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September 24, 2018

Mike Benjamin

Why Asset Managers and Owners Should View Hotel Maintenance as a Revenue Opportunity

Hotel Preventive Maintenance (PM) has long been viewed as a necessary hotel engineering function and best practice. Most owners assume the management team is doing proper maintenance to achieve the useful life of assets (equipment, guest rooms and public spaces) and to avoid costly premature failures or replacements. Both owners and operators want to know PM’s are getting done, but few prioritize and monitor maintenance as a key performance metric like they do with revenue. Research shows strong hotel maintenance is a revenue opportunity.

Hotel guest satisfaction research has shown for years that guests are less likely to return if they experience a problem (Making Customer Satisfaction Pay- Cornell CHR). The study notes that Guest Room and Facilities represent 43% of the factors driving satisfaction scores. The article also points out that “The Guest Satisfaction Index was found to be a significant predictor of stated intent to repeat the room purchase and to recommend the hotel. “ The results clearly show increased revenue with repeat stays, additional ancillary spend and referral revenue from more satisfied guests.

Data from guest problems reported during the stay (captured through Guestware, a leading task management and maintenance software) reveals over 70% of guest problems reported are engineering, most of which are room related issues (HVAC, Lighting, Plumbing, Locks, etc..). If we consider the industry’s high number of “guest problems experienced” which is still at over 20%, it’s clear there is a significant revenue opportunity with a reduction in room problems. Automating this process by using software to monitor performance metrics is the best way to realize this additional revenue. Guest response and facilities maintenance automation have been adopted by many full service and luxury operations for years.

Consider most select or limited service hotels (and many smaller full service hotels) still operate manually with NO automated software system to track PM’s, service requests or work orders. This leaves owners and managers without automated reporting or metrics to measure performance or accountability for maintenance. How could they know if maintenance is really being done properly or done at all? If asset managers and owners viewed maintenance performance like revenue, these systems would be standard in all hotels alongside mission critical PMS, sales and accounting systems where key metrics are used for accountability and performance.

Strong room and equipment PM processes not only extend the useful life of assets but also reduce problem frequency. Room problems are inevitable in a hotel. However, when the same PM system is also used for dispatching guest reported problems, the benefits of effective problem resolution have a great impact on overall satisfaction and intent to return. The data collected with automation and reporting tools build a culture of process improvement whereas manual processes perpetuate poor practices and zero accountability.

Success is best achieved when management companies (not the brands) standardize on one system across their portfolio so they can effectively manage their teams and the property to maximize revenue and minimize costs for the owner. Brands may try to mandate some standard systems but none currently mandate a maintenance system and franchise operators should strongly resist if this changes.

The more traditional financial assessment with maintenance is typically on the other side of the P&L and balance sheet. Management companies that standardize & automate their maintenance will lower their operating costs, reduce risk of a lawsuit and extend the life of assets. The data provided by these systems is particularly helpful during a downturn to minimize capital expenditures and can positively impact valuation during due diligence with a sale. The actual cost to implement a system is a tiny fraction of the labor and other costs to maintain the facility. The best time to implement a maintenance system is before a downturn or sale but this requires mutual understanding by ownership and management of the value with automating maintenance processes.

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