Managing a hospitality business has some unique challenges that aren’t present in other businesses (and a few of the same issues too). On the financial side, it’s not the easiest industry to do well in either. For this article, we provide 5 tips on how to approach managing the finances of a hospitality business.
Strictly Manage Payroll
Managing finance is a key part of effectively managing a hospitality business. Depending on how many locations there are for your hotel or other hospitality business, many staff will be involved in running the operation. They may come and go and work a variety of changing shifts from daytime to evening, or night shifts within the hotel industry.
Accordingly, the pay rate for their work may vary, not just because of their tenure with the company, but also relating to the shifts they pick up.
The payroll has to be strictly controlled to ensure that the sheer variety of work shifts and people don’t overwhelm the system. Given the number of moving parts, the actual cost of paying staff versus the budget may vary widely each week. Also, seasonal changes to staffing levels to reflect a lower occupancy rate with rooms is necessary too.
Keep IT Systems Streamlined
It’s all too easy to end up with a myriad of IT systems and software apps to help with running different aspects of the business. The cost of maintaining these systems and training staff to understand how to use them is not inconsiderable.
Avoid spending too much on software and other systems, like key-cards for hotel doors, that tie directly into the central system. While this may work for the larger hospitality chains, it’s overly expensive for smaller ones. Also, if there’s a hotel restaurant, use a single POS system that’s simple to manage and is compatible with the other financial systems.
Don’t overcomplicate on the technology side as it doesn’t always make people more productive and increases financial waste.
Use Forecasting Models
Don’t get caught out with a seasonal drop in trade. If you’re new to the industry and the seasonal trends are not obvious to you, ask someone else in the industry for some pointers or check online.
Use forecasting models to establish revenue levels, expected increases and sudden declines throughout the coming year. This can be done using Google Sheets and doesn’t necessarily require sophisticated software if budgets are tight.
By understanding fully when cash flow will be substantially reduced, it’s possible to manage the expenditures more carefully during those times. This includes staffing and reducing capital expenditures in slower periods.
Borrow for Seasonal Dips or Unexpected Expenses
There are times when you get surprised by an unexpectedly high business tax bill, a need to refit some older rooms, or the seasonality has been particularly harsh this year. This can create a financial hole that you’re unable to fill at the time.
If you’re in the hospitality trade, quick loans for hotels and B&Bs can be a great solution to plug the gap in the finances. Because the loans are at a fixed cost, the repayments are fully understood before going ahead. This makes future financial planning much simpler to do too.
Strategically Offer Package or Loyalty Discounts
Not all discounts help the finances of a hospitality business. What you should want are loyal customers who keep coming back. To encourage this, a loyalty program works especially well. It’s a good idea to offer a few little extras to encourage repeat customers, but these must be affordable to do. Ensure the loyalty program is a profitable one for the company.
Package deals in the hotel industry can be useful to get a large group of customers to book out an entire floor. Usually, this adds materially to the bottom-line without a corresponding increase in expenses from the group booking guests.
Managing the finances of a hospitality business is very different from a shop, supermarket or construction business. As such, it has to be approached in a way that will deliver success. To this end, hiring an accountant experienced in the hospitality industry is often beneficial.