Updated: Feb 11
ID HOTELIER - It seems like a paradox; profitable hotels that are inefficient, and unprofitable hotels that are highly efficient! While there is generally a correlation between efficiency and profitability, we have often found profitable hotels hiding serious inefficiencies because they have enjoyed buoyant market conditions; factors outside the control of management. Similarly, we have found unprofitable hotels or marginally profitable hotels that were highly efficient!
The most effective efficiency analysis is therefore one that controls for external factors and matches a hotel’s performance on its internal, controllable factors. Because no two hotel markets are the same, evaluating a hotel’s performance and efficiency is one of the most challenging issues facing management.
Making use of a technique known as Data Envelopment Analysis (DEA), investors can control these external factors and identify significant annual expense savings not identified with traditional financial and operating ratio analysis!
DEA has become an increasingly popular management tool for evaluating and improving hotel operating performance since the 1990s. Over the last twenty years, DEA has been used to maximize productivity and profits in corporate travel departments, restaurants, casinos, and hotel portfolios.
I will be attending the Hotel Revenue Summit at the 6th Hospitality Indonesia Conference in Jakarta on February 8, 2023. If you are attending the conference and would like to schedule a meeting to explore how we might be able to assist you in developing more efficient operating models, please feel free to reach out to me.