Lodging chains have taken a hit the last couple of years as occupancy rates declined forcing management to discount prices to be competitive. Naturally, when revenues decline management’s first reaction is look for ways to reduce operating expenses in order to maintain gross profit margins. It is unfortunate that sometimes the knee-jerk reaction of slashing headcount or deferring maintenance and repair can have unforeseen negative long term consequences on the financial health of Lodging Chains. This article will highlight several areas that an Enterprise Asset Management (EAM) system can help reverse the damage done by short-sighted management decisions on Lodging Maintenance Repair and Operations (MRO).
Lodging Cost Containment With an EAM
Good managers adjust to difficult economic environments by discovering where the opportunity for improvement lies. For Lodging professionals this means understanding where your expenses originate and discovering a path that allows you to do more with less. Three of the biggest expense opportunities are reducing utility costs (energy costs), reducing emergency repair and operational expenses and of course labor. EAMcost containment for these three areas comes from the automation of the work order process as well as using EAM features that allow for complete asset lifecycle management tools. For example:
- Reducing energy costs. Energy costs include electric, gas or any other energy source used to power equipment, heat water, heat or cool spaces and so on. When equipment is not properly maintained it requires more energy to achieve the same output. To visualize this imagine a clogged air filter obstructing the air flow in an asset. The reduced air flow causes the HVAC unit or industrial dryer to run longer to achieve the same result.
“For a full-service hotel, energy costs are usually between 4 and 6 percent of revenue, but historic and luxury properties may see energy costs hitting 10 percent or more.”
An EAM schedules regular inspections and preventive maintenance on designated assets to ensure optimal operating conditions. Management reports can provide corporate managers a listing of properties not complying with corporate standard operating procedures. How much is 10% of your Lodging revenues?
- Reducing emergency repairs. When maintenance is deferred on lodging assets, they are far more likely to fail requiring emergency repairs. For example, a corroding joints on piping if left unattended could rupture or a clogged storm drain can backup and flood portions of the premises. On top of raising liability issues for negligence, emergencies repairs will cost more in parts and labor further draining cash flows.
“Information is King …Efficiency seems to be the watchword of every year, but for 2010 it is an imperative… Efficiency in the internet age is particularly crucial to the effective leveraging of available information.”
Increasing maintenance efficiency is a snap with a Lodging EAM software solution. Through the organization/automation of work requests and work orders lodging maintenance teams have the time to become more aggressive scheduling preventive maintenance and inspections which are key avoiding unplanned MRO activities. In addition, the results of all work performed is recorded by the EAM allowing corporate managers to identify the known issues throughout the properties. The identification of company wide issues enables better repair or replace decisions as well as more accurate capital budgeting planning.
- Reducing Labor expenses. Although maintenance and repair workers command higher wages (see table below), lower revenues does not always mean that there will be lower maintenance requests. In fact as assets age, it is likely that the number of work orders will actually increase. When work orders remain constant or increase, slashing headcount is rarely the best alternative to reducing labor expenses. A better solution comes from implementing an EAM to increase lodging efficiencies at all locations.
An EAM can increase labor efficiency several ways. The first is the use of mobile handheld devices which transform paper based maintenance operations into online, automated maintenance systems. The second advantage is that by implementing a Lodging EAM, maintenance operations shifts from reactive firefighting to pro active maintenance giving local managers better scheduling flexibility and controls. In this manner more work can be done with the same amount of resources.
Lodging EAM is a Long Term Cost Solution
Increased efficiencies resulting in maintenance expense savings are only part of the corporate benefits of an EAM system brings to the table. When EAM software is used properly the entire useful lifecycle of an asset can be tracked from the planning stages through its retirement/replacement. The reason is all asset information such as location, description, cost, vendors and complete maintenance history are recorded. EAM system output reports can then provide corporate or local managers with the frequency of maintenance work orders, the associated costs, parts used, technician and many other details.
Astute management can use this information to make more accurate predictions of capital needs or provide new maintenance staff across multiple locations a knowledge base of maintenance procedures or answers. Given that the average of a maintenance professional is over 50, it makes good sense to be able to accumulate their knowledge before they retire.
The Final Analysis
Economic adversity is a time when great Lodging managers can think through the knee jerk operating actions such as cutting headcount to find a maintenance solution with both immediate and long term benefits. An EAM is one such solution because of the features and customization available that enable a tailored lodging maintenance solution.
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