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The High Cost of Low Hotel Opening Performance:Improving Project Management Maturity.
By Gert Noordzy - Exclusive for 4Hoteliers.com
Tuesday, 1st March 2016
 

Exclusive Feature: A Project Management Maturity Indicator is a simple and powerful measure, to what degree an organization has implemented proven project and program management practices.

It ranks organizations’ project management practices on a scale from 1 (no established or randomly applied process) to 5 (a well-established, tested process) that also includes dynamic learning from past experiences from post project reviews.

A recent doctoral research project collected data on the outcomes of 700 new hotel opening projects in Asia.

Their performance was measured against the project constraints of time, scope, cost and quality. Analysis of the data strongly suggests that hospitality industry practice in Asia could be generally classified on the low end of project management maturity. And as a direct result of this neglect, 75% of all new hotel openings were delayed from the on-boarding of the hotel opening general managers by an average of 40 weeks!

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From the Project Management Institute recently published the 2016 Pulse of the Profession, globally, US$122 million is wasted for every US$1 billion invested in projects due to poor project management. Not surprisingly, projects of organizations with a high level of project management maturity are 2.5 times more likely to meet original goals and business intent.

But the magnitude of the difference between the effectiveness and efficiency in the use of resources between organizations that excel in project management practices and those that rank at the low end of project management maturity is staggering. The latter waste on average US$250 million for every US$1 billion invested in their projects, which is about 13 times more than the organizations that excel in project management practices!

In context, 2015's global development pipeline of the Top 10 international hotel management companies was US$86 billion worth of fixed asset projects. In China alone, this represented US$ 26 billion, meaning that at least US$ 2.8 billion have been at risk. Compared to 2015, the number of projects and rooms in China’s 2016 pipeline have dropped by 5.3% and 1%, respectively.

Despite this slowdown, the current pipeline still stands at 2,513 projects totaling 548,550 rooms, compared to 2,654 projects with 554,025 rooms in the spring of 2015. This means that China continues to have the world’s biggest hotel development pipeline.

According to PMI (2016) "More projects are actually failing and creating significant monetary loss for their organizations. The reasons are complex, but with worsening project outcomes, disruptive global trends, and uncertain economy, it’s time to strengthen the conversation around the issues, which the research indicates as essential to improving both project & business results."

Improving project management practice

Project management is a key competence for developing a strong and effective competitive advantage. Effective project management is vital to surviving economic uncertainty by “doing more with less”. Hotel companies must therefore embrace project management as a strategic competency to “stop the bleeding” of precious financial resources by reducing risk, cut costs, and improve ROI.

The practical approach to improve new property opening project performance and enable hospitality companies to open hotels and resorts more effectively and efficiently, is through an effective 2-phase method:

Diagnosis: New Assets Opening Project Performance Assessment
The current performance baseline is established through a time-efficient and reliable research-based method, which includes an online assessment tool supported by targeted interviews.

Intervention: Organizational Project Management Maturity Improvement
The company is taken from where it currently is to where it should be, through a comprehensive change management program. The change process is achieved through the application of the following building blocks.


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Culture

To be an efficient approach to opening new hotels and resorts, projects management needs to be made part of the company culture and embedded in the corporate DNA. To do so successfully, it must be driven from the top through focused application of effort, resources, time, effective change management, and persistent commitment.

Organization

Hotel companies, both owners and operators, must review the organizational aspects of project management, including best practices such as having a knowledgeable project management office with certified project managers, and key personnel with clearly defined roles and responsibilities.

Education

One of the key success factors to applying project management methodology successfully and consistently to each project is employing training and continuous development to upgrade the knowledge and skills of the people involved in the projects. The bottom-line is that it is people who manage projects. Even in organizations with a mature project management methodology, the company still depends on its employees to follow, refine, and further improve the processes.

Project Management Methodology

Hotel companies must implement project management methodologies, drawing on the body of knowledge of several internationally accredited organizations supporting the project management discipline. These provide practitioners and organizations with standards, credentials that verify knowledge and experience, resources for professional development, and networking as a community of practice.

Project Management Standards

Hotel companies need to establish well-defined project management standards that will enable them to consistently deliver superior project results. Using clearly defined project management processes, competent staff can successfully implement a project. These processes are associated with initiating, planning, executing and closing a project while monitoring and controlling it by constantly checking existing processes against preceding or forthcoming processes.

Project Performance Improvement for the hospitality industry is one of the services offered by Northside Consulting. Contact us through the website below for a full scope of services and our executive bios.

Gert Noordzy " Managing Director, Northside Consulting

Gert Noordzy is an international hotelier, Organizational Project Management subject matter expert and doctoral candidate. Gert graduated from Hanze College Hotel Management School, Zwolle, the Netherlands, and holds an MBA from the University of Saint Joseph, Macau with majors in Strategic Management & Marketing and Financial & Business Analysis.

He is also a Certified Associate in Project Management of the Project Management Institute and holds a Financial Advisors’ International Qualification (FAIQ) from the Chartered Insurance Institute.

He has over 20 years’ professional experience in Greater China and South East Asia and has been involved in opening over 30 new hotels. In 2014 he founded Northside Consulting Company Limited. 

Gert can be reached at gert.noordzy@northside-consulting.com. For more information, visit www.northside-consulting.com

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