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Taking Over a Hotel Is an Art If Orchestrated Properly,
Or It Could Be a Disaster
Hotel Management Takeover

A successful transition is like merging onto a freeway; you can do it smoothly and easily or you can jet into traffic without looking and the results can be immediate, disastrous, and cause a lasting effect.

By Bill Huigens, December, 2003

Taking over a hotel is an art if orchestrated properly or a disaster that can have a long-term effect on revenues, expenses, and overall profitability. HVS Hotel Management has experienced many successful management takeovers, due mainly to the extensive preparation and detailed checklists we have designed and implemented.

After choosing the best management company and signing the contract, the single most important phase of a management change is the actual takeover process. When trying to merge new management processes with old management habits, all transitions present unique challenges and almost always a new twist. HVS Hotel management has developed a comphrensive takeover checklist that assures a smooth and uncomplicated transition. Some of the critical areas of a takeover are reviewed in this article.

A successful transition is like merging onto a freeway; you can do it smoothly and easily or you can jet into traffic without looking and the results can be immediate, disastrous, and cause a lasting effect. Similarly, a smooth takeover can mean the difference between continuing or increasing current revenue levels, or severely damaging relationships with existing customers and employees, thus having a negative effect on revenues.

Assuming pre-transition analysis is complete and you know what you are walking into, the beginning of the week is typically the best time to schedule a takeover. As the week continues there will be less and less time to take care of functions that require coordination with outside vendors like banks, locksmiths, help desks, security companies, etc. Most of these vendors are five day a week businesses; not 24/7 like the hotel business. If the property has a liquor license, you’ll need to obtain a new license to continue operations in the bar. The governing offices are usually not open on the weekends, and if your new license isn’t secure by end-of-the week, you risk halting vital liquor sales through the weekend. Sometimes there is no option as to which day of the week the takeover occurs. In such cases, make the best of the situation at hand by making a list of priorities, and handle the most important items as efficiently as possible.

Once onsite, the first and foremost item on the list is securing all cash and revenues at the property. This includes bank accounts, safes, departmental banks, and credit card processors. It is remarkable how often takeovers occur and new ownership or management fails to immediately change the credit card receipt process. New accounts must be established at once and the old terminals disconnected; otherwise, the property will continue to deposit funds into the former owner’s bank account. Finally, choosing a financial institution with local representation and opening a depository, operating and manager’s accounts should be completed before moving on to anything else.

After the money is secure, the next phase is to gain control of the physical plant. Seek the assistance of a locksmith to determine which areas will need controlled access change. Management offices, storage, equipment, as well as any safe and departmental bank(s) are just a few general areas where keys or combinations should be changed. With today’s electronic entry systems some of these functions may be done in-house. All master keys of any kind need to be deleted from the system, re-issued, and re-assigned. Other property systems also need to be controlled, for example, the guest room locking system, front and back office computers, and individual software programs, including accounting, food and beverage, payroll, time clock, andothers (depending on the individual facility.) Another crucial function (if you want your electronics to work) is to contact the utility companies servicing the property. In some cases, previous invoices may not have been paid and the property could be in jeopardy of losing service with the electric, gas, water, or telephone company. Obtaining account and phone numbers, then placing a call to determine current account status, could alleviate any potential problems. Often a deposit equal to the cost of one to two months service is required to initiate service.

When the property is secure, the next, and overall most critical step is gaining the confidence of the staff. Soon after takeover, rumors and gossip will prevail around the property; some of which might even be factual. Not only will the staff be talking but in some cases the entire community, even to the point of local reporters calling the property asking for the “story”. Scheduling two meetings as soon as possible after the takeover is announced will keep everyone’s blood pressure at a minimum. The first meeting scheduled is with department heads and management, then an entire team meeting. The management meeting is the first step in communicating just exactly what is going on at the hotel. This meeting is also the preliminary look at the hotel’s management staff and their interactions as a team. This initial contact is an important part of the overall management evaluation process that is ongoing during the first couple of weeks. Some companies take over a property and immediately terminate the management staff. Unless there are known illegal activities going on at the hotel, an unconditional termination might have a negative effect on business, other staff, and possibly the community.

The second meeting is an all employee meeting with the basic agenda the same as the first. Since local management is now aware of the transition, they will take an active roll in this second meeting. During these meetings, honesty is absolutely the best policy. Sharing all relevant information honestly with employees will empower them so that they can focus on the job at hand instead of worrying about whether they will have a job next week. Typical meeting topics are as follows:

  • What effect, if any, will this transition have on the staff and their future employment? (Single most important question.)
  • What effect, if any, will this have on the hotel? Will the hotel be closing?
  • Who is this new management company and why are they here?
  • Why is this happening?
  • Explanation of events during the next few days; as well as a look into the next three months.
  • Review of any basic business strategies that will change immediately.
Beyond these topics will be basic roundtable discussions and, as previously stated, honesty is the best policy, as well as a positive attitude toward building relationships with your new staff.

The most critical areas have now been covered, however, there are many details that still need to be addressed in order for the property to operate smoothly during this transition period. Therefore, the next step in our process is to determine the short term operational needs of the property. During this same time some long term needs will also arise and will have to be dealt with on a priority basis. Short term operational needs can sometimes turn into an owner’s nightmare if the property has been poorly managed and maintained. Supplies may be limited; furniture, fixtures, and equipment could be in a run-down or even inoperable condition. Restoring a property to operating standards with these kinds of problems can add up to a sizable cost. A review of linens, cleaning, office, and guest supplies, as well as food and beverage items are all important pieces of the day to day operational needs. Vendors need to be contacted and orders placed to bring inventory to minimum operating levels. This is also a good time to establish a relationship with the vendors and schedule a meeting to review products, pricing, credit, and address the changes that are occurring at the hotel.

A review of the accounting function needs to occur early in the transition process. A determination must be made as to the functions that need immediate modification. These functions include, payroll, petty cash, manager’s account(s), daily reports, purchasing, payables, and receivables. Any process changes in these areas must be prioritized and modified to meet the new management standards. The most critical of these items is typically payroll. Have employees been paid? Do they have vacation and sick time? How is time reported? More often than not, employees will question new management about all this during the all employee meeting. Also, during the accounting review the process of securing and reviewing all leases, contracts, and long-term agreements should be completed.

Now that the operation is reasonably stabilized, a complete property tour is needed to inspect all areas of the hotel. The tour will include offices, storage areas, housekeeping / laundry, maintenance, kitchen, and the roof—to name a few. Public areas, including the pool/spa, business center, and parking lot, should also be inspected for any flaws that could be poorly effecting customer expectation or service. Should any of the facilities contain defects, changes should be made swiftly to restore a positive perception of the property. Then there are the guest rooms (ah yes, the reason that we are all here!). They will need a complete inspection. At least ten percent of the rooms should be reviewed immediately, more if there are major deficiencies that could effect customer expectations or perception, or if there is a potential safety hazard to the guests or staff. Ultimately, within the first three to five days all rooms should be inspected and graded for the condition of walls and ceilings, floor coverings, furniture, amenities, fixtures, and cleanliness. The general manager, executive housekeeper, and maintenance engineer should all be in attendance during this inspection. Consistency and cleanliness is the focus of the tour; what is the guest seeing and experiencing when they walk into and use the room? At HVS Hotel Management one of the major components of our success is creating consistency throughout the property as well as standardizing operational guidelines.

A review of each functional area of the property must be completed soon after takeover. These functional areas will include sales and marketing, banquets and catering, food and beverage, front office, and others, depending on the property itself. Initially, a quick overview is made to validate that there are no distress points, then there is a more in-depth inspection once the initial takeover shock has worn off. The quick review will often uncover any operational, financial, or logistical type of issues. Once issues have been identified, modifications to the processes and procedures can be made and new controls put in place to keep the same type of problem from occurring again. The in-depth review will be ongoing over the next couple of months as a better understanding is gained about the property and the customers’ needs.

Another essential step in the takeover process is the training function. Training is one of the most important factors in any successful business today. Often training costs are the first line items that are removed from a budget when cuts are needed. 
However, statistics will show that a less trained staff will reduce your earning potential and in the end cost you more in indirect training expenses than if you had done it properly the first time around. More details about the training process will be in the next article.

As you can see there are many, many details, some large and some small, but all integral and crucial to the management takeover of a hotel. What you have read so far only represents a small portion of the total takeover process, there are many more details that would take a book to review. As stated previously, taking over a hotel is an art if completed properly or a disaster that can have a long-term effect on revenues, expenses, and overall profitability if handled improperly. HVS Hotel Management has orchestrated many successful management takeovers, due mainly to the extensive preparation and detailed checklists we have designed and implemented.

HVS Hotel Management was created to provide independent third-party management services to owners of lodging properties and currently manages full - and limited - service hotels for private owners and investors. Services include assistance to developers from earliest planning through successful operations. We combine renowned hotel industry expertise with a first-hand understanding of the lender experience, so we can confidently provide REMICs, Special Servicers of CMBS portfolios, and other institutional lenders and owners a comprehensive range of services for under-performing properties. HVS Hotel Management brings a consistent approach and a flexible implementation to all assignments. For more information regarding HVS Hotel Management, contact Dan King at 303 554-9766 or Bill Huigens at 602 743-4436.

Copyright 2003 by HVS Hotel Management. All rights reserved. This article, or parts thereof, may not be reproduced in any form without permission. For permission please contact pweyers@hvshotels.com.


 
Contact:
Bill Huigens
HVS - Hotel Management
Vice President Operations
602 743-4436
bhuigens@hvshotels.com
http://www.hvshotels.com
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Also See: Taking Over a Hotel:Checklists and Routines / Kirby D. Payne, CHA
Hotel Development Cost Survey 2003 / Elaine Sahlins, HVS / December 2003


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