There have been a lot of articles warning of the upcoming debt bubble about to burst for hotels that obtained financing just before the economy tanked. These hotels may be faced with difficult decisions including reducing maintenance operational costs and waiting for foreclosure.
Hotel Foreclosures and Maintenance
For hotels, resorts and lodges that face this situation, senior management and owners need to remember that not performing preventive maintenance on their assets when faced with foreclosure or cash flow is tight works against them. The intelligent financial decision is to continue maintenance activity right to the very end. The reasons this should be done include:
Why Stopping or Cutting Back Hotel Maintenance is a Bad Idea
- Loss of resale or liquidation value: Broken assets have only scrap value and poorly maintained assets will be found by inspectors who will lower their value.
- Liability exposure: Failure to maintain assets on proper operating condition is a lawsuit waiting to happen. It only takes one accident resulting from asset neglect to add legal and settlement dollars to the books.
- Employee moral suffers: No one likes to be on a sinking ship, turnover will increase thus decreasing the availability of skilled professionals to handle repairs and emergency issues.
- Work orders and work requests skyrocket: The frequency of work requests and work orders increases as unplanned maintenance increases. This occurs because when inspections and preventive maintenance are not being performed equipment breaks down more often. Resulting in:
- Higher labor costs – fewer people, more work, more overtime- enough said.
- Higher repair costs – repairs are almost always more expensive than an ounce of prevention.
- Higher capital budget expenditures – Poorly maintained assets have a shortened lifecycle, if a boiler or chiller fails it either has to be repaired/replaced or guests stop coming.
- Energy/utility costs increase: If HVAC units, kitchen equipment, chillers, boilers etc. are not properly maintained they will need more energy to accomplish the same output. With energy/utility costs already accounting for up to 50% of operating costs it does not make sense to increase this expense.
The Smart Play for Hotels
The amount of time each hotel has before it is foreclosed upon or sold is different. However, increasing maintenance activity can grab the low hanging fruit (expense dollars saved quickly) in as little as 6 months or faster if a CMMS system is already in place.
The key to keeping as much value to your hotel as possible is making sure that maintenance management is proactive. With or without a CMMS system there are basic maintenance practices that should be followed. These include but are not limited to:
Basic Hotel Maintenance Practices
- Scheduling all work management. This includes work orders, inspections, preventive maintenance and rounds. Scheduling work management:
- Shows that assets are not being neglected.
- Identifies equipment problems early through inspections and preventive maintenance lowering unplanned or emergency repair situations.
- Lowers labor costs by controlling overtime.
- Maintains the energy efficiency of assets.
- Keep records of work history. Knowing the condition of all assets will enable owners to better valuate their properties. When used properly, a CMMS system tracks all work history.
- Follow the hotel maintenance 80/20 rule. This will allow hotels maintenance operations to grab the low hanging fruit as well as keep expenses to a minimum.
The Unexpected Benefit of Smart Hotel Maintenance Management
Financially distressed hotels that have implemented CMMS programs or practice basic hotel maintenance as described above may enjoy additional benefits. Better maintenance and management increases cash flow.
If the hotel can avoid foreclosure, it is in an excellent position to quickly become a thriving enterprise. Monies saved by reducing capital expenditures can be used for cosmetic improvements, additional staff, technology upgrades such as Wi-Fi or the replacement of older hotel assets.
Saving a hotel and its assets is not an easy task. It requires a maintenance commitment and planning. Reducing maintenance costs just isn’t a good decision.