Bob Cotton, Non-executive Director of lndiCater, shares his views on the importance of back-office software in ensuring that the independent hotelier remains profitable in a challenging climate.
For the independent hotelier, life is evermore competitive. Major brands are taking a greater share of the market while competition from them gets tougher by the day. Cost pressures too, are making inroads into profitability led by the introduction of the National Living Wage which, by 2020, will rise to £9 an hour, adding millions of pounds to the industry’s payroll bill.
Meanwhile, the recruitment and retention of the right staff remains an overwhelming concern for almost every operator; with a Brexit-orientated government in power, this is unlikely to ease with the added pressure of food and beverage costs likely to rise.
When it comes to investment in the business, the independent faces a tougher challenge than any of the major groups that have a much readier source of available funds. The independent is, literally, on his (or her) own and survival depends on how cannily revenue can be maximised and costs minimised.
So how best can the independent hotel survive profitably?
Overall, survival depends on doing what the independent always does best: providing a happy welcome, great personal service, good food, deep comfort – and value for money. So no problem there! These qualities, however intimidating, depend on the operator for their success. Either the business provides them or it doesn’t – and if the latter, then it is likely to fail. But even the most successful business in terms of customer satisfaction can be less than profitable when it comes to management controls:
- Is the monthly profit and loss account checked against the budget and are any variations investigated?
- Is the kitchen sufficiently tightly controlled and regulated?
- Are there accurate recipe costings and regular stocktakes?
- Are sales forecasts prepared and compared to turnover?
In today’s environment – the most competitive ever – the independent has to recognise that the traditional qualities of the hospitality industry demand a sophisticated back-office system that provides real-time information on which the business can act. No longer is it acceptable for performance figures to be available only on a monthly (or even annual) basis when they are needed on a weekly, often daily, basis. With payroll costs rising – by 2020 they will probably be nearing 40 per cent of revenue in many establishments – the use (and misuse) of staff will become a critical issue. Peter Nannestad, one of the industry’s most thoughtful consultants, calculates that one hour over-rostered will currently cost a business £6,205 a year in over-payment. If operators know what the problem is in the first place, they can effect a solution.
Without the kind of up-to-date information that modern electronic systems can provide – information which many group hotels have at their fingertips, to their huge advantage – it’s well-nigh impossible for the independent operator to keep tabs on key aspects of the operation on a daily or weekly basis, which is what is required in today’s business environment. Without such day-to- day control, the business is sailing without a compass. Sales income, staff rotas, absence management, payroll, stocktaking, standard recipes, sales invoices, the customer database , outlet bookwork, e-procurement, electronic supplier invoices all now need to be systematically recorded, monitored and compared against budget to provide the information needed to run the business at maximum profitability and at minimum cost. Companies like IndiCater provide affordable web-based, back-office solutions, which can make the difference between profit and loss!
Why do so few independent operators take advantage of the more sophisticated systems now available? Certainly, major companies have proved that the savings made by them, together with the opportunities presented for increased revenues, cover the cost of the software many times over. Wise independents already recognise this; to survive profitably, every independent will have to.
Article by Bob Cotton
Featured in epmagazine.co.uk (pp50)