Hospitality CEOs: The 10 Mistakes Hotel Owners Make Often

Bruce Prins

Hotel owners often make basic mistakes when operating their hotels and then cannot understand why they either make no money or the hotel eventually closes down. Below are just some general mistakes but these are not exhaustive.

First, there is the tendency to base room rates only on what competitors are doing instead of what is actually offered to the guest in relation to what it costs the hotel. There has to be a balance between perceived value and the guests paying a fair value for what they are getting. Should a guest feel cheated the guest will never return. It is very rare for a hotel to be premium in its reputation and location for it to charge what it wants.

Thus stated, where a hotel has no clear rate policy that dictates what the standard room type rates are and what is discounted to companies, groups or frequent guests can be costly for an owner. Quoting on an individual negotiated basis can lead to mistakes. Some clients may abuse the discounts they are used to and if a hotel refuses to honour what they did before the guest may actually go elsewhere. Though guest loyalty is a fallacy, if guests know how the hotel's policy works and they know what to expect, they can actually become regulars and trust that for what they are paying for is fair in relation to what they are getting.

Such a rate policy is usually an internal document not shared with guests but highlights what the normal rates are and what a guest is offered for what they pay. Furthermore, it would also specify what discounted rate they would get based on a justification such as they are actually a group or a regular company or a regular guest. The guest is given the full rate and then the rate offered that best describes the qualification for such a discounted rate. No percentages should be used but rather the value of the discounted rates.

Hotels that misrepresent themselves as luxury or budget when in fact they are the opposite can alienate guests and cause the business to fail. Services and facilities determine a hotel's grading and status as either to be budget, economy, mid-scale, up-scale or luxury. It is important for the owner to get professional advice on what grade their hotel is before making claims and deciding what rates to charge for their hotel rooms.

The practice of not doing preventive maintenance by checking all furniture, fittings and equipment daily or weekly and then using cheap labour or skills to conduct maintenance is destructive for a hotel. The worst is when the hotel just plainly expect guests to stay in a hotel with paint peeling off walls, leakages everywhere and furniture and equipment either broken or not working at all. Guests will realise they are being taken for fools and move elsewhere. If it is a hotel that charges cheap rates then this will attract guests that will go further to add to the deterioration of the hotel as an asset and its reputation.

Hotels that then add gimmicks to compensate for poor service, exorbitant rates or poorly maintained facilities, do so as a cheap attempt at making their guests feel they are getting value for their money. Gimmicks can be extra services, furniture or equipment added that actually do not really add value to the guest. An example would be to place chocolates on the pillows at night time in a hotel where the air-conditioning does not even work. Hotels have to get the basics right such as cleanliness, hygiene, good service and working equipment before even attempting to add little touches to entice or appease guests.

Hotels do get old and money should be invested at least every five or ten years to ensure the hotel is kept up to standard. That is if the hotel was properly thought out and built to begin with. If no money has been allocated for it or no investment is forthcoming, the hotel will lose out to its competitors and eventually go bankrupt.

In today's world where competition is forever increasing no hotelier can afford to sit back and think guests will just take it or leave it.

Owners that withdraw profits from the business on a continuous basis, especially during the first few years and then take loans when serious funds are needed are setting the hotel up for a disaster and wasting their money. Profits should be kept in the business until all loans are paid and then these same profits should be used to either pay out as dividends or form part of future re-investment.

A hotel is a business but most of all its value is in its appreciation over time into an asset that can be sold at a high value, especially if it is successful and has a good brand name. At least the building and land can be sold as is at a greater value when need be because property most of the time increases more in value than cash in the bank.

If staff in a hotel are exploited by either being paid far below what the average salary would be for their work, or not being trained or even being replaced at a whim without clear disciplinary policies applied consistently, it is a given that the hotel will lose business. Staff would steal and in actual fact contribute to the hotel's deterioration with a mediocre and apathetic attitude to their work, each other and the hotel guests.

It is common for an hotelier to also think that when the hotel pays to have people trained they will leave for better jobs. That may be so but then the question begs as to why the staff would be so eager to leave. The fact that staff do leave hotels or move around is a normal situation in hotels world-wide and yet a lot of hotels that actually encourage staff turnover in a positive way find that they have better occupancies, happier customers and more profits. The trick is to keep the staff that add the most value and show the most potential in ensuring the hotel is a success.

Lastly a hotel owner should be careful of who they encourage and even allow to stay in their hotel. When prostitutes are consciously allowed to operate in or from a hotel they draw in bad elements such as criminals and drug users. Drug users or criminals encourage kingpins to also frequent the hotel and then attract murderers and even entire gangs to take up residence. Once the latter occurs the owner has no more control over his or her hotel and is subservient to the abuse and whims of the clandestine community he helps to create within his or her own hotel.

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