Monthly Archives: April 2010

Economic Analysis: Weathering the Storm: Tom’s Take

Was just reading that 61% of US Government expenses are covered by the taxes the government collects. Other 39% has to be borrowed.

The Congressional Budget Office (CBO) has already forecast a 4.5% deficit to GDP for the next 10 years.

Meanwhile, the government continues to spend money we don’t have on programs that will never increase real tax revenues or the size of the taxpayer base. In the last 50 years the federal government has made no real attempt to solve the above deficit problems long term.

So what does it mean for hotel business as we look “down the road?”

One persons problem is another persons opportunity.

As the government gets bigger and bigger obviously there will be more business from governmental agencies. Equally important will be all the companies calling on various government agencies either to sell to, or get something from the government. Then there will be all the companies who call on the government who are just trying to get a piece of the action.

Historically, “insiders” have gained the most from swings in governmental spending. That’s why there are so many lobbyists trying to influence governmental agencies. Yes, they are trying to influence policy, but more important is having advanced information that can benefit them.

How do you become a government insider?

Knowledge is power.

Who in your community will benefit from the government taking a more active role in our economy? How much do you know about those entities? How can you learn more?

Even if your business is in a small town there are businesses and organizations that work closely with various business organizations. Be sure you know who they are and have a plan on how to increase your business from those organizations. They are going to have needs for hotel rooms, create group business, and have a need for recreational programs. They can benefit hotels that specialize in transient business or group business, and they can benefit resorts.

What’s the best way to tap into this buisness?

Use the Internet.

Create a social media campaign using email to reach out to organizations for each market segment you are interested in.

When thinking social media we immediately think of Twitter and Facebook. Instead, create your own social media network and let it expand based on people who are interested in what you are offering.

Have a monthly email that appeals to a highly targeted group of your customers. Ask them to subscribe and to share your emails with others they know who would be interested. By appealing to a highly specific group of customers it becomes very easy to write to them. It’s much easier to write for a narrow market. As soon as we try to write information that will appeal to a mass market we have to spend a long time carefully thinking about the market we are trying to appeal to.

This blog is written first for the hotel industry and secondly has some applications to the overall hospitality industry. Were I to write this for a much broader audience I would have to write much longer blog articles and use lot more examples, and I could not be as specific. I have a great deal of admiration for people who have the ability to cogently write for large mass audiences.

Break your marketing emails down to as small a market segment as you can. This will enable you to exchange information and feedback that is highly targeted to the needs of the specific segment. Your goal is to increase your business from that segment by 10% each year. Will you always hit the goal? Probably not, but having an aggressive revenue goal will keep your monthly emails highly targeted.

Share what’s working for your hotel. We are all peers, very, very few of us are really competitors.

Economic Analysis: Plan Now to Profit from Coming Oil Shortage

U.S. Military is warning that by 2010, surplus oil production could completely disappear. By 2015 the oil shortage could be 10 million barrels per day.

Obviously shortages of that nature would have severe impact on business for hotel/resort/conference center industries. It will even spill over to restaurants. China has hundreds of millions who will have economic capability to buy cars over the next few years. It is projected they could absorb any excess capacity. India’s consumption of oil is greatly increasing.

Whether the above time frames are exactly right, all businesses that plan on being around 2-5 years from now, need to evaluate how to expand their business if oil and gasoline shortages get severe.

There’s Opportunity Here!

Resorts that are close to cities stand to benefit from this. Resorts that are farther away have opportunity to develop business alliances with tour operators and mass transit providers. Developing that business will take time, so get started. At the very least you will be developing additional business.

Suburban hotels will benefit from those businesses and citizens that are close to them. But they too will need to develop some alternative means of transportation. Hotel shuttles will need to be expanded, or the hotels will need to tie in with mass transit providers. Mass transit providers will probably also get into the charter business to optimize fleet usage.

Hotels and restaurants will have more opportunities to work together.

We know the amount of oil is limited. We also know that alternative fuels can only meet a small percentage of the worlds demand. New technologies to solve energy problems are years away from mass commercial applications.

Progressive hotel owners, General Managers, and other executives are starting to evaluate where they are going to get their business several years from now. The population of the world will double in the next 50 years. Executives who will be most in demand are those who pay attention to trends and identify how those trends can benefit their business.

Economic Analysis: Uncertainty Can Be Good News: Tom’s Take

Robert Frost said, “In 3 words I can sum up everything I have learned about life. It goes on.”

Friday I was reading that crisis in Greece continues to worry investors. RE market seems to have turned the corner in the US. Next article said RE market remains weak. Meantime, volcanic eruption in Iceland has royally screwed up airline flights. To point UK has sent ships to pick up stranded citizens in the Baltic. Stock market rallied. Wait a minute, it dropped Friday on news of yet another scandal.

What the heck (alright I tamed that down) does all of this mean? How do we make it work for our businesses?

The more I read the less I know. If I don’t like one analysis I can read a little more and get the opposite analysis. Economics has always been more art than science. Yet, people, or at least the media seem to be dwelling on economic predictions more than ever.

“At first I was uncertain, now I’m not so sure.” Anonymous

Those of us in business need to be aware of what’s going on in the world. But then move forward without relying too much on what’s going on. Another quote I like, “There’s nothing wrong with looking back, just don’t stare.”

There are certain things we know.

The world knows that natural resources are depleting and the population is exploding. Likewise, each of us should know what is going on in each of the communities we do business in. Which businesses are growing and which are contracting. But do we?

I was recently talking to a VP Operations who has been asking their hotel management teams:

  • When was the last time the GM’s asked their teams, specifically, which local businesses were growing or poised for growth? When was the last time the sales team visited those businesses to learn what their needs were?
  • When was the last time they attended Chamber of Commerce Meeting? Met with the local CVB? Had lunch with their peers from other hotels? Attended a Rotary or Kiwanis meeting? Were involved in another civic activity?

This VP was worried that the teams were concentrating on today’s business to the exclusion of future business. The VP was right. The GM’s had not been asking the first question. Attending a staff meeting it was quickly apparent Department heads were not getting into the community to learn what was coming. Most of the Department heads belonged to one or more organizations, but they rarely attended meetings.

Action Plan

Hotels had their sales teams calling on known accounts and local businesses. Department heads had to attend at least one civic function a month. By dividing up civic organizations, each hotel assured attendance at majority of meetings and functions. Things that should have been happening all along, but in the effort to get immediate business, things that were not being done systematically.


First month hotel picked up 4 additional catering functions. Booked 3 small meetings for the next month. All a result of sales team calling on businesses they added to their list of prospects. Attendance at civic functions and meetings resulted in booking 3 wedding receptions, an anniversary party, role out party for expansion at local business, and events for 3 new businesses that were opening within 3 months. Plus over 20 leads for other business functions with potential for over 300 room nights.

VP’s prodding reminded Department heads they were all responsible for sales for their hotel.

Silver Lining in Residential Foreclosure Market: Tom’s Take

Home foreclosures first quarter are 35% higher than in 2009. Appears the nation is on track for 1 million foreclosures in 2010.

How can there be a silver lining in that? There certainly isn’t for the people displaced. But for those in businesses that benefit from meetings those foreclosures represent opportunities.

Financial institutions are increasing meetings as they look for ways to divest these assets. Whether it’s meeting with a group of realtors, or potential investors, or companies to handle advertising, maintenance on the assets, etc.

There is plenty of money available to invest. So far, major investment groups have been watching for commercial assets. Commercial Backed Mortgage Securities (CBMS) hold many, if not most of the desirable commercial real estate assets. CBMS are very, very complex. They normally cover a number of assets, so unraveling them and preparing individual assets for sale takes a long time.

I doubt the groups with large cash holdings will be interested in residential real estate. However, some of the smaller groups may decide they can pick up groups of homes, rent them out, and then sell them in several years when real estate market conditions improve.

What businesses may have needs for your hotels? Mortgage companies, residential real estate companies, landscape and home maintenance companies, insurance companies, security companies, CPA’s, small and mid-sized banks and financial institutions. Call on them to see what their needs are. Listen and get creative in ways to gain business from them.

Top 3 Performance Evaluation Questions

The objective of a performance evaluation is to boost the employees motivation and to learn ways to improve your business.

Hopefully the following are already part of your performance evaluation process. If so, congratulations. Your are in the Top 5% when it comes to effective performance evaluations.

  1. Ask your employees what the top three goals are for the business. Many times employees can’t answer that question. Your employees can’t be on the same page unless they understand the goals. Often we assume everyone understands the goals to achieve our mission.
  2. Next, ask employees how they would take business away from your company if they were competing with you. This gives employees the chance to identify any weaknesses the company has. Managers are often surprised how quickly employees can identify weaknesses or shortcomings, especially hourly employees.
  3. See if employees can identify “business changers.” Ideas that can make a significant difference in how you conduct business. Ask employees what they would change to take your business to the next level. What they would do if they could change anything. Your objective to to help employees think of ways to do your business differently. Another way to ask the question is to ask them what parts of their job drives them nuts. Follow-up question of course is what they would do to fix it.

We are all busy. It’s easy to just concentrate on immediate performance when giving an evaluation. Many managers view performance evaluations as “unpleasant” or “a waste of time, the employee already knows how they are doing and where they stand.”

Human Resources Departments need to remind managers of the objective of the performance evaluation is to improve employee motivation and improve the business.

How does HR make that happen? Add a Standard of Performance that states each manager needs to gain one idea per employee on how to make the company better. Then, when you send them an email on the date of their next performance evaluation remind them to ask the employee of ideas on how the business can be made better. Don’t assume they remember. Like all of us, your managers have a lot on their minds. It’s easy for details to slip. Especially on portions of their jobs they don’t do often.

Economic Analysis: In 4 Sentences-Tom’s Take

Received the following in the email the other day. I wish I knew who made the statement to give them the credit due.

“You cannot legislate the poor into prosperity by legislating the wealthy out of prosperity.

What one person receives without working for, another person must work for without receiving.

The government cannot give to anybody anything that the government does not first take from somebody else.

When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that my dear friend, is the beginning of the end of any nation.”

Tom’s Take: Innovations for Second Quarter

Yesterday in Business is Better, Closing In On Good, But Not Great “” I indicated that most companies we have talked to did slightly better than planned for the first quarter. Some felt they were overly conservative in their projections. Others felt they didn’t get as big a “share” as they wanted. Etc. Bottom line: many companies are not as happy about first quarter as they should be. Congratulate yourself if you achieved NOP!

Innovative Thinking for Second Quarter.

Had a delightful conversation with a progressive thinking VP Sales & Marketing early this week. He really got me thinking. I asked if I could share his ideas. He agreed.

He introduced me to:

Zero Based Marketing & Sales Projections Increase Revenues 11%

All of us are familiar with Zero Based budgeting that was all the rage a few years ago. (Incidentally, a number of progressive management companies are still using the concept and seem to be beating the industry profit averages by 5-7% every year.)

This VP sits down with sales teams at each hotel, every quarter. They analyze all the booked business. What has been booked. At what rate. What additional services/products were added to the sale. What F&B is included. Then they go through a check list of 97 things they can offer to any group or guest to identify what they did not sell. Now they re-analyze each piece of business to identify how to get additional revenue from the group.

They have been doing this for 9 months. On average they have increased revenue from existing bookings by 11%.

The VP takes this a step farther. Before each sales call the sales person studies the list of 97 items that can be sold and charged. Which will benefit this group or corporate account the most. They look at what will provide the most benefit to the customer. Not what will give the hotel the greatest profit margin. This VP understands the key to sustained long-term profits is to keep all the accounts. VP knows that only happens if you meet the clients needs first.

Can It Really Be This Simple?

VP Sales and Marketing said they learned early that they always left money on the table. Sales people are trained to close the sale. It’s tough to be in the middle of that process and remember everything you can sell. By analyzing what was missed, from the customers perspective, they can go back to the customer and help the customer better meet their needs.

I asked if the customer always “traded up.” The answer? “Almost always, but typically at a fraction of what we suggest.” It’s easy to identify ways a customer can significantly increase their results by spending 20% more. That’s rarely in the budget. “Customers always appreciate our suggestions, even when they don’t use them. They appreciate our thinking about their business. By concentrating on how our suggestions will benefit them, they “get” that we are not just trying to re-negotiate the deal.

Sweetening the deal.

Once in a while, the customer just can’t add anything. Before we make our suggestions the sales team at the property has identified 1-2 things they would be willing to “throw into the existing deal” to improve things for the customer. These customers are blown away by our offer. It stops them cold if they were thinking we were just trying to renegotiate after the deal was signed.

The Best Part-90% Re-bookings.

That’s right. This company has re-booked 90% of the business that has been exposed to the above. “Customer loyalty is the name of the game for any business. I always remind our teams that it’s easier to get additional dollars from existing customers than to find new customers. We all know it. In our zeal for additional business, I found we were pushing our sales teams so hard they were not giving our existing customers the attention they deserved.”

Reaching Your Goals…Everyday

John Giusti, VP Small Business Marketing for Staples recently stated “You’re 80% more likely to reach a goal if there’s a commitment with some level of incentive and accountability.”

John’s quote got me thinking on what each of us can do to be more effective. Following are things we have started.

Each of us has more to do in a day, than there is day. Give yourself incentives to complete items on your “To Do” list. Give yourself larger incentives for the strategic tasks on your daily list.

Hold yourself accountable to the critical items on the “to do” list. Carefully evaluate which tasks will impact your business and career the most.

Now pass along the above tips to your employees and then have some fun comparing results and offering a prize to the team member that does the best job staying on task for the week.

It’s not easy. Our business world has lots of interruptions we can’t control. We each need assistance in “staying on task.

Share what works for you.

Business is Better, Closing in On Good, But Not Great

This week I’ve started to hear some pessimism from a number of companies. When I ask how business was the first quarter they all say “slightly better than in 2009.”

This year the economy is supposed to grow about 3.5% (3/10ths of a percent per month.) Most of that growth is supposed to occur the second half of 2010. I know we all hoped our business would be the exception and that we would grow faster than the economy as a whole.

If most of you are doing slightly better than in the first quarter of 2009 , be thankful. You are moving in the right direction. Just not as fast as hoped. Did your business grow faster than the economy as a whole? If so, congratulate yourself, and your team.

Business is slightly better and it is closing in on good.

What happened to Great? Ahh, that’s where the rub comes in. Any of us that want “great” have to be significantly more nimble in adopting new ideas, strategies, entering new markets, etc. In a word, we have to be better “innovators.

This has to be a long slow recovery for the country as a whole. We have a huge country with lots of people. We have a country that wants to provide more socially for our citizens. That requires a lot more taxes than we are paying today. Majority of employment increases are coming from the public sector. That sector has never contributed to the economic growth of the country. None of our businesses can grow as fast as we would like if we continually have to pay more to the government before we can invest in our companies.

Saw an interesting quote earlier in the week that summarized what’s happening. “The government cannot give to anybody anything that the government does not first take from somebody else.” Our country is slowly exhausting the credit limits China and other countries are willing to extend. I understand interest on the debt we owe China now exceeds a billion dollars a day.

It does not matter if we agree or disagree with the above, it’s happening. Our role as business people is to identify ways to grow our business faster than the government can figure out ways to confiscate our profits.

None of us can afford to wait for the economy to turn around. Start by realizing we had a good first quarter if we exceeded 2009 and our first quarter’s NOP. Now let’s tackle the second quarter and see if we can do slightly better than planned, again. If so, we should end the first half of the year a percent or more ahead of our first half projections.

Historically that would be good, it’s only been in recent times that we have started expecting double digit increases in business year after year.

Don’t get me wrong. We all should be shooting for double digit increases every year, 20%+ is ideal. But those types of increases rarely happen unless we are very innovative with our business.

Innovations for the Second Quarter coming April 8th.

Had great conversation with dynamic VP Sales & Marketing. He agreed I could share his ideas. Watch for tomorrow’s blog.

Economic Fundamentals-Making Them Work for You:Tom’s Take

US became a world power based on our manufacturing prowess. Our world role as a manufacturer of products has greatly decreased.

This recession is the first instance that the government is creating most of the jobs (since the Great Depression.) Their attempt of course is to restart the economy.

Unfortunately, the loose spending policy and stimulus by the Federal Government, and the willingness of State, County, and City Governments to continue overspending does not contribute to a sustainable recovery. Our government continues to deal in microeconomics instead of macroeconomic fundamentals. The governmental policies continue to create asset bubbles. Sooner or later, like all bubbles, they will pop.

How do we protect our businesses?

Understanding the above is the first step. Second step is protecting our companies by minimizing the business we do with asset categories that are bubbles, like commercial backed mortgage securities. If we have to deal with them, then we each need to recognize we are dealing with risky markets and we need to develop alternatives as fast as we can.

There’s nothing wrong with doing business with risky sectors of the market as long as we understand them and don’t depend on them.

How do we protect our businesses? If government at all levels is taking a larger role in all aspects of society, then we need to structure our businesses to attract more government business.

Some of that business will be directly from the government. More business can come from various businesses and organizations that do business with governmental agencies close to you. Identify and market to those companies to encourage them to do business with you when they are in town.

Be proactive identifying business opportunities based on today’s market conditions.