Ensuring your hotel remains in top working condition is the responsibility of all team members
When evaluating a hotel’s performance, discussions between hotel owners and operators inevitably turn to operating profit and the short-term commercial outlook.
Most performance assessments take into account the commercial aspects of the property. However, it is important to consider one basic element. The building is a key component of the hotel business. A poorly maintained asset will negatively impact occupancy and the Average Daily Rate (ADR).
So why is this factor often ignored? A Profit & Loss account contains numerous expenses relating to the property itself. Maintenance, engineering department salaries, replacement and repair costs, utilities, and AMC (annual maintenance contract) costs, are just a few examples of line item expenses directly related to the property’s upkeep. It can often represent 25% to 35% of total revenue, highlighting its importance to the hotel’s bottom line.
Ignoring these factors can lead to larger problems. For example, a hotel may offer fabulous accommodation, but if a guest reports a poor shower experience due to water pressure problems, it will ultimately impact ADR.
Hotel operators should focus on hiring an experienced chief engineer to ensure their facilities remain in top working condition. Ironically, a chief engineer’s worth is often only acknowledged when a specific problem arises.
Ideally, the hotel’s asset management team should have the requisite expertise to evaluate typical flaws and address them accordingly. The asset manager is ideally placed to lead this process, formulating a set of key performance indicators designed to maintain the property in optimal condition.
Utilities cost per room night, energy consumption comparisons between different periods, kw/h consumed per room night, on-going repairs, open requests, ratio of requests per guest, percentage of requests resolved and repair average cost ratios, are but a few examples.
When considering these factors, the asset manager and operator should also review them as part of their regular monthly discussions.
Ultimately, hotel staff should also be trained to focus on the physical aspects of the building and incorporate best practices in their daily responsibilities to ensure it remains in top working condition.
Additionally, the asset manager should regularly monitor the reserve fund to ensure adequate monies are available to cover any potential issues that may arise.
A reserve fund adequacy study should highlight any potential faults, analyse the lifecycle of key items, cover the cost of required improvements and also propose additional measures to reduce operational costs without negatively impacting the overall guest experience.
Ultimately, any assessment should also benchmark the property’s performance against its main competition. Being able to compare your maintenance or consumption ratios with your competitors will foster a stronger sense of the state of your asset.
Responsibility for the preservation and appreciation of the asset lies with the asset manager and the hotel operator. However, all employees have a role to play in monitoring the day-to-day performance of the property.
About The First Group and TFG Asset Management
The First Group (www.thefirstgroup.com) is a British-owned global property development company based in Dubai, with an exclusive focus on creating innovative, iconic hotel projects. The First Group Asset Management (TFG Asset Management – www.tfgassetmanagement.com) assists with every aspect of a completed development to ensure property investors get maximum return on investment. Head of asset management, Mariano Faz, has more than 12 years of expertise in global hospitality and real estate markets and has held a number of high-level positions in hotel operations.