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How To Control Costs At Your Small Hotel?

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The challenge of keeping costs under control is an ongoing one for most business owners. It’s particularly difficult in competitive industries such as the small hotel industry – and is something that can keep you awake at night.

Hotel cost control and analysis:

In business, cost control is defined as “the practice of identifying and reducing business expenses to increase profits.”

To find all your costs, run through your credit card statements and other places where your spending is documented. If you’re using software with accounting or reporting functions, this should be easily accessible.

Next, you want to run a quick analysis to see where you’re spending money and where you may need to cut back your spending.

With your list of expenses in front of you:

  • Compare your expenses to your budgeted expenses: are you going over budget and, if so, which areas seem to be the problem areas?
  • Categorize your expenses (labor, food and beverage, utilities, marketing, subscriptions, accounting, legal, insurance, maintenance and repairs, office expenses, and other relevant areas) to get an understanding of where your money is going
  • Classify costs as fixed or variable: fixed costs are those that remain the same regardless of business activity while variable costs go up and down with changes in business activity levels
  • Find controllable costs: the expenses that can be adjusted or influenced by a person are the ones you really want to focus on – for example, switching off lights can bring down electricity bills but your monthly accounting software fees are generally fixed
  • Calculate return on investment to work out which expenses are justified by the amount of money they bring back into the business.

 

Methods and techniques for cost control in the Hotel industry:

If it looks like things have gone from bad to worse after your analysis, don’t panic! There are plenty of ways you can start cutting costs, including:

  • Outsourcing: moving tasks that are currently handled in-house to an external provider often cuts costs through economies of scale (and by lowering your labor costs)
  • Focusing on efficiency: money could be seeping from your business simply because your processes are letting you down (or you’re not allocating and using resources to maximize profits)
  • Bulk buying and other ways to reduce supply costs: negotiating a better deal across all your suppliers can add up to significant cost savings
  • Finding errors and unused services: running an eye over your bills to find costly errors or services you simply don’t use or need anymore can deliver quick money-saving wins
  • Focusing on small savings: remember that making small changes consistently can add up to big costs savings in the long run.

 

Food and Beverage cost control:

A small restaurant or other food and drink offering can be a drawcard for guests, however, the costs can quickly escalate. 

Food and beverage cost control is one area that deserves special scrutiny. While some of the general areas mentioned above can help you cut costs, including looking at  suppliers and labor costs, there are some additional ways to improve your food and beverage profits:

  • Get the pour size precise for alcohol by training staff or using jiggers
  • Reconsider portion sizes if meals are often praised but often left partly uneaten
  • Design menus so some ingredients and prep work are shared among dishes
  • Shrink the menu and go for quality over quantity 
  • Make sure the kitchen isn’t over-prepping or failing to efficiently store ingredients, leading to waste
  • Consider whether a breakfast buffet would work more efficiently as a “grab and go” style breakfast menu
  • Cut down the hours or room service if it’s becoming a drain on resources.

 

Tools to help control Hotel operations costs:

If you’re examining and managing your costs manually, using pen and paper or Excel spreadsheets, this time drain can also become expensive for your business  – undoing your efforts to save costs.

Investing in hotel technology and software can not only help you manage costs, but it can also improve efficiency and decision-making across your entire business and boost your guests’ experience. 

Imagine being able to:

  • Connect your channel manager and booking engine
  • Take direct bookings on your website
  • Track and measure which online sales channels are generating the most bookings 
  • Manage reservations with a simple drag and drop calendar
  • Organize and streamline housekeeping
  • Use a mobile app to manage your property from anywhere
  • Get more time back to spend in the business or simply doing what makes you happy.

 

 

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