All posts tagged Balanced Scorecard

Key Facts About Hotel Benchmarking

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What is needed for the hotel management to optimize hotel performance? Perhaps, the first thing they need to know is what problems and weaknesses they have a moment. The next thing is to design strategy for future development. Yes, in a modern business world it is impossible to survive without having a comprehensive strategy. This is explained by a tough competition in the markets. Hotel industry is not an exception here. It is possible to say that the competition is even tougher in a hotel industry than in other business areas. Indeed, if business owners do not know where they are driving at it is very difficult to achieve positive results, especially if competitors and rival hotels are looking for a chance to wipe them out. Strategy is a protection method. A strategy is about dealing with problems even before they occur. Strategy helps and organization to focus on most important thing and problems both in internal and external environment. Use of a reliable and effective strategic management tool is a must for every company that wants to achieve success. Perhaps, you will not find a single hotel that is not happy to welcome guests. However, the hotel management wants that these guests will come back next time. In such a way hotel creates customer database which consists mostly of regular customers. It should be noted that Balanced Scorecard is so far the most effective strategic management tool used to drive strategy into action.

There is a very simple principle behind Balanced Scorecard. It consists of four categories: financial, customer, internal business processes, learning and growth. Each category contains key performance indicators, which are measures to be evaluated. KPIs represent critical success factors for various business aspects. Having found the right combination of key performance indicators, the hotel management will possess up to date information on current hotel performance. Choice of key performance indicators is the most important stage of Balanced Scorecard implementation. Every individual business has own indicators, and hotel is not an exception here. Lets review a couple of key performance indicators that are widely used in hotel benchmarking.

Occupancy % of rooms. This indicator will demonstrate efficiency of marketing and advertising campaign. If hotel has 100 rooms and only half of them are regularly occupied, such a hotel will most certainly suffer losses because of expenses for maintenance of all rooms. Evaluation of this indicator will help optimize hotel performance and its booking policy.

Average cleaning costs per room. This KPI is related to the first one since all rooms have to be cleaned and maintained while not all of them are regularly occupied by guests. This indicator will help top management of a hotel optimize cleaning costs and introduce some measures that will save costs.

Average length of stay per guest. This indicator will help top management figure out what services guests would need during their stay and for how long (on average) rooms have to be clean. If guests stay mostly for several nights they would need additional services.

A Guide On Managing Hotels Kpi

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KPI management is as important as implementation process of Balanced Scorecard. Sure thing, the choice of the right key performance indicators and development of the right strategy is vital for BSC success. At the same time maintenance of Balanced Scorecard and management of key performance indicators is a critical success factor for efficient use of Balanced Scorecard. By the way, improper management of key performance indicators is one of the most common mistakes in implementation and maintenance of Balanced Scorecard. Just having a set of key performance indicators is not enough. It is necessary to adequately measure them, exchange obtained information between different managerial levels, as well as use evaluation results in decision making and strategy revision. This also concerns hotel Balanced Scorecard. Hotel industry is known as being extremely competitive. Indeed, there is no lack of options when looking for the hotel to spend the night there or the entire vacations. Hotels are eager to use
Balanced Scorecard since this system can certainly help transform strategic plans into real actions. This is only possible if all rules and norms of Balanced Scorecard maintenance and KPIs management are observed.

As known, Balanced Scorecard consists of four categories: financial, customer, internal business processes, learning and growth. What makes Balanced Scorecard unique? Unlike similar performance evaluation systems of Balanced Scorecard evaluates nonfinancial indicators as well. In terms of a hotel industry these indicators refer to customer satisfaction, improvement of hotel personnel professional level, optimization of internal processes, for example laundry, dining services, housekeeping and cleaning, reception services etc.

No less imagine such a situation hotel top managers have developed a strategy and selected a set of key performance indicators that fall into the above mentioned four categories. Now is the time to start using Balanced Scorecard and evaluate the selected KPIs. It needs mentioning that key performance indicators should be measurable and understood. As time passes by the first results are obtained. This is perhaps the most important stage since top managers have to find out whether are not they have made the right choice and assigned the right weights for indicators. For instance, such a key performance indicator as room occupancy may not matter much as visitors tend to stay for more than three days in a hotel and maintenance of vacant rooms requires little expenses. This is just a hypothetical example.

Having obtained the first results, top management needs to analyze them. KPI evaluation results show progress or regress of a hotel on its way to implement strategic goals. Thus, hotel managers and owners locate problematic areas and make decisions as to necessary improvements. For instance, if your kitchen performance prevents hotel from optimize an overall performance, relevant decisions need to be made (e.g. hiring new chef, changing food supplier etc.). Balanced Scorecard will work only in case the information it provides is actually used to initiate changes. Balanced Scorecard will not change the situation by itself but rather offer important and valuable information for top managers and business owners.

Hotel 25 Improvements How To Succeed In Hotel Industry

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Movement is life. This principle is true for business as well. Every business must develop otherwise it will fail sooner or later. Loss of competitive advantage results in loss of customers. There is a tough competition in all markets, and customers of free to choose any products they like. If a customer is not buying from you it will most certainly buy from your competitor. This is true for all businesses, including hotel business. This industry is highly competitive as there are hundreds of hotels in every country. When high season comes hotel top managers do everything possible to attract customers and make them stay in their hotels. Of course, they do not only promise high quality services but the actually offer them. Hotel is not just a place where you spend the night. Some people want to feel at home in a hotel. This is possible in case you come to a top quality hotel.

In order to improve hotel services owners and managers of our hotel need to know where to start from. In other words they have to be aware of current performance in order to make plans for the future. Until recently performance evaluation was about measurement of financial indicators for the past periods. Such approach is not perfect since it misses nonfinancial indicators that are extremely important in any industry. It is not enough just to announce implementation of new plans and improvements in hotel. A real work begins when these improvements are implemented and measured.

For example, if a new service, say, WiFi connection in all rooms is introduced the hotel spends a certain amount of money to buy equipment and maintain network. Then, the quality of Wireless Network has to be evaluated. However, what is more important is the attitude of customers towards this new service and the way they use it. If it turns out that only 10% of hotel guests actually use wireless network and only half of them really require high speed Internet there is probably no point in spending huge money for super speedy Internet. If most of hotel guests are business people for whom high speed Internet is necessity than well established wireless connection is a must.

If improvements concern reception service top management of a hotel needs to understand who their guests are and why they come to their hotel. If most of them are tourists than it would be reasonable to introduce new services like offering information on sightseeing tours, contact details of various Entertainment Services, taxi phone numbers etc. As time passes by, efficiency of these improvements needs to be tested in order to introduce amendments if necessary.

Such evaluation of improvements can be performed with the help of Balanced Scorecard which is a very efficient performance evaluation and strategic management system. Balanced Scorecard will coordinate efforts of all services and business units of a hotel and align strategies of different departments, for example restaurants and hairdressers service. This is a flexible system which means changes can be easily introduced.

Hotel Performance Measures Evaluation

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What is a universal success recipe in business? Even the most well known business gurus will not give you a definite answer. The problem is that every business is individual and thus requires individual approach. It should be noted that the situation is aggravated by a tough competition. If 30 years ago commercial businesses only had to offer high quality products at competitive prices, now the situation has entirely changed. These days, companies have to win loyalty of their customers. It especially concerns hotels. When vacation season begins hotel start a real fight for customers. Indeed, visitors have a very wide choice of hotels in different price ranges. As already said, hotels compete for customer loyalty. You know that in most cases those hotels win that have well thought and realistic strategy. One of the most common mistakes in strategic planning is that strategy unfortunately remains on paper. There is no problem in designing the most ambitious strategic plan but if they remain on the top management level there is no use in such a strategy. Thats why hotel owners and top managers are strongly recommended to use Balanced Scorecard which is known as one of the tools used for strategic management and performance evaluation purposes. Every strategy in a hotel is definitely customer focused. Sure thing, financial goals matter most of all, but the truth is that they simply cannot be achieved without retention and attraction of new customers. This is the only way a hotel can generate income.

As known, Balanced Scorecard employs very simple principle: it evaluates key performance indicators (KPIs) that represent critical success factors both in internal and external business environment. The four categories of Balanced Scorecard financial, customer, internal business processes, learning and growth cover the most important aspects of inside and outside the hotel. With a Balanced Scorecard it is possible to adjust internal processes in accordance to new market conditions and requirements. It is remarkable that the set of key performance indicators can be changed during evaluation process, as required by external changes. Lets review several key performance indicators used in hotel Balanced Scorecard.

Number of hotel guests per employee. This is a very important indicator that makes it possible to efficiently manage number of hotel employees and optimize personnel quantity. This indicator can also demonstrate group performance of employees. Naturally, the more hotel guests an employee can manage the better.

Net room revenue. This is a very important financial indicator that makes it possible to calculate total revenue for the entire hotel as well as offer valuable information on how to increase revenue without sufficient hike in hotel rates.

Percentage of international guests. This indicator can tell much of hotel quality and services. The more international get choose to visit a hotel that hire its reputation and the international and local community. If there are not many international guests in a hotel, perhaps new services and offers have to be introduced in order to attract such customers that are expected to spend much money.

Management Of Hotels Scorecard With Bsc

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It happens that Balanced Scorecard turns into said waste of time and money. This explains critical reviews of Balanced Scorecard submitted by top managers with a negative BCS experience. The problem is that Balanced Scorecard is often considered and magic business management tool that can solve any problems. BSC is a strategic management tool and thus some top managers think it can substitute strategy. Balanced Scorecard mistakes are quite typical, although they differ throughout various industries. Sometimes sets of key performance indicators and implementation guidelines are taken from online sources without proper revision and harmonization with company strategy, organization structure, goals and objectives etc. This also concerns implementation of Balanced Scorecard in hotels. As known, hotel industry is extremely competitive. In order to maintain competitive advantage and revenue rates hotels have to make unique offers to customers providing them with top quality services at competitive prices.
This is only possible if everyone in the company is thinking of ways to improve his or her performance and contribute to implementation of strategic goals.

Balanced Scorecard is perhaps the best tool for these purposes. It does not only serve as performance evaluation tool but also as a powerful strategic management system. It communicates operational in strategic management and takes strategy from presentations and strategic plans to real actions. Implementation of Balanced Scorecard in a hotel has its own peculiar features which are mainly represented in the choice of key performance indicators and customer oriented strategies.

The first thing top managers and hotel owners have to do before making a final decision to implement Balanced Scorecard is to develop a strategy. Do not hope that Balanced Scorecard will substitute the strategy. One should think of future. There is nothing wrong in earning immediate cash, however, you will lose in the long term since competitors make plans for three, five and even ten years. In this sense Balanced Scorecard is just perfect. BSC makes it possible to design long-term strategic plans and control their implementation in real time. Previously, hotel top managers analyzed only financial indicators which represented financial results for past periods. With Balanced Scorecard it is possible to be kept informed on implementation of hotel strategy all the time.

Once the strategy is developed, top managers and maybe Balanced Scorecard consultants have to look for key performance indicators which will be measured in order to obtain information on strategy implementation efficiency. Key performance indicators cover critical success factors in various spheres and aspects of running hotel business. KPIs fall into several categories: financial, customer, internal processes, as well as learning and growth. Names of categories are quite explicit and it is easy to imagine what key performance indicators can be found there. It needs mentioning that implementation of financial goals is only possible through implementation of goals in the other categories. Big profits are made only when more and more customers are coming to hotels, which is only possible through optimization of internal processes, development of unique offers and improvement of personnel professional skills and knowledge.