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Strategies for Hotel Controllers.
By Dr. John Hogan, CHA MHS CHE
Tuesday, 14th April 2009
 

Larry King, American author, television/radio host often recognized in the USA as one of the premier broadcast interviewers -

While Larry King is better known in the media and entertainment world rather than hospitality, an internet search on him shows the extreme successes and failures that he has faced in his career.  Those extremes parallel many of the swings in revenues and profits for hotels of all sizes, locations, brands and ownership.

This is another segment of the Bakers Dozen of Strategies series and focuses on hotel controllers.

There is an enormous range of responsibilities for financial controls in today's hotels and much of this depends on the type and size of hotel property.  A facility that has gaming, banquet facilities and extensive public space has very different needs than a smaller rooms only hotel. A four or five star upscale property has different client needs than a property serving youth groups.

All hotels need someone to act as the financial manager of the hotel, and there can be a danger and a liability if the General Manager has to be the one who handles all facets of the operation.

Controllers are usually the one responsible for short and long term planning, as well as daily operations of the accounting department.   In larger organizations, s/he interacts with some regularity with the brand or management company Vice President(s) and Corporate Controller. They may deal with accounting transactions or control practices not specifically addressed in the acceptable company accounting policies and procedures manual or which requires interpretation.

In smaller hotels, the role of Hotel Controller may be handled by a 3rd party who may or may not be at the physical building each day.  Many ownership groups use a cluster approach on this function, and have only very basic financial activities at the hotel level with all reconciliations and filings done by the owner's office or an accountant.  Management companies often successfully use this approach.

With that as an introduction, the following "Bakers Dozen" of Strategies for Hotel Controllers can be considered in either approach.

1. Take the lead on establishing and administering all financial systems and internal controls. This includes an approved and complete plan for overall financial checks and balances for control of operations.  In the case of high volume food and beverage, gaming, retail or other revenue centers, this is critical to cash flow management.  Most hotels use approved industry standard accounting systems and formats.

2. Create the guidelines and expectations for the preparation and updates of all operational budgets, forecasts, operating results, financial reports.   While the controller should not physically prepare all documents, s/he should provide guidance, forms and overall direction. This includes profit projections and planning, sales forecasts, expense budgets, capital requirement/needs, cost standards and the required approvals for implementing the agreed upon plans.

3. Identify the annual hotel's capital plan and establish time lines and protocols for implementation.    Capital needs are identified through many sources, including planned renovations, changes in competition, market variables, brand requirements, legal obligations and ownership preferences.  It is the ultimate responsibility of the hotel controller to estimate returns on investment and to offer recommendations to ownership and senior management.

4. Implement firm procedures for the preparation of operational statements returns in compliance with government regulations, company, franchise and ownership requirements.   There are many entities requiring detailed and consistent reporting.

5. Set up and administer all government reporting and tax filing activities to guarantee accurate, timely information is provided in compliance with laws and regulations. This includes local, state/provincial and federal agencies.

6. Formulate and manage local accounting policies that coordinate with ownership's or brand systems and procedures.   We all realize that data and reports can be stated in creative ways and it falls to the controller to keep comparisons of performance to budgets, forecasts and updates accurate and consistent.  Clear and concise recaps of the financial reports that interpret operational results of operations to all levels of management and ownership (where applicable) are essential

7. Operate as if you were a financial consultant for your hotel(s). Consultants ask questions to make certain time sensitive reports and information are provided to maximize revenues and profits.  Done in a proactive and ongoing way, this can greatly assist operations.

8. Monitor compliance with hotel and accounting policies and procedures, legal requirements and contractual obligations .   These could include obligations under a management agreement or brand contracts.  A system of  internal controls, auditing and security procedures should be in place to make certain disparities or variations are brought to the attention of the General Manager and/or appropriate ownership or management representative to safeguard the hotel's assets.

9. Manage the accounting department and other areas as appropriate.  Some hotel controllers oversee Security/Safety staffs while others are responsible for Human Resources.  This is a local decision but the goal is to maximize resources and/or effectiveness, not to save a few dollars by eliminating a management position.  

10. Supervise the installation and maintenance of accounting computer systems and equipment to secure optimum performance.   The Controller should also be the one to typically approve all contracts, with the co-authorization of another senior manager.

11. Maintain a fiduciary accountability to the company and management.   Many large organizations have Controllers reporting to the hotel general manager, but with a dotted line to a corporate officer or other responsible person.  This is a system of checks and balances.

12. As a member of the hotel executive team, share the professional expectations provided to you from ownership and/or management clearly with all members of the staff.     

Newcomers to the industry sometimes imagine huge profits when they compare their hourly wage with the rooms' rates paid by guests. Those of us who have been in the industry for more than just a few years realize that profits and losses go in cycles, and that it is important to share the realities of the cost of doing business at all levels.

All staff should understand the total costs of ownership, including support staff such as security, engineering and sales, franchise or royalty fees, management company fees, the concepts of debt service and more.  Make those expectations understood, explain the value and rationale to all staff and be certain these expectations can be measured fairly.

13. Increase the commitment to training whenever and wherever possible throughout the hotel.     Many controllers in the past functioned apart from the operating staff.  The successful controller of the future will maintain a required equilibrium with the departments they may be monitoring, but they will also learn to:

  • More regularly interact with the sales and front office management to obtain accurate  forecast of short and long term trends
  • Better anticipate capital needs and the ROI needed to justify them
  • Assist the total team by better communication with ownership, management, brand offices and government agencies as appropriate
Feel free to share an idea for a column at johnjhogan@yahoo.com anytime or contact customized workshops, speaking engagements or me regarding consulting…  And remember – we all need a regular dose of common sense.

Autographed copies of LESSONS FROM THE FIELD – a COMMON SENSE APPROACH TO EFFECTIVE HOTEL SALES can be obtained from THE ROOMS CHRONICLE www.roomschronicle.com and other industry sources.

All rights reserved by John Hogan and this column may be included in an upcoming book on hotel management.   The opinions expressed in this article are those of the author and do not necessarily reflect the views of this publication

John Hogan, a career hotelier and educator, is a frequent speaker and seminar leader at many hospitality industry events.  He is a successful senior executive with a record of accomplishment leading organizations at multiple levels.  His professional experience includes over 35 years in hotel operations, food & beverage, sales & marketing, training, management development, consulting, management, including service as Senior VP of Operations. 

www.linkedin.com/in/drjohnhoganchache
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