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Cost Containment and Contingency Planning

Nexus Hospitality FOCUS

Several of my colleagues and I were instrumental in creating and refining an Expense Management and Revenue Enhancement tools that were used system wide in a Top Tier hotel company when either the market, economy or ownership dictated that spending needed to be reigned in and revenues and flow thru increased.

A model was created that anticipated a decline in full year revenue and it can be tailored dependent upon the severity of the crisis.

Every hotel General Manager should develop and implement a crisis plan. Specifically what they would do if the decline was 20% or more in revenue, and how they would minimize the impact to house profit.

GMs and their Leadership teams involvement is critical, as they must be intimately involved in the creations and implementation of their plan to be accountable for their hotel. A very comprehensive audit of all areas to augment both savings and revenue opportunities will be done.

This is the typical cycle that would trigger the crisis plan, but these times are not typical!

Hotel Crisis Cycle

Nexus Hospitality SOLUTION

  1. The “Contingency Planning Program” (CPP), provides you a summary of high impact items/recommendations from cost containment plans put together from 2001, post 9/11, up to previously completed exercises' using many other hotels as benchmarks.
  2. The “Individual Property Plan” (IPP) will be utilized to summarize and detail the CPP and expected savings as well as to trigger dates for follow up and tracking of the actual property compliance and effectiveness.
  3. The “Crisis Cost Containment document”, is used to summarize, by category, what the GM's put into the IPP contingency document including:
    • Forecasted house profit, assuming a percentage reduction has been agreed to and approved by ownership which is a minimum of 20% of revenue.
    • Develop a cost containment plan to improve house profit in the event there is a 20% or higher reduction in revenues and input the results in the four categories of savings (F&B, Salaries and Wages, Benefit effect of payroll savings, and controllable savings).
    • Provide detail of the specific initiatives on how the property will achieve the savings in each of the categories listed above, and ensure the amounts tie to the crisis savings model.
    • Complete an owner's priority review as it applies to individual property ownership groups or debt service needs for their property.
    • Document the savings associated with any Brand Standard changes that could negatively impact the brand.