HOTEL TACTICAL COST - LABOR COSTS

COST & EXPENSE MANAGEMENT – LABOR COSTS

Overview
The primary financial goal of any business must be increase economic value over time and add to shareholder wealth. Experts generally agree that there are four ways to do this:
1. Reduce operating costs and expenses, without adding to capital employed
2. Undertake all capital investments where increased net operating income exceeds the cost of capital
3. Discontinue operation where savings in the cost of capital employed exceed any net operating income
4. Restructure the financing (ie, debt and equity) structure of the enterprise

Market trends and other external forces beyond the control of hotel management can often put pressure on our ability to deliver revenues. This, in turn, generates a "Flow Through" impact to profitability. In order to deliver the established profit targets, particularly when we are experiencing revenue shortfalls, we must cotiuallyexamie our operations to ensure that costs and expenses are well controlled and reduced as much as possible.

The tactical cost and expenses management process should be participative in nature. Department heads and staff must be actively involved. In this way, each department will have ownership of their savings targets and the process will be much more than an accounting exercise.

Front Office
Level 1
• Combine Reception/Cashier duties
• Combine the Concierge/Guest Relation/Front Desk Operations
• Reduce Concierge/Guest Relations Operating hours and level of staffing

Level 2
• Eliminate Guest Relations section. Certain responsibilities assigned to other departments.
• Reduce number of Bellmen.
• Staff Reservations from Front Desk.
• Eliminate baggage delivery service.


Housekeeping
Level 1
• Review occupancy on a 5 week rolling and/or daily basis.
• Cover morning and afternoon shifts only as required, i.e. if there is a late large check-out,reschedule staff from am to pm.
• Do not prepare extra rooms –“level until tomorrow”.

Level 2
• Early am or late pm cleaning to be performed.Suspend night allowances.
• Cancel “spring cleaning” where extra staff would have to be employed or overtime incurred.
• Cancel “turn down” service on discount or group and crew rooms unless specifically contracted for.
• Increase maids’ quota of rooms to be cleaned or “turn down”.

Level 3
• Transfer Laundry staff to rooms and vice versa.
• Close off floors.
• Cancel “turn down” service in all Suites and for VIPs.
• Change bed linen every other day in non-full rate occupied rooms.
• Encourage supervisors/managers to service rooms.


Food & Beverage
Level 1
• Review forecast occupancy and cover counts on a 5 week rolling and/or daily basis
• Perform profitability analysis on all outlets and consider alternative uses if profit margins are insufficient.

Level 2
• Eliminate F&B cashiers where possible
• Review opening hours of outlets in light of covers served. Reduce hours or number of outlets open if possible.
• Investigate use of buffets to reduce waiter levels
• Perform profitability analysis on all banquet functions and accept only those with an acceptable profit margin.
• Increase productivity standard for waiters,preparations and stewarding associates.

Level 3
• Reduce ratio of staff to customer for banquets/functions/parties
• Outlets hostess/greeter to be made redundant.
• Close unprofitable outlets and relocate personnel to busy outlets/departments.
• Move breakfast to buffet style and investigate other similar opportunities.
• Reduce room service operating hours.


Telecommunications
Level 1
• Investigate feasibility of transferring switchboard to front office for night operation.

Level 2
• Investigate feasibility of installing ACD system
• Investigate call demand and handling rates and restructure shifts accordingly Prioritize which calls are answered first (outgoing or incoming)


Administration & General
Level 1
• Review need for certain senior positions, e.g Deputy General Manager, Assistant Financial Controller, Assistant Purchasing Manager, other Assistants,etc.
• Review time keepers and security staffing levels
• Combine night audit function with night reception

Level 2
• Reduce messenger and driving duties to essential services only
• Reduce the number of storeroom and/or store opening hours
• Reduce the number of secretaries in accounting and other Administration offices
• Introduce policy of no advance payment of wages
• Reduce security staffing levels and consider contracting out/in (as appropriate)
• Combine the position of IT Manager with some other appropriate function
• Perform process review and task analysis in all areas in order to reduce workload and staffing
• Reassign responsibility for storerooms to F&B, eliminating storekeeper positions
• Combine purchasing, receiving and storeroom positions, with compensating controls if possible

Level 3
• Suspend/make redundant messengers,collectors and drivers
• Combine jobs of a similar nature
• Eliminate IT support functions, if possible


Administration & General (Human Resources Department)
Level 1
• Liaise with Heads of Department and staff representatives/trade union(s):
- on the policy for suspending recruitment
- on the policy for forced vacations
- on the policy for voluntary unpaid leave
- to coordinate reductions in staff rosters
- with a view to suspending/curtailing overtime payments by reallocation of personnel resources within the departments or between departments
- to recruit casual staff for full-time positions so that labor can be sourced or suspended at short notice
- coordinate cross-training within departments and between departments to enable associate relocation as required by business demand

Level 2
• Liaise with Heads of Department and staff representatives/trade union(s):
- to implement policy of employing personnel on temporary contracts during period of uncertainty
- to implement a policy canceling all overtime
- to implement policy of employing personnel on temporary contracts during periods of uncertainty
- to formulate a policy to offer days/ time off in lieu of special premiums
- to formulate a policy for rotation of full-time associates either within or between departments, with a view to re-scheduling all weekend/night work to reduce premiums paid
- to formulate a policy on the introduction of flexitime working to incorporate reduced hours per week

Level 3
• Tighten negotiations with staff representatives/trade union
• Liaise with Heads of Department and staff representatives/trade union(s)
- to suspend all premium working hours
- to suspend all bonuses
- to reduce employee benefit for specified levels of associates
- to require vacation to be taken including unearned paid and/or unpaid vacation
- to introduce a 4 or 3 day working week
- to introduce forced redundancy if natural attrition is insufficient
- to suspend wage increases. Offer other benefits instead


Advertising & Sales
Level 1
• Review Central Marketing Delivery. Allocation of resources to other expenses categories needs to be justified in light of CMD levels

Level 2
• Reduce the number of sales Managers and Coordinators in non-arriving segments
• Reduce staff in sales and consider telephone selling rather than sales calls
• Combine PR function if appropriate

Level 3
• Eliminate sales staff responsible for non-arriving segments
• Consider renegotiating pay structure to more commission based structure
• Eliminate stand-alone PR function


Suggestions for All Departments
Note: See suggestion specific to an individual department after general suggestions.
Level 1
• Formulate policy on hiring freeze for part-time, contract or casual labor
• Freeze recruitment for new associates and do not fill current vacancies unless absolutely necessary
• Carefully review staff (particularly casual) schedule and prepares as close to each day as possible
• Ensure most recent forecast is used in determining manning requirements
• Re-evaluate productivity standards in order to identify opportunities for improvement
• Schedule associates to take “unearned” leave
• Suspend overtime payments by allocating manning resources within or between departments (multi-skilling)
• Identify opportunities for job combinations
• Ensure cross-training within or between departments, to enable personnel to be relocated as required
• Replace”seasonal” departments headcount with casuals so that labor can better managed on a short-term basis
• All overtime requests to be approved in advance by General Manager and Controller

Level 2
• Employ new associates on temporary contracts
• Reduce overtime payments to absolute minimum
• Encourage full time employees to work in other department where business fluctuates, e.g. banqueting
• Conduct feasibility study on contracting services outside in order to reduce headcount
• Re-scheduling “off-hours” rosters in order to reduce any premiums, which may be required
• Offer voluntary redundancy or early retirement, where possible and/or appropriate
• Encourage supervisors/managers to assume “hands-on” responsibilities

Level 3
• Adjust operating hours of outlets and other operated departments
• Eliminate all overtime and premium working schedules
• Schedule all vacation to be taken
• Take legal means to introduce mandatory redundancy and/or early retirement programs
• Suspend wage increases where legally possible


PT & ER – Personnel Development (Including Recruitment)
Level 1
• Review staffing levels in this department
• Increase use of reference checks before calling people for interviews
• Prospective employees located in other cities to be interviewed by the personnel Manager in other same branded properties to minimize reimbursement of travel fares
• Reduce dependence on recruiting agnecies
• Encourage existing associates to propose prospective new associates
• Review training plan to assess cost exposure
• Defer overseas training
• Defer regional and local training which involves external instructors and high course expenses
• Cancell all language training where undertaken by paid teachers. Consider using staff with language skills

Level 2
• Combine recruitment advertising resources with other same chain properties where feasible
• Suspend use of recruitment agencies
• Cancell all outside training courses
• Cancell skill training, where expensive set-ups are required or where space can be utilized for revenue generating activities
• Cancell all external training
• Cancell all training courses where temporary staff have to be employed to cover the duties of those attending the course


PT &ER – Medical
Level 1
• Review local regulations as to minimum provision of first aid boxes, medicines and first aid supplies
• Review location of first aid boxes to ensure that those in back of house areas are properly secured
• Review frequency of health checks conducted more frequently than is legally required
• Review coverage under present insurance system
• Ensure that all rebates have been claimed from the insurance company
• Review insurance scheme use and number of claims

Level 2
• Review contract with doctor. Reduce hours of attendance if possible
• Review coverage under present system
• Ensure that all rebates have been claimed
• Review scheme use and number of claimed
• Negotiate higher exclusions for lower premiums


PT&ER – Sport and Social Activities
Level 1
• Conduct inventory of benefits under this heading
• Encourage staff to carry out fund-raising activities to finance football, basketball similar activities, by running social events outside the hotel
• Encourage sponsorship by hotel suppliers such as liquor companies for equipment, transportation, staff parties, outings etc
• Establish links with other hotels and agree ways to reduce cost


PT&ER – Employee News Letter
Level 1
• Obtain sponsorship to finance production of the publication
• Reduce content and quality of finish
• Reduce size of print run to minimum required
• Review Frequency of productions

Level 2
• Do not distribute to all staff. Display on employee notice board

Level 3
• Suspend publication


Employee Meals
All Department and Employee Cafetaria
Level 1
• Review list of associates entitled to dine in F&B outlets. Issue instructions to reduce entitlement
• Stop all dining in the cafetaria by non-hotel employees (e.g.construction workers,concessionaires, etc)
• Review and enforce policy on dining policy (ie. Only one meal per work shift per associate, only associates on duty entitled to meals)
• Target cafetaria food cost reduction of 10%

Level 2
• Stop serving coffee, tea, other drinks in the cafetaria, except with duty meals
• Reduce operating hours of cafetaria
• Reorganize cleaning process in order to reduce stewarding staff
• Reduce cafetaria staffing
• All associates required to dine in cafetaria
• Target cafetaria food cost reduction of 20%
• Issue policy canceling entitlement for alcoholic beverage with meals
• Review entitlements for food and beverage rquisitions for associates who live in

Level 3
• Institute policy of cafetaria :co-pay” for all associates
• Eliminate position of cafetaria supervisor and cafetaria waiter/servers
• Perform feasibility study on replacing cafetaria operation with a meal allowance
• Cancel all dining privileges and close the cafetaria
• Target cafeteria food cost reduction of 30%


Employee Transportation All Department
Level 1
• Implement formal policy on associate transportation entitlement
• Review level of taxi cost and identify/ justify consistent users
• Encourage associates to share taxis with others
• Explore opportunities for negotiation of a “contract rate: with local taxi or transportation company

Level 2
• Revise entitlement of taxi use for associates working late shift, e.g. change from entitled after 11.00 PM to entitled after 1.00 AM
• Required associates to share transport with other. Associates to justify not sharing with others
• Forbid use of chauffeur driven cars or limousines and insist on taxis or public transport(including executive committee members)
• Hotel operated transportation to be utilized on popular routes on a scheduled basis to replace associate usage of taxis
• Conduct feasibility study on the cost/benefits of using hotel accommodation if public transport not available

Level 3
• Cancel all use of taxis for staff working early/late. Suspend all employee transportation
• Eliminate/suspend use of”personal” cars or transportation allowances for eligible associates


Employee Housing Administrative and General (Human resources Department)
Level 1
• Prepare summary of existing leases, when they expire and details of early termination provisions
• Check all utility bills monthly for opportunities for reduction
• Liaise with Department Heads on associates housing requirements and how they might be reduced
• Ensure all new leases are for terms of six months or less
• Review cost of maintenance and repair on all houses and departments and identify opportunities for reduction

Level 2
• Cancel rent allowances to new employees
• Restructure offers of employment to eliminate housing allowances, while increasing base salary
• Offer accommodation in hotel, if available and cancel lease or rental contract
• Offer salary alternatives to associates if lease or rental contract can be canceled or are due to expire

Level 3
• All associates entitled to housing to be given accommodation in hotel
• Renegotiate terms of contracts where housing is part of contract

Sources : hotel-knowledge.blogspot.com/2009/03/hotel-tactical-cost-labor-costs.html