Tessa Quinn
The hospitality industry is unique in that customer service is a significant component of the product. As such, cost-saving strategies must be deployed thoughtfully to avoid negatively impacting the guest experience. This includes maintaining equipment to minimize energy consumption, investing in labour-saving technology, and optimizing staff scheduling to reduce labour costs. Food and beverage (F&B) establishments should focus on menu engineering and portion control to reduce food costs, while hotels should consider the cost of amenities and complimentary items. Ultimately, by understanding how the hotel functions, managers can identify areas to reduce costs without compromising service quality.
| Characteristics | Values |
|---|---|
| Labour | Optimise staffing levels to reduce labour costs, which can account for roughly 50% of a hotel's operating expenses. |
| Energy | Use Energy Star appliances and maintain HVAC systems to minimise energy consumption and reduce costs. |
| Maintenance | Implement a schedule for maintaining equipment to extend equipment life and avoid costly breakdowns. |
| Technology | Use technology to automate and streamline operations, such as integrated hotel software, a booking engine, and a channel manager. |
| Suppliers | Consolidate suppliers to leverage higher volume for discounts and negotiate better pricing with longer-term contracts. |
| Food | Monitor and track inventory, analyse purchasing decisions, control portions, and reduce waste to manage food costs. |
| Customer Service | Maintain high service quality while reducing costs by using AI messaging and strategically offering upsells. |
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What You'll Learn
Reduce labour costs by automating processes
Automation is an increasingly popular strategy for reducing labour costs in the hospitality industry. By embracing automation, hotels and restaurants can improve efficiency, reduce errors, and free up staff time to focus on more strategic tasks.
One way to reduce labour costs is to automate data aggregation. Hotel teams often spend a significant amount of time manually pulling data from different systems, a process known as "swivel-chair" operations. By implementing technology like Otelier IntelliSight, hotels can fully automate data aggregation, saving time and minimising errors.
Another area where automation can help is in managing invoices and payments. Automating income audits, bank reconciliations, and vendor payment processes reduces the time spent on these tasks, enhances accuracy, and ensures timely payments to vendors.
Automation can also streamline operations, such as reservations, check-ins, room service, and inventory management. Integrated reservation systems and self-check-in platforms can improve convenience and reduce waiting times for guests. Additionally, automation can be used to handle orders, payments, and loyalty programs, providing real-time reporting and analytics to help operators understand their business performance and optimise operations.
While automation offers benefits, it also comes with challenges, including implementation costs, data security concerns, and a shortage of skilled professionals. However, with strategic planning and seamless integration, hospitality businesses can successfully reduce labour costs and improve overall efficiency.
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Lower energy bills by maintaining equipment
Energy efficiency is key to reducing energy bills in the hospitality industry. The UK's hospitality sector, for example, spends over £1 billion a year on energy, contributing to around 3.5 million tonnes of CO2 annually.
One way to lower energy bills is to maintain and upgrade equipment. Regular maintenance of equipment ensures that it is running efficiently and extends its lifespan, reducing the likelihood of a costly breakdown. For example, clogged HVAC filters can increase energy consumption by 15%, so a yearly tune-up of your heating and cooling system can improve efficiency. During periods of low occupancy, entire wings or floors can be closed down, and lighting and HVAC systems in these areas can be reduced.
Upgrading old equipment to more energy-efficient alternatives can also significantly decrease energy use and help the environment. Energy-efficient appliances, such as LED lighting, use less energy and require less maintenance. Hospitality businesses can also upgrade old refrigeration equipment, which is often a significant energy drain, to more energy-efficient models.
Another way to reduce energy costs is to invest in smart HVAC technology. Smart HVAC systems use technology like occupancy sensors, programmable thermostats, and advanced analytics to optimise energy use. For instance, smart thermostats can automatically adjust temperatures based on room occupancy and outside weather conditions, leading to energy savings of up to 15% of total hotel energy bills and around 30% of HVAC energy costs.
Water-efficient appliances, such as low-flow fixtures in showers and taps, can also help to reduce energy usage. Water-efficient dishwashers and washing machines, for instance, use less energy to heat water. A water management plan can also be implemented to monitor water usage, set reduction targets, and educate staff and guests on water-saving behaviours.
Finally, simple measures such as using power management features on computers and other appliances, and educating housekeeping staff to turn off lights and appliances in unoccupied rooms, can also help to lower energy bills.
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Cut food costs with inventory tracking and portion control
Food costs are a crucial component of a restaurant's budget, and they can sometimes be tricky to manage. A robust Point of Sale (POS) system integrated with an inventory management system is one of the best ways to cut food costs. This system allows you to monitor ingredient usage in real time, automatically deducting ingredients from your inventory when a dish is ordered and prepared. This helps to identify discrepancies between expected and actual usage, which can be caused by over-portioning, spillage, or staff errors.
Inventory management software can also help to track stock levels accurately, ensuring you have enough stock to avoid disrupting sales, but not so much that it increases costs and the risk of waste. This software should provide features like real-time tracking, easy-to-use interfaces, and detailed reporting capabilities. It should also be able to handle the complexities of the industry, such as tracking perishable goods, monitoring stock levels, and forecasting demand based on historical data.
Portion control is another crucial aspect of cutting food costs. It refers to serving standardized amounts of food to maintain cost efficiency, ensure consistency, and deliver the expected customer experience. Standard portions mean consistency in the taste, quality, and quantity of food, which leads to customer satisfaction. It also prevents ingredient overuse, ensuring food costs remain consistent and predictable across dishes.
Recipe standardization helps with portion control and allows you to forecast inventory, manage food costs, and streamline training for new employees. It also ensures your restaurant can deliver a consistent product, which is key to building customer loyalty. Recipe costing involves calculating the exact cost of each menu item down to portion sizes and individual ingredients. Tracking each menu item's recipe cost can help optimize food usage and reduce food waste over time.
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$2.99 $9.97
Reduce fraud with digital authorisations
The hospitality industry is particularly vulnerable to fraud, with 55% of credit card fraud occurring in hotels and online travel agencies. This is due to the large volume of low-value transactions, which can go unnoticed, and the prevalence of synthetic identity fraud, where criminals use a combination of real and fake information to create a new identity to open bank accounts, apply for loans, and make purchases.
Hotels can reduce fraud and chargebacks by up to 90% by using digital authorizations. Here are some ways to do this:
- Use a secure digital solution like Canary Digital Authorizations, which is PCI Level-1 compliant, to replace paper and PDF credit card authorization forms. Paper forms are not only insecure but also violate PCI requirements, with non-compliance penalties ranging from $5,000 to $500,000.
- Send each guest a unique link to enter their credit card information through a secure online form. This ensures that sensitive credit card information is kept safe and reduces the risk of unauthorized access.
- Utilize AI and machine learning algorithms to enable two-factor authentication and biometric authentication for bookings and payments, further protecting guest information and preventing fraud.
- Monitor bookings and transactions for any suspicious patterns, and be vigilant in verifying customer identities using advanced identity verification tools.
- Analyze customer feedback and reviews with Natural Language Processing (NLP) to identify potential fraudsters through language patterns and keywords.
By implementing these digital authorization measures, hotels can significantly reduce fraud and chargebacks, protect their guests' credit card details, and minimize financial losses.
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Choose specialist hospitality suppliers
Choosing specialist hospitality suppliers is a key strategy for reducing costs in the hospitality industry. Here are some ways to implement this strategy effectively:
Firstly, identify your specific needs and supply gaps. For example, are you short on linens in housekeeping or struggling with outdated equipment in the kitchen? Knowing exactly what you need will help you choose the right specialist suppliers.
Next, it is important to conduct thorough research on potential suppliers. Look for vendors that specialize in catering to the hospitality industry, whether it's technology suppliers or product vendors. These suppliers will have industry experience and a better understanding of the unique challenges and opportunities in the hospitality sector.
When evaluating suppliers, consider factors beyond just the initial cost. Supplier management involves homework such as checking delivery schedules, quality control, responsible sourcing, and the vendor's ability to provide a consistent supply. Building strong relationships with your suppliers and monitoring costs are also crucial aspects of effective procurement.
Consolidating purchases is another strategy to consider. Buying in bulk and consolidating buys across different locations can often lead to better prices, more consistent product quality, and more efficient supplier management.
Finally, don't underestimate the power of switching energy suppliers. Many hospitality companies are overcharged for their energy due to fuel inefficiency, high energy prices, and ill-fitting tariffs. By switching to a new energy supplier, you can benefit from stable energy bills, eco-friendly energy options, and potentially better customer service.
By following these steps and choosing specialist hospitality suppliers, you can significantly reduce costs and improve your overall procurement process.
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Frequently asked questions
Employee turnover is high in the hospitality industry, and it is expensive to find, hire and train new staff. To reduce labour costs, consider investing in technology that automates and optimises operations, such as all-in-one hotel technology, which includes hotel software, a booking engine, and a channel manager.
Rising energy costs are a huge problem for hospitality operators. To reduce energy costs, you can use energy-efficient appliances, maintain and regularly service equipment, and educate staff about saving energy. You could also investigate whether insulation could make a difference to your energy costs.
Food cost management can be tricky in hospitality businesses. To reduce food costs, you can monitor and track your inventory, analyse purchasing decisions, control portions and reduce waste. You can also analyse your menu items and ingredients to see if there are any changes you can make to improve revenue.
55% of credit card fraud happens in the hospitality industry, and every chargeback erodes hotel revenue by 1-5%. To reduce the cost of chargebacks and fraud, you can use digital authorisations to protect guests' credit card details and reduce fraud and chargebacks.
