by Josiah Mackenzie
Founder & Publisher, HotelOperations.com
Josiah worked in all areas of the hotel business – from the front desk to technology companies serving tens of thousands of hotels in areas such as revenue and investment management – and found operations held the biggest opportunity to unlock performance and financial success.
To succeed in hospitality, you need to focus on operations above all else.
Operations is more important than sales, marketing, design, technology, or revenue management.
Excellence in hotel operations means happier guests, better staff, and more profits for your investors.
I learned this through working with tens of thousands of hotels around the world
My career in hospitality started working the front desk at a small property on the California coast. From there, I built a hotel marketing website which eventually 70,000+ hoteliers used each month to learn how to increase demand for their properties. I wanted to learn about how to turn demand into revenue, so spent a few years at Duetto, a revenue management company co-founded by the former CTO of Salesforce.com. After that, I spent the past few years working with hotel owners and hospitality real estate investors at Juniper Square.
But it was the years I spent helping to build what became one of the biggest hotel operations technology companies in the world (ReviewPro) – which provides more than 60,000 hotels globally with tools to listen, understand, and serve guests – where I learned something that has stuck with me since.
Operations is the point of highest leverage
A successful hotel business requires so much:
- A great location
- Differentiated design
- Empowering technology
- Attention-grabbing marketing
- Revenue strategy
- .and many other things
But I’ve seen how operations is the highest point of leverage for driving results in a hotel business.
Let’s look at the reasons why.
Operations attracts talent
“The magic in hospitality is in having the right staff,” says former investment banker-turned-hotelier Philippe Zrihen. Now Chief Operating Officer at Ennismore, he believes “We’re only as good as who we can recruit, and we recruit by having an operating philosophy that says we’re all here trying to provide a fun, non-stuffy lifestyle in our hotels.” That’s a big statement from the leader of a company renowned for hotels with stellar design.
Terry Haney, Managing Director of San Francisco’s #1-rated hotel, hasn’t even had to post job openings because the operating environment he’s built drives employee referrals. “Our team comes to work because they enjoy being here. They enjoy making our guests happy. They get a real sense of satisfaction in knowing that they’ve created an experience for their guests and that the guests are happy with their performance. The walls and the linens and the artwork in your hotel only go so far. It’s the employees that bring the soul to your experience.”
Great operators see the opportunity to build a culture that attracts and retains talent. Food and beverage teams have been among the hardest to hire for, but Richard Garcia, Senior Vice President at Remington Hotels, is overcoming this challenge by creating an inspiring vision for how their teams operate. “This creates a strong sense of community and belonging within our company. Rigorous standards of excellence gives our team goals they can work to attain. It’s been a big part of our success in recruiting.”
Jamie Holmes led The Nantucket Hotel & Resort to #1 in the US on TripAdvisor by making it clear to all new hires they are there to build a world-class operating team. “It makes a difference when you go to work every day knowing you’re on a winning team. It’s crucial for both attracting and retaining the right talent. Job satisfaction comes from feeling appreciated and respected, creatively expressed, and challenged to reach their full potential. Our team has fun doing this.”
Excel in hotel operations, and you’ll find your hotel business becomes a talent magnet for the right people.
Operations is the best form of marketing
Delight your guests, and they will deliver better results than any marketing campaign could.
Adele Gutman ran sales, marketing, and revenue management at The Library Collection, and achieved the extraordinary: her four properties earned the top four spots on TripAdvisor in the hyper-competitive New York market. “Your reputation is the foundation of everything you do in marketing, and it’s impossible to achieve marketing success without cultivating that reputation,” she observed. In her experience, “Operating in a way that earns you ‘super fans’ will reduce your cost of marketing and make life so much better for you – whether you are attracting more guests, more staff or opening more hotels.”
Excel in hotel operations, and your guests will do your marketing for you.
Operations gives you pricing power
Professor Chris Anderson studied this at Cornell University and found that a 1% increase in a hotel’s Global Review IndexTM is related to a 0.99% increase in RevPAR.
This held up in the field. I remember sitting down with leaders at ReviewPro’s client companies and adjusting compsets for hotels that were outperforming in guest satisfaction and could charge higher rates.
Dominic Longo was one of the leaders I worked with. By leveraging his experience as an operator with increasing responsibility, he built systems from the ground up at Red Lion Hotels (now Sonesta) that gave the hundreds of hotels he oversaw higher pricing power. “Operating in a way that improved our guest review scores improved our revenue,” he told me.
Excel in hotel operations, and you’ll escape commoditization, compset-based pricing, and earn bookings at rates higher than ever.
Operations drives brand value
Think of an iconic brand like Ritz Carlton. Brand Finance estimates the value of its brand alone at more than $1 billion. With $3 billion in annual revenues, premium pricing power, and customer loyalty, it’s likely quite a bit higher. And that value is the sum of every interaction every guest has with its brand. For decades.
The power of operational excellence at work.
Your reputation precedes you, and carefully stewarding experience through operations means you can be picky about which developers and owners you work with, creating a virtuous cycle of investment into expanding your presence and brand.
As brand positioning guru Al Ries taught us, your brand is what consumers say it is – not what you want it to be.
Excel in hotel operations, and you’ll increase the value of your brand.
Operations drives real estate value
While working at Juniper Square, I saw how investors were attracted to hotel real estate because of the unique opportunity to unlock value and outsized returns. “Hotels are operating businesses, and that creates the ability to earn higher yields,” Jake Wurzak, CEO of real estate investment firm DoveHill said. In his view, the management company he also runs gives him a “big-time competitive advantage” as an investor.
I spent years working with JLL and hotel real estate investors who would comb through guest reviews in the underwriting process, and use them to form a business plan for new acquisitions. Or look for ways to boost profits in preparation for a sale. Either way, the value was created in operations.
This is why Tyler Henritze at Blackstone said investors should focus more on operations at the NYU Hospitality Investment Conference earlier this year. “Where we’ve really had success is where we not only owned the real estate but also the operations behind it.”
Excel in hotel operations, and you’ll increase the value of your property.
Operations is the most important part of running a hotel business today
Whether you are a hotel general manager, an operations leader at a management company, or an investment manager stewarding capital, operations is the key to unlocking potential – and profits.
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