different hotel departments to be located in 2025: in house, out-sourced, centralized, or no longer needed? Approximately one fourth of the audience in the IHIF workshop expected that a General Manager would no longer be needed, while another fourth expected that the General Manager would be working from a centralized office, and one half expected that the General Manager would stay on property. Regarding other departments, such as Finance, Human Ressources, and Revenue Management, the majority of participants believed that they would be centralized. Departments such as cleaning and security was mainly expected to be out-sourced.A Needed Step in Productivity: A workshop at IHIF 2016

This line of thought is completely in agreement with other trends and advice given at IHIF. Hotel managers should find inspiration from newly available types of supply, such as Airbnb and Homeaway, which use customer data to conform to new Millennial travelers. The offer is minimalistic and service is short but sweet, allowing for considerable profit margins. In various IHIF sessions, hoteliers were advised to use and analyze their customer data so that they can really focus on what the customer wants and let go of other irrelevant and costly offerings. In this way cutting costs is made possible through flexibility and alignment with customer expectations.

Efficiency and productivity is the new focus. Management agreements including the White Label and Manchise models are steadily growing to cut costs through centralization and allowing for greater investments in technology. We can expect to see an increasing amount of new companies allowing for independent hoteliers and pure franchises to cut costs through out-sourcing. It’s an exciting time for the hotel industry, and we’re eager to see exactly where we will be in 2025.

Authors: Gwen Martignoni, Bachelor student at Ecole hôtelière de Lausanne, Jonathan Humphries, Professor of Asset Management at Ecole hôtelière de Lausanne and Philippe Rogiest, Managing Partner & CEO, EffCo.

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