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Small Hoteliers Go On Diet To Cut Cost, Hospitality Cos Find New Ways To Trim FatBy Dr arvind, Section GN
Nflationary pressures, an economic forecast of under 8% growth and growing competition has led to fears of declining profitability in the small and mid-size hotel segment. That, in turn, is pushing hotels to cut down on costs, to better their margins. While most costs are fixed in a hotel, they are finding ways and means to trim the fat.
Mid-size hotel chain Lemon Tree is controlling costs on multiple fronts. Two of its hotels in Gurgaon and one in Pune (which will be launched by December this year) will harness solar power to service 20% of their power requirements. The hotel chain has also adopted a central purchase strategy on IT spending. It has tied up with IBM to provide servers, Lenovo and HP for laptops to get lower costs on mass orders. "Cutting costs is an obvious thing to do when growth is slower than expected," says Rahul Pandit vice president - operations Lemon Tree Hotels. He says: "We don't want to tinker with room amenities or even payroll, so these were the easiest ways to cut down costs." By keeping the employee-to-room ratio constant, the company will rely more on contract employees in future, while keeping the number of payroll employees at a constant level. Sarovar Hotels, though, is letting go off temporary staff - part-timers and trainees - that has helped them save 5-10%. "We are alowing a lot of people go on annual leaves that too at this time of a downturn," says Ajay Bakaya executive director Sarovar Hotels. Click on "Full story" For More...
Mona Chhabra associate director (real estate and hospitality practice) Ernst & Young India says: "The possible slowdown in demand for rooms, coupled with the fact that inflationary pressures have forced developers to shelve their plans to build new hotels, point at the need to institute urgent cost cutting measures. So we are definitely going to see a rationalisation of cost structures in the small and mid-size segment. Since cost-cutting on the talent front is difficult, I expect that other things like airport transfers or room frills could be first to go."
Energy cost is one of the largest for hotels and that is one area Sarovar Hotels is trying to work hard. Major areas in a hotel - kitchen, banquets, toilets and public areas - are being metered to get a fix on the consumption patterns. "We check notes everyday to see where we can reduce unnecessary usage," explains Bakaya. Sensors have been installed in some areas to automatically switch off lighting when not in use. Suresh Kumar president of Fortune Park Hotels says it is a little difficult to cut down on the fixed cost in a hotel but there are areas where you can still save. Basic instructions have been given to all hotels - to effectively rationalise utilisation of resources, of course without compromising oncustomer satisfaction. Advertising, marketing and travel costs are also being rationalised. "We are deferring some of our advertising and marketing plans to a more convenient time," says Kumar. As in the case of Lemon Tree, Sarovar too is using innovative and efficient systems, in its new hotel projects. "New hotels will use solar power as well as VRV air-conditioning systems which are energy efficient," he says. Sure they will have to shell out 15% more on the capital equipment but the pay back period, says Bakaya, is under 12 months. From: Economic Times, Sep-10-08
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