More than a Stoplight, It was a game as a kid

There is a job search site that takes a while to get through, after the basics the applicant has to take a test. After you take the test the applicant is placed in a category.  I worked recently for a medium size hotel company.  When I began as a TaskForce Manager when we looked for staff HR would review applicants, send them through inter-office mail and through a painful process eventually set up interviews with prospective employees. The game changer was when one property used a online job board as a filter process, since it worked well for them, it was decided that it would work well for the rest of the company, kind of like one size fits all.

The process was a bit painful at the beginning, we were all issued passwords and had to review applicants and the site placed them preemptively in assigned categories by a test they took during the process. The site had three colors they placed applicants in, similar to a inverted stoplight. Green for go, yellow as caution, and red for stop, being said you had to take time out of your already time crunched day, and review resumes ad test scores. I can tell you that at 3am after a full night and paperwork trying to put someone in  a category will make you even more bleary eyed, I found in my searches was that in my determination that either the tests were wrong, or people didn’t pay attention, just to get through the process, and I understand that as well.

The funny thing I came to realize in talking with them and subsequently hiring them was that a couple of the greens failed miserably, and a couple of the reds and yellows turned out to be a couple of the best hires.  In retrospect the tests did not tell me the whole picture, I had to get them in front of me to make the correct determination. Yes, previously we did have HR screen them, which makes you wonder how many did we let go or get by based on someone else’s gut feeling. Hiring the right staff is more than a game when it affects your operation. Perhaps some people are right about Outsourcing HR.

Ask us about F&B in a Box...a new concept for 2013....(www.sutterpine.com)

Put us on a retainer. Use us as TaskForce Management. Cost Controls, Inventories, Service analysis. Have us to create a system for you to get to the next level. Need an Objective viewpoint of your Hotel & Restaurant Operation development.  Save $$ on OSE and FFE for Construction and Renovations

A Funny thing happened on the Way to Alaska…

Last year I accepted a post consulting in Alaska at a premier resort.  I came back into a Hospitality field that has changed dramatically. In the coming Blog posts I will look into the changes and some of the things I have encountered.

I am deep into writing a book “Man at the Door” it chronicles my stints in renowned restaurants and resorts, More about that later…

I spent time in Wisconsin @ The Grand Geneva managing the Geneva ChopHouse…One of the Top 10 Restaurants in Wisconsin……and ended up in the Caribbean at Cap Juluca..the #2 Resort in the Caribben…Re-Opening the Resort and reviving their F& B Operations….

Ask us about F&B in a Box...a new concept for 2013....(www.sutterpine.com)

Put us on a retainer. Use us as TaskForce Management. Cost Controls, Inventories, Service analysis. Have us to create a system for you to get to the next level. Need an Objective viewpoint of your Hotel & Restaurant Operation development.  Save $$ on OSE and FFE for Construction and Renovations

What’s your Core..?

Having finished Drew Brees book, I was taken by his humility and openness, he wrote about being released by San Diego, and his journey to New Orleans, He embraced his situation, Believed in himself, and never gave up. Several key points I took were;

The movie ‘300’ and how he saw the movie and applied it to the Saints and they had their championship season he likened the Spartans march to battle Persia.  They chanted “Ha-ooh..”This is Sparta”, ‘Ha-ooh….I also liked the movie, and understand what he saw.

 

When I was in Leadership class while at Rappahannock Community College, in one section we reviewed a few movies such as “12 Angry Men”; “Hoosiers”; and “Apollo 13” watched the movies and learned the leadership roles and how they were applied, Drew did the same thing with ‘300’ and applied it to the Saints.

How to Test Hotel Feasibility

(Steve Rushmore writes about economical feasibility of hotel development.)

http://www.hospitalitynet.org/news/4053121.html

When designing a hotel, the architect and development team need to create a project that is ultimately economically feasible. Unless the hotel's owner is ego driven rather than economically motivated, most investors are looking for a return on their invested capital. Since feasibility means different things to different people, and as a hotel consultant having prepared thousands of feasibility studies, I have been asked to provide my perspective on this topic.

The process I like to use for determining whether a proposed hotel is economically feasible is to compare the total project cost (including land) with the hotel's estimated economic value on the date it opens. A feasible project is one where the economic value is greater than the cost. Accurately estimating the total project cost is a relatively simple process for the architect and development team. However, determining the economic value is much more complicated.

The first step in the valuation process is to perform a market study where the local hotel demand is quantified and allocated among the existing and proposed supply of lodging facilities. The allocation of room night demand is based on the relative competitiveness of all the hotels in the market. The end result is a projection of demand captured by the proposed subject hotel, which is then converted into an estimate of annual occupancy. A similar procedure is used to project the average room rate.
The second step is to project the hotel's operating revenue and expenses based on the previously estimated occupancy and room rate. This results in an estimate of annual net operating income. Most consultants use a five- to 10-year projection period, so this process needs to be repeated for each year.

The last step is to convert the projected NOI into an estimate of value using a weighted cost of capital discounted cash flow procedure. The end result is an estimate of economic value that can be compared to the total project cost.

Some consultants will substitute a net present value calculation or determine the internal rate of return (IRR) for the last step. However, I prefer using the economic value approach because you end up comparing "apples with apples" - i.e. cost with value.

As you can see, this process of determining economic value requires local market knowledge, hotel financial expertise and experience with valuation methodology. Luckily for architects and hotel developers, there are two simple rules of thumbs that will provide a rough approximation as to whether a project is economically feasible.

The first thumb rule tests the cost of the land to determine whether it exceeds a supportable economic land value. The following formula calculates economic land value:

Occupancy x ADR x Rooms x 365 x .04 / .08 = Economic Land Value.

As example, a proposed hotel is being considered on a parcel of land that can be acquired for $3,800,000. Zoning permits the development of 200 rooms. Based on local market conditions, the proposed hotel should achieve a stabilized occupancy of 70% and an average room rate of $150. Using these inputs the Economic Land Value would be calculated as follows:

.70 Occupancy x $150 ADR x 200 Rooms x 365 x .04 / .08 = $3,832,500.

The calculation shows the Economic Land Value is above the cost of the land so the developer is not overpaying for the land. If the land cost was $4,000,000 or above, the developer needs to re-evaluate the project because it's not supported by the hotel's underlying economics. Perhaps additional rooms could be added, which would increase the room count or a higher quality of hotel developed would increase the average room rate.
This Economic Land Value formula works well in most markets.
For prime center city locations the .04 factor can be moved up to .08.

The second rule of thumb is the Average Rate Multiplier formula. This is a very simple way to approximate a hotel's total economic value. The formula is as follows:

ADR x Rooms x 1,000 = Economic Value

Using the numbers from the example above produces the following Economic Value:

$150 x 200 x 1,000 = $30,000,000

If the hotel's total development cost is over $30,000,000, there could be a feasibility problem. In most cases where the development cost is significantly higher than the economic value it is because the local market's average room rate is too low to support the contemplated improvements. In these situations the proposed plans and specifications need to be scaled back in order to produce a lower total project cost, which might then create a feasible project.

One additional point of reference looks at the percentage relationship between the hotel's land cost and the economic value. In this example, the value of the land is approximately 13% of the overall economic value ($3,832,500/30,000,000 = 13%).

This relationship should be no more than 15% to 20%. In other parts of the world where labor cost is low, this percentage relationship can be higher.

Using these hotel feasibility rules of thumb combined with a professionally prepared study will insure the architect and developer are not creating a project that has no economic viability. As with any rule of thumb, there are numerous exceptions that need to be factored into the evaluation. Before abandoning a project because the rules don't produce the desired results, it is a good time to call in a professional consultant to prepare a more in depth analysis to either verify or dispute the conclusions produced by the rules of thumb.

Where are We Really?

I met with a couple of clients this week…and business is off…not the greatest but they manage. One is a in lodging, and they are running about 52% occupancy year around on a room inventory of 70 rooms.  It’s not a large property but it is huge with all that they offer.  I think that they will survive.

The other is a small restaurant that holds their own and the owners told me that they get by ok.  I know this because he was a customer of mine when I sold food.  The place has great food and is a small place that does breakfast & lunch only. He told me that he put an ad in the paper for a server that could work Friday, Saturday, and Sunday, he said that the ad specified that you had to be able to work all 3 days.  He said he never got so many applications for 1 position, and that they came from all walks, banking, retail, and managers, People who were in a different career field.

The ironic part is that the lodging client was seeking an Executive position, and they were overwhelmed, for the 1 position, they received over 300 applications, 40 locally, with people who have been a hotel GM and such other experience.

In the old days, you would go to your Rolodex and call a buddy or someone you had worked with and got them the job. It’s not like that anymore. It’s all web based. A test here, a quiz there, And they wonder why there are so many Un/Under Employed.

 In the hospitality field as job searching goes. In my opinion, if I worked with you, and you have progressed, and I have a position available, you’re gold.

Through the Windshield or the Rearview Mirror

In The End It’s How you Look at It..

Product                                             Goal
Strategy                             vs.           Strategies
Goal                                                 Products

Business is always looked at in a triangle view from top to bottom, and then there are those businesses’ that get it, and invert the triangle in both senses, In the Customer model they look at the customer first and use the module on the right, Assess their needs, figure out a strategy for them to get there, and find the products that will fit their needs. They also do it on the employee side. They put the employee’s interest first.

It is companies like this that have an edge today and the ones that people don’t want to leave.  It takes structure, vision, and a desire to go outside the box, it equates to the difference of street cruising, and going off roading.  Are you looking at this going forward..or in the mirror as something you went by..?

 So buckle up, put a helmet on, and enjoy the ride.!!

Notes from Tribal Leadership

This is a book I really Enjoyed.
If you pick it up I think you will find it very informative.


Every company, indeed, every organization, is a tribe, or if it’s large enough, a network of tribes—groups of twenty to 150 people in which everyone knows everyone else, or at least knows of everyone else. Tribes are more powerful than teams, companies, or even CEOs, and yet their key leverage points have not been mapped—until now. In Tribal Leadership, Dave Logan, John King, and Halee Fischer-Wright show leaders how to assess their organization’s tribal culture on a scale from one to five and then implement specific tools to elevate the stage to the next. The result is unprecedented success.

In a rigorous ten-year study of approximately 24,000 people in more than two dozen corporations, Logan, King, and Fischer-Wright refine and define a common theme: the success of a company depends on its tribes, the strength of its tribes is determined by the tribal culture, and a thriving corporate culture can be established by an effective tribal leader. Tribal Leadership will show leaders how to employ their companies’ tribes to maximize productivity and profit: the authors’ research, backed up with interviews ranging from Brian France (CEO of NASCAR) to “Dilbert” creator Scott Adams, shows that more than three quarters of the organizations they’ve studied have tribal cultures that are merely adequate, no better than the third of five tribal stages.

The authors explain exactly what Tribal Leadership is, and offer a wealth of “technical notes” which explain how to implement the leadership system in any culture. They also offer coaching tips and a “cheat sheet” that provides the key action steps to building great tribes—including how to identify a tribe’s language and customs, how to move yourself forward while moving your people, and how to build a support network. “The goal is to give you the perspective and tools of a Tribal Leader,” the authors write. “The result is more effective workplaces, greater strategic success, less stress, and more fun. In short, the point of this book is for you to build a better organization in which the best people want to work and make an impact.”

TRIBAL LEADERSHIP details each of the five tribal stages and helps readers identify which actions affect it and which strategies will enable the tribe to upgrade to the next level. The authors discuss how each stage has a unique set of leverage points and why it is critical to understand them—more than three quarters of the organizations they studied have tribal cultures that are adequate at best. The five stages include:

• Stage One: The stage most professionals skip, these are tribes whose members are despairingly hostile—they may create scandals, steal from the company, or even threaten violence.

• Stage Two: The dominant culture for 25 percent of workplace tribes, this stage includes members who are passively antagonistic, sarcastic, and resistant to new management initiatives.

• Stage Three: 49 percent of workplace tribes are in this stage, marked by knowledge hoarders who want to outwork and outthink their competitors on an individual basis. They are lone warriors who not only want to win, but need to be the best and brightest.

• Stage Four: The transition from “I’m great” to “we’re great” comes in this stage where the tribe members are excited to work together for the benefit of the entire company.

• Stage Five: Less than 2 percent of workplace tribal culture is in this stage when members who have made substantial innovations seek to use their potential to make a global impact.

The authors also offer an in-depth look at Tribal Leadership strategies, and discuss how leaders can identify the tribe’s core values and the noble causes to which they aspire. They then explain how to use those principles along with the tribe’s inherent assets and behaviors to foster success based on the tribe’s goals and objectives. As the authors explain, once the tribe sets its strategy based on these factors, a palpable sense of excitement begins to emerge. “Every member of the tribe knows exactly how to succeed and what each person must do to make the tribe effective,” they write. “That’s the promise of tribal strategy.”

Leaders, managers, and organizations that fail to understand, motivate, and grow their tribes will find it impossible to succeed in an increasingly fragmented world of business. The often counterintuitive findings of Tribal Leadership will help leaders at today’s major corporations, small businesses, and nonprofits learn how to take the people in their organization from adequate to outstanding, to discover the secrets that have led the highest-level tribes to remarkable heights, and to find new ways to succeed where others have failed.