S. Lakshmi Narasimhan's Blog
April 4, 2012
5 Stars for Discover the Genius in the Mirror Book
In his own words: "Rarely do I pick up a self-help book that is not superfluous and worthless with little new to offer, and frankly, they are often a waste of my time. Nonetheless, I must admit that I was pleasantly surprised when a copy of S. Lakshmi Narasimhan's Discover The Genius In The Mirror: Your are An Einstein Waiting To Be Discovered crossed my desk. And no doubt your are asking yourself, as I did, with a title like that, is this "guy" for real!?
According to Narasimhan, who by the way is not alone in this belief, we all have an inherent capacity to learn and be infinitely creative-the essential ingredients to becoming a genius. To achieve this feat it is essential to have the right attitude and a belief system which begins with believing in ourselves- the person who stares back at us every morning in the mirror.
With this in mind and over the course of 185 pages divided into four sections, Narasimhan shares his wisdom as he journeys with us on an intense well-thought out itinerary demonstrating how it is possible to realize our passions and motivations. And along the way, pointing out some interesting scenery as the elements that comprise the "what makes us tick" properties of our persona".
He concludes by saying: "Most of us have a tendency to focus on our shortcomings, however, there is a great advantage in switching to the mentality that Narasimhan presents in Discover The Genius In The Mirror: Your are An Einstein Waiting To Be Discovered, provided we stay the course".
Norm Goldman also conducted an e-interview of the author about this motivations for writing the book. Click here to read the e-interview.
Filed under: Potential
March 16, 2012
How NOT to read a Profit and Loss Statement
What you never knew about your Profit and Loss Statement!
Every business needs a measure to make some meaning out of its activities and to assess results. The most commonly used statement for this is the monthly profit and loss statement.
If you missed our earlier posts, you may want to visit Repeat Guest Ratio, Average Length of Stay – 2 Paths to Revenue Growth Nirvana, Table Turnover, Meal Period Analysis – 2 Paths to Restaurant Revenue Growth Nirvana, Market Segmentation Reports – Road Map to Revenue Results and 5 Myths about Financial Analysis, to catch the thread of related posts. Go to Flow of Revenues – Part 1 and 2 here and here.
However, it is unfortunate that most times the profit and loss statement is read incorrectly and worse, decisions are taken based on such erroneous reading.
The following are some of the most common errors:
Revenue and expense items are read individually - Most people including many with a finance background tend to treat revenues and expenses as silos. Their analysis approaches revenues and expenses separately. They do dig deep into these but their analysis is ineffective because they do not see the connection between them. They see the trees but fail to see the forest.
Profitability is a derivative - What does this mean? It means that it cannot be generated on its own, it can only be derived from a comparison of revenues and expenses. This means that profitability is affected by changes in revenues and expenses.Hence, without analyzing what the changes in revenues are and what the changes in expenses are, it is impossible to carry out any analysis and worse take decisions in the operation.
Profit and Loss Statement is only historical - Revenues and expenses recorded in the Profit and Loss Statement are cumulation or aggregation of hundreds of financial transactions during a particular business period, normally a month. As such, these are historical in nature, I.e., they are past events. They only tell you what happened under a certain set of circumstances prevailing at that time.
Tendency to concentrate only on expenses - Everybody who reads a Profit and Loss Statement is paranoid about expenses. They give you the impression that controlling costs (meaning cutting in almost all instances) is the only profit model. Your Performance Appraisal depended on it, your bonus was impacted by it and you were persona non-grata to your boss because he or she did not look good.
Nobody looks at the behavior of revenues and expenses - Scarcely anybody concentrates on the behavior of revenues and expenses. Since the emphasis is all the time on "what happened" or "what is", there is no importance given to "what could be." Even if "what could be" is considered, it is a half baked, hit or miss approach.
The Cause-Effect Relationship analysis is missing - This is the most critical element of the analysis and sadly very few have time for this. Financial Analysis is thoroughly misunderstood to be an analysis of revenues first and then an analysis of the expenses subsequently without leveraging the power behind the relationships between these two. The Funnel Principle of Financial Analysis clarifies the concept of cause-effect relationships.
So, the next time you get your hands on a Profit and Loss Statement, use the following powerful approach:
Ask these questions:
what is the change in revenue compared to the previous period/budget? Is it positive? Why?
what is the change in expenses compared to the previous period/budget? Is it positive? Why?
what is causing the change in revenues and the expenses? Was it some action of yours?
what is the result of the change? Is it positive? If yes, replicate it. If it is negative, course correct.
How can you take action now? What action can you take?
At the end of the day, reading a Profit and Loss Statement is not rocket science. However, it needs some big picture thinking as well as going into details. Such a balanced approach to reading the Profit and Loss Statement will eventually appear to become magical.
March 9, 2012
The Steve Jobs Way – Life Pursuit of Passion
For those who pursue their passion in life, there cannot be a greater example or role model than Steve Jobs. Read on here on how to embark on your voyages of discovery.
Filed under: Discovery, Genius, Potential Tagged: einstein, genius, passion, self-discovery, voyages of discovery
February 17, 2012
Flow of Revenues – Part 2 of 2
Flow of Revenues – Books of Account to Financial Statements
One of the key elements in financial analysis for non-financial managers is how the flow of revenues takes place from books of account to the financial statements. This is where, most times, a lack of understanding of this fundamental concept baffles non-financial managers.
If you missed our earlier posts, you may want to visit Repeat Guest Ratio, Average Length of Stay – 2 Paths to Revenue Growth Nirvana, Table Turnover, Meal Period Analysis – 2 Paths to Restaurant Revenue Growth Nirvana, Market Segmentation Reports – Road Map to Revenue Results and 5 Myths about Financial Analysis, to catch the thread of related posts. Go to Flow of Revenues – Part 1 of 2 here.
Understanding Flow of Revenues
Non-financial managers for the most part come into contact with financial statements once a month when the profit and loss statement and related reports are circulated to them. In a way, they are at the tail end of the process which actually originated in the operation.
Financial Statements reflect the performance of the hotel operation during a particular month and are the index of business results. Revenues drive business results as the top line. Without this top line there would be no bottom line. Hence an understanding of how the flow of revenues takes place resulting in the generation of financial statements goes a long way in cementing fundamental concepts of accounting and financial analysis without splitting hairs.
Example of a Food and Beverage Operation
Taking the example of a food and beverage operation, the financial statements related to this operation actually originate in the humble guest check which is created in a food and beverage outlet.
For an in-depth look at how the flow of revenues begins from the books of account and ends up in the financial statements, watch the below video. It will be an eye-opener.
Flow of Revenues – Part 2 of 2
Click this RSS Link or the one on the Top Right side of the home page to be updated automatically when a new post appears or forward to your friends who you think will benefit from the discussion.
The Flow of Revenues is a unique perspective on a journey which is central to understanding, interpreting financial statements and taking key decisions based on that.
January 14, 2012
The Genius Belief System
In our earlier post, we talked about Napoleon Hill's all time classic: "Think and Grow Rich" and its phenomenal capacity to inspire in us super human efforts and achieve the impossible. But such feats are possible only if we are ourselves convinced we can do them.
There is indeed genius residing in all of us but for the most part of our life we are not aware of this phenomenal blessing. Why is this? Is it due to our own belief system? Do we believe we are capable of great things and achievements? Do we believe in our own genius?
It is said that all great endeavors are born out of a dream, a burning desire, a passion, an obsession. In short, having a belief system. This is all about trusting ourselves and our abilities and while we may not be able to see the future right now, we are able to visualize it. Through effort, we then bring that visualization to reality.
But belief systems are like plant seeds which first need to be planted properly and then nurtured through their growth into beautiful plants. Ironically, we have ourselves established many hurdles in the way of creating and nurturing such a belief system.
The following are typical reasons for this situation and raises some questions we need to ask ourselves:
- Our Frenetic Lifestyle
- Lack of Reflection & Relaxation
- Are we clear what we want from life?
- Are we willing to sacrifice our present for a better future?
- Do we have a burning passion to go beyond our comfort zones?
- Do we want to leave a worthy legacy?
Our Frenetic Lifestyle
We are busy human beings. We rush from place to place every day carrying out our work responsibilities or even the personal ones without pausing to catch our breath.
We are fighting fires most of the time and have no time to address the systemic/long-term issues that need more attention. Dr. Stephen Covey, in his all time classic "The 7 Habits of Highly Effective People" calls it " Sharpening the Saw." This is the inclination and ability to pause, take stock and address structural issues rather than going through the motions of existence.
Our lack of reflection and relaxation
Our frenetic lifestyles give us no time to pause and reflect. We also do not get an opportunity to relax. Stress is baggage we carry throughout our waking lives.
When was the last time you had some time to yourself and you were completely immersed in doing nothing, just relaxing. In almost all instances, this is rare.If we never take time out for ourselves, how are we going to achieve things in life. We need to be clear where our destination is otherwise we will end up anywhere.
Resolve to spend a minimum of ten minutes each day all by yourself, in silence and just relaxing. After a couple of times of doing this, you will learn to begin to reflect on things in your life. Go on, try it out. It is therapeutic and you will definitely feel the relief washing over you.
Are we clear what we want from life?
When was the last time you set any goals for yourself in various aspects of your life: work, business, personal, health, dream, passion, lifestyle etc. Goals are powerful catalysts. They move us from the thinking phase to the action phase which is critical for any form of achievement. Moreover, goals through action cure our fears. For the most part, we are afraid of setting goals because of fear of failure. But it is better to set a goal and fail in achieving it in part (at least the effort was there) than not setting any goals or taking any action and wallowing in regret.
So, do this, if it is the only thing you will take action on. Write down your goals. Goals for the short-term like the rest of the current year, goals for the medium term like 1 to 3 years, goals for the long-term: 3 to 5 years. I can guarantee that once you start this goal setting process, you will find the motivation to keep it going.
Are we willing to sacrifice our present for a better future?
If we are fire fighting most of the time and have no time for reflection and relaxation and do not pursue goal setting, then we are placing the future at jeopardy. All of us have the mechanism built within us for success but to identify that and draw on that treasure trove requires commitment, effort and most importantly time. In a manner of speaking, we must commit to take some time out of our present lives to pause, think about the future so that we may craft that according to our dreams and aspirations.
When you commit to spending ten minutes each day in reflection and relaxation, you are sacrificing your present in a small way but critically to think about your future. Life is finite and minutes pass into hours and hours into days. The time for action is now.
Do we have a burning passion to go beyond our comfort zone?
Nothing great was ever achieved without effort. Thomas Edison the prolific inventor and a genius himself said: "Genius is 1% inspiration and 99% perspiration."
Do you have a dream? Are you passionate about something? Do you want to achieve something remarkable in your life? All of us do have dreams and are passionate about things and do want to be achievers. However, that requires dedication and single-minded devotion towards getting out of our current comfort zone and stretching ourselves. We have sought refuge in our comfort zone because it does not require much effort to keep doing what we have been doing. As a great personality once said: "if you keep doing what you have been doing, you will keep getting what you have been getting." So, in order to really make extraordinary achievements, you have to come out of your comfort zone and challenge yourself to new horizons, new destinations and new perspectives.
Do we want to leave a worthy legacy?
Life is finite and time passes very quickly. Before we realize, we will be approaching the evening of our lives and during those times we will be left only with regret for not having lived life more fully than we did. This is that future that we did not think and plan about in our younger days. Moreover, do we not want to be role models for our children, our students, our friends and the world at large? It boils down to leaving a legacy behind which will live on forever.
Having asked ourselves these critical questions and given ourselves time for reflection, relaxation, goal setting, we are beginning to establish the foundation for that genius belief system.
At the end of the day, remember it is all in this belief system. If you crave for happiness, then first be happy yourself and then spread happiness, for happiness or for that matter anything that you have a burning desire for is a choice! Choose wisely! It is the only way to discover that genius residing within you.
Happiness is a ChoiceFiled under: Genius, Potential Tagged: genius, genius belief system, self-discovery, voyages of discovery
January 8, 2012
Power of the Human Mind
The awesome power of the human mind is rather misunderstood and underutilized. Most of us think we are incapable of greatness and acts of genius. It emanates from a belief system which is low on self esteem. We just do not think we can do extraordinary things. But history is replete with examples of what a human being can achieve once he or she sets their mind to something.
Once upon a time, climbing Mount Everest was considered impossible until Sir Edmund Hillary (along with able assistance from Tensing Norgay, the sherpa) made it possible. Thereafter, many have accomplished the feat so much so that some have climbed it without oxygen. While nature is indeed the final frontier, a human's quest for adventure, conviction in self and a flair for challenge have laid low many of nature's barriers.
One of the most powerful philosophies put forth in a book format and proved time and again as unerringly accurate in its designated objective to achieve the impossible is that of Napoleon Hill in Think and Grow Rich. The title is astoundingly powerful in its simplicity.
I first read this book from cover to cover in November 2011 although I had read some of the author's other works in article, audio book and even print formats over the last couple of years. It was quite astonishing what could be achieved if we stuck to the principles and values that Napoleon Hill talks about as the cornerstones for thinking and growing rich. Although I was delighted to find at the end of my first read of the book that I had already been practising many of the tenets that Napoleon Hill reinforces as absolute necessities to garnering success, I was still amazed at the results coming out of the principles that I did not know about and began to practise. For example, Napoleon Hill's mind master alliances was something that blew me away. I had not realized what could be achieved if we begin to forge alliances with like minded individuals. It was fitting that he says that two minds in harmony can accomplish impossible feats compared to just one.
The book has stood the test of time for more than fifty years now and is as relevant to the modern day context as it was when it was first written. The laws of success that Napoleon Hill talks about are as ageless as time.
If you ever had any doubt about what a determined and focused mind could achieve, just pick up Napoleon Hill's "Think and Grow Rich" and you will never be the same again. I have done a brief review of the book at the goodreads website which can be found at: http://www.goodreads.com/review/show/258278526.
So, go on, think….and grow rich with Napoleon Hill to guide your voyage of discovery of your immense potential.
Filed under: Potential Tagged: discovery, genius, greatness, human potential, mind power, napoleon hill, voyages of discovery
September 8, 2011
Flow of Revenues – Part 1 of 2
Flow of Revenues – Journey of the Guest Check
One of the key elements in financial analysis for non-financial managers is how the flow of revenues takes place from guest check to the financial statements. This is where, most times, a lack of understanding of this fundamental concept baffles non-financial managers.
If you arrived at this post directly, you may want to visit Repeat Guest Ratio, Average Length of Stay – 2 Paths to Revenue Growth Nirvana, Table Turnover, Meal Period Analysis – 2 Paths to Restaurant Revenue Growth Nirvana, Market Segmentation Reports – Road Map to Revenue Results and 5 Myths about Financial Analysis, to catch the thread of related posts.
Understanding Flow of Revenues
Non-financial managers for the most part come into contact with financial statements once a month when the profit and loss statement and related reports are circulated to them. In a way, they are at the tail end of the process which actually originated in the operation.
Financial Statements reflect the performance of the hotel operation during a particular month and are the index of business results. Revenues drive business results as the top line. Without this top line there would be no bottom line. Hence an understanding of how the flow of revenues takes place resulting in the generation of financial statements goes a long way in cementing fundamental concepts of accounting and financial analysis without splitting hairs.
Example of a Food and Beverage Operation
Taking the example of a food and beverage operation, the financial statements related to this operation actually originate in the humble guest check which is created in a food and beverage outlet.
For an in-depth look at how the flow of revenues begins with the guest check and ends up in the financial statements, watch the below video. It will be an eye-opener.
Flow of Revenues – Part 1 of 2
Click this RSS Link or the one on the Top Right side of the home page to be updated automatically when a new post appears or forward to your friends who you think will benefit from the discussion.
The Flow of Revenues is a unique perspective on a journey which is central to understanding, interpreting financial statements and taking key decisions based on that.
August 26, 2011
5 Ways your Employee Turnover is hurting you
Employee Turnover analysis is one of the most critical elements to maintaining a stable, motivated complement of employees. Nothing hurts an organization over the long term more than the inability to provide consistently top class products and services and thus earn and retain customers. In this process, the contribution of well looked after, motivated and trained employees is many times not given the importance it deserves. Unfortunately to the detriment of the organization, very often, as a priority, this is relegated to the bottom.
If you arrived at this post directly, you may want to visit Staff to Room Ratio – indicator at best, 2 Paths to Revenue Growth Nirvana, 2 Paths to Restaurant Revenue Growth Nirvana, Market Segmentation Reports – Road Map to Revenue Results and 5 Myths about Financial Analysis, to catch the thread of earlier related posts.
5 Ways your Employee Turnover is hurting you
Consistently delivering high quality service requires a energized, stable work force. Regular employee turnover hurts it like no other phenomenon.
Let us look at 5 ways employee turnover is hurting you as an organization:
Lack of consistent delivery of quality service – This is the most obvious of reasons. As said earlier, having long serving employees makes delivery of consistent service that much easier. Guest contact employees are the ones whose turnover causes maximum disruption to delivery of service but it is equally applicable to other areas also although to a lesser extent.
Increased cost of training – When employee turnover occurs, the orientation and training imparted to the employees goes away with them. The new incumbents have to be oriented and trained all over again and this costs effort, time and money.
Reduced motivation in employees – Constant movement in employees both those leaving and those coming in causes all round decrease in motivation levels. Hotel industry being a service industry, a lot of the service quality that is attained is done through team work exhibited and cooperation forged between employees. Employees tend to create rapport amongst themselves which makes their jobs that much stress free resulting in increased motivation to provide consistent quality service.
Damage to reputation of the organization – When employee turnover becomes rampant, the word spreads fast and the organization gets a very bad name as a uncaring employer irrespective of the actual reasons why employees are leaving. Very soon this reaches the customers and guests who simply move to a better hotel property where they find consistent high quality service provided by a stable work force.
Possibility of irregularities and even frauds – When employees keep coming and going, in particular those who are in guest contact areas, who handle cash or other sensitive areas like purchasing etc., there are higher chances that irregularities are perpetrated owing to break in continuity of processes. Many times hand over and take over of functions are sloppily done leaving gaps in the processes which can be taken advantage of by unscrupulous characters.
What does analysis of Employee Turnover yield?
Monthly Employee Turnover analysis is a key part of the overall human resources as well as people strategies of an organization. Having said that, what actually is this analysis all about.
Firstly, an effective employee turnover analysis system tracks reasons why employees are leaving. Typical reasons are salary and wages, too much pressure, no proper policies and procedures, bad bosses and colleagues, lack of training etc., For instance, if you discover that your employees are leaving because of a below par remuneration package, it can turn fatal for the business. A regular feedback system from employees through Employee Opinion Surveys and a Competition Market analysis of salaries are two methods to regularly address this.
Secondly, an effective employee turnover analysis system tracks which levels of employees are leaving. For example, are employees in supervisory positions leaving or in rank and file levels or the managerial level? Turnover experienced in each of these levels bring with them their own set of problems. Moreover, turnover noticed in supervisory or managerial levels may indicate more serious problems like lack of a proper set of policies and guidelines or even service philosophy.
Lastly, a good employee turnover analysis tracks the destination of employees leaving. For example, are employees leaving to join the competition? This can prove disastrous for a hotel property since this might mean ultimately that the guests also could be poached.
The Secret of keeping guests happy
There is a saying in the hospitality industry that the best way to keep your guests happy is to keep your employees happy who in turn will ensure that the guests are kept delighted too.
What are your thoughts and views on the Employee Turnover in this post?
Leave a comment and tell us what you think.
Click the RSS Link on the Top Right side of the home page to be updated automatically when a new post appears or forward to your friends who you think will benefit from the discussion.
Employee Turnover analysis is a powerful operational analysis tool which can very well mean the continued existence of a profitable business.
July 28, 2011
The Funnel Principle of Financial Analysis
The Funnel Principle of Financial Analysis
Financial Analysis is an exercise which is fraught with pitfalls if we do not adopt a right approach to it. Every business manager has to review and analyze financial statements and reports on a daily basis and to take decisions in the operation or shop floor based on such analysis.
If you arrived at this post directly, you may want to visit Repeat Guest Ratio, Average Length of Stay – 2 Paths to Revenue Growth Nirvana, Table Turnover, Meal Period Analysis – 2 Paths to Restaurant Revenue Growth Nirvana, Market Segmentation Reports – Road Map to Revenue Results and 5 Myths about Financial Analysis, to catch the thread of related posts.
Big Picture Overview versus Details in Financial Analysis
Often the dilemma is whether to take a big picture overview of financial statements and reports or to go into details. It is a fact that effective financial analysis is achieved by a balance between the two. When we talk about informed decision making, what we mean is that decision making is supported by sufficient information and data which have a bearing on the results of that decision. Too often, we see business managers taking decisions which are not backed up by enough homework being done on factors having a bearing on that decision. This turns into an unpleasant surprise when we do not get the results we want.
It is not to say that big picture overview is bad however, it is important to realize that such an overview is merely a starting point to financial analysis. No kind of analysis can be completed without either a big picture overview or a detail oriented scrutiny and financial analysis is no exception.
Decisions based on symptoms instead of causes
The single biggest blunder and a very damaging one at that is taking decisions based on mere symptoms instead of causes. In financial analysis, symptoms take the form of variances, budget or forecast comparisons, percentages, ratios etc. These tools are merely indicative of a condition which is what a symptom can be described as. However, taking decisions merely on these variances etc which are symptoms without understanding causes underlying the behavior can be nothing short of catastrophic. This is why cause-effect relationships are paramount in any form of analysis and financial analysis is no exception.
For an in-depth look at how to approach financial analysis, watch the below video. It will be an eye-opener.
The Funnel Principle of Financial Analysis on You Tube
Click this RSS Link or the one on the Top Right side of the home page to be updated automatically when a new post appears or forward to your friends who you think will benefit from the discussion.
The Funnel Principle of Financial Analysis is a unique perspective which will make your decisions sound and results oriented with no unpleasant surprises.
July 22, 2011
Staff to Room Ratio – indicator at best
Staff to Room Ratio is one of the critical factors that determines an optimum level of balance between permanent staff and hotel room capacity. This influences the labor cost which happens to be the single biggest expense line item in a hotel Profit and Loss Statement.
If you arrived at this post directly, you may want to visit Repeat Guest Ratio, Average Length of Stay – 2 Paths to Revenue Growth Nirvana, Table Turnover, Meal Period Analysis – 2 Paths to Restaurant Revenue Growth Nirvana, Market Segmentation Reports – Road Map to Revenue Results and 5 Myths about Financial Analysis, to catch the thread of related posts.
How to calculate Staff to Room Ratio
Staff to Room Ratio in a hotel is computed using the following formula:
Full-Time Employees / Total Number of Available Rooms
What does Staff to Room Ratio do?
The function of the Staff to Room Ratio is to provide an indication of the balance between the number of full time (permanent) employees and the rooms available in a hotel.
You might well ask: What is the connection between full time employees and rooms available in a hotel? Well, the answer to that is: There is no direct correlation between the two which actually depends upon many factors like:
Is it for a city hotel or a resort?
This question basically addresses the fact that a city hotel is often a vertically oriented building structure with multiple floors. This means that the structure has various levels to it but area wise is not spread out. Contrast this to a resort which is spread out mostly and thus covers a wider area.
When the resort is spread out (and even in the case of a city hotel which is horizontally spread out), the logistics of staff movement becomes critical. Whereas, in a vertically oriented city hotel structure, movement of staff from one level to another may not take as much "time" as in the case of a resort. This has a direct bearing on the number of staff required to service a particular operation area for the simple reason that it takes more time to get from one point to another. In effect, it may dictate the hotel's manning requirements particularly the housekeeping function and more specifically the public area attendants.
How many restaurants does the hotel or resort have?
This is another important factor determining the Staff to Room Ratio in a hotel or resort. The more the number of restaurant outlets that the hotel or resort has, the more the staff complement needed. This will further be influenced by factors like how many of the restaurants are food restaurants (this brings the element of kitchens into the equation) and whether each of those have a dedicated kitchen etc.,
Whether the hotel is located in a developed country or a developing country?
This factor literally determines the labour cost factor of the hotel vis-a-vis rooms available. For example, a hotel or resort located in an emerging market like Brazil or Russia or a developing country like China or India will have a higher Staff to Room Ratio than in developed countries like US, Canada, Australia. This is mostly driven by the fact that basic salaries and wages are very high in developed countries. Additional factors could be better educated, trained staff etc.,
What is the degree of Multi-tasking?
Even in developing countries, salaries and wages are on the rise constantly which have a significant bearing on the bottom line performance of the hotel or resort. Since bottom line is driven by the top line, generating revenues faster than the increase in labour costs becomes paramount. When revenue increases cannot keep pace with labour cost increases, manning cuts are inevitable.
However, considering that the hotel industry is a service industry, keeping service levels high according to customer expectations may well determine sustained revenue growth and in this scenario multi-tasking has become a powerful tool to tackle perennially rising labour costs. By training staff to do more than one task (often at the same time), the Staff to Room Ratio can be kept in check. Multi tasking can also mean combining functions currently performed by different individuals so that these can be done by one person.
Staff to Room Ratio Examples
Staff to Room Ratio can range all the way from 2.5:1 (2.5 full time staff for every room available) in underdeveloped countries like Brazil, Russia through a ratio of 2:1 in developing countries like China, India (in fact, it is around 1.75:1 in India) to less than 1:1 in developed countries like US, Canada, Australia, UK.
Combined with a low staff to room ratio in developed countries, the labour cost % to gross operating revenue is very high, in the region of 40% to 50%. This compares with less than 30% in developing countries and less than 20% in emerging markets.
Staff to Room Ratio – an indicator at best
It is thus paramount to understand that the Staff to Room Ratio is at best an indicator. It is to be used more to verify if the ratio is significantly above or below the norm according to some of the factors stated earlier (city hotel or resort, how many restaurant outlets, whether in a developing or developed country) rather than apply as a rule of thumb.
What the ratio certainly provides however is a quick indication of the balance between the complement of full time employees and the rooms available. This is very useful in the case of a new hotel project where the owners or investors would like a quick and dirty way of knowing what this balance is like. And as stated earlier, it has a major influence on the ultimate labour cost.
Operating Hotel Staff to Room Ratio
In the case of an operating hotel, the staff to room ratio can change over a period of years as the hotel or resort matures and the staff becomes more and more trained (of course assuming that they stay with the hotel over these years). This can result in significant improvement in the staff to room ratio.
What are your thoughts and views on this post?
Leave a comment and tell us what you think.
Click this RSS Link or the one on the Top Right side of the home page to be updated automatically when a new post appears or forward to your friends who you think will benefit from the discussion.
Staff to Room Ratio is like all other operational analysis tools which complement the tools of financial analysis in providing a comprehensive picture about a hotel's business performance and results.
