Among all industries, the hospitality industry is most severely affected by the economic downturn. And, as the economy starts showing signs of recovery, it will most definitely reach hotels at a far slower pace.

During a long period of economic gloom, managers of all types of hotels are faced with the challenges of budget cuts while maintaining a steady operation. One step we caution against is the process of combining or merging responsibilities in an effort to cut payroll. This step could only work in properties that have initially invested in high quality staffing and training. In those instances, staff is able to perform dual responsibilities without incurring any damage to the delivery of service which in turn affects the image of the hotel and most definitely its present and future status.

Another step we caution against is the process of eliminating the department of sales & marketing. Many managers of mid scale properties that offer limited service are considering this option. They feel that the function of sales is not vital to day-to-day operation.  We caution against this step. Eliminating cost by eliminating sales, will likely incur cuts in occupancy by limiting the potential for growth. Sales remain one of the most significant agents that drive occupancy through solicitation and prospecting.

Sales bring in new business. Day-to-day operation maintains and ensures repeat business. Surely, the property will be losing on many fronts since the absence of sales thwarts the chances of new businesses. Cuts in sales efforts can negatively affect staff members whose daily presence is vital to operations. Cuts in hours, raises, bonuses or even the threat of job loss will certainly affect the morale and performance of workers at a time crucial to the property’s present, future and long-term survival. In a tough economy sales become pivotal. So, while there could be immediate savings as a result of sales cuts, the long term effects will be damaging and not easily repairable. Occupancy gaps are not reversible. Sales efforts must remain active even if it is at minimum to maintain property visibility and retain the hotel’s presence in the market within its competitive set.  Aside from the occupancy factor, these types of cuts must be well scrutinized before being put into effect. In the past, budgets were always tightened even during a good economy.

The intended message here is not to allow finances and funds to take control of our company values and the mission of hospitality. True, the tough economy has resulted in less travel; some hotels still have a chance to meet the bottom line by careful budgeting.

We caution against making decisions that are strictly cost driven. While the budget is a factor critically considered in business forecasts, it should not become the only deciding element in business planning and strategy. Budget cuts are in some areas inevitable, however, hotel managers must not allow those cuts to affect the over all return on investment. Budget cuts are only effective when they succeed in controlling the damage and not escalating it.

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