0203 205 7239

Project Tulip

Consultancy Management appointment over a single hotel in South West of England

Project Tulip

Assignment

Assured Hotels were contacted directly by the owner of this 44 bedroom property, who understandably had concerns over its historical and ongoing performance. The primary objective in our appointment is to assist revenue growth and improve the EBITDA conversion to a recognised level for a property of this size.

Scope

From the annual c£1.6m top line revenue the business was trading at a small loss when we would forecast to see at least £200k (12.5%) in year 1 of, growing to 18% in year 2 of our management. Assured Hotels therefore undertook a full financial and operational review of the property and quickly established that:

  • Turnover of the business was at an adequate level, but mostly propped up by a higher than normal mix from lower margin/ high cost of food & beverage outlets, particularly weddings & events
  • Revenue growth potential from the bedrooms was significant, with poor practices leading to much lower KPIs in both occupancy % and rate management to industry expectations
  • Profitability was further compounded by a lack of a cohesive procurement policy and no recognised cost management or controls; reduced margins damaging the business when we consider over 65% of revenues were from F&B sales
  • Payroll was an urgent consideration as was running at almost 50% as a cost of revenues (industry expectation would be 33-37%)

Assured Hotel's team immediately started working directly with hotel key management to implement the required turnaround strategies & partner introductions.

Outcome

Whilst still early in the overall 2 year project the review quickly highlighted areas where quick benefits could be achieved by working with the Assured Hotel's team, key results being:

  • Supply savings by switching to Assured Hotels routes of between 8% & 19%, specific examples:
    • Food purchase savings of 9% on like for like purchasing
    • Chemical, disposables and sundries purchases saving of 19%
    • Beverage purchase savings of 9.93%, with additional 3% quarterly retro to the hotel on spirits, softs, bottled beers and wines
  • Management controls implemented including weekly and monthly reporting to Directors & Assured Hotels, price point and costing regime and improved business forecasting
  • Payroll forecasting to target of 37% in year 1, meaning a theoretical cash saving of c£80k
  • Revenue Management and improved bedroom sales & distribution leading to uplift in rooms revenue to £690k (from £540k), improving the rooms sales mix to 43% (from 33%)

In addition the Assured Hotels team continue to work closely with the hotels team to assist in the development of the key personnel on site, with an ongoing objective that the competencies and abilities of the team on site improves alongside the financial performance, ultimately over time reducing the dependency on Assured Hotels management.