Turnaround management

In New York, as elsewhere, the financial tsunami has proven to be a six-sigma event (when valuation drops by more than six standard deviations) resulting in Revpar drops of greater than $100 for some hotel operators. The Wall Street Journal and the FT both have articles on guides that serve companies across industries to better handle economic adversity.

The Journal's article has many pointers that can be of used for hotel operators. These include better communication with employees. Crises tend to have leaders (GMs included) operating behind closed doors (some of that stems from a desire to not convey their own sense of panic as also not to be embarrassed by the bad results) and away from staff. More typically, the tendency to blame staff lower down spikes dramatically in bad times but that does not typically address the problem of falling Revpar. A third thing to avoid is " fragmentation and infighting". "When a company is having problems, so people are not very outgoing.
They're not nearly as collaborative, lose respect for other people and
become very discouraged easily. So leaders have to make sure that
there's some shared feeling about the goals".

The WSJ article points to leaders who have led successfully in times of crisis and cites the example of Continental airlines during the power outage in the summer of '08. People assumed another terrorist attack but Continental managed creative ways of keeping their Newark hub in operations. While other airlines lost money during that period, Continental made money. Lastly, the journal notes that successful turnaround managers are those who do not just focus on cost cutting but those who show "respect to their people".

The FT has a different focus that is helpful all the same. A crisis put the "puts the CFO (Controller) in the driving seat of the business".  Where should he/she start: "daily cash meeting with key lieutenants to keep liquidity levels closely monitored". Secondly "keep CEOs (GMs) and boards up to date on the simplest of questions:
do we have enough cash to survive a week, a month, a year or even two
years". "third, gain control over who your debtors are and their financial health" That includes not selling to people who cannot pay back. "The CFO's (Controller) role, however, is not just to run the numbers but also to question any predictions made by management". The FT also notes that companies need to "Stress test the business. Take your worst-case scenario and stress test it at even more pessimistic levels". That would include dropping revpar to levels not seen since 2003. 

Published by

Vijay Dandapani

Co-founder and president of a New York based hotel company for 24 years. Grew the firm to five hotels in Manhattan and also developed a greenfield project at MacArthur airport, New York. Speaker at numerous prestigious forums including Economy Hotels World Asia, Lodging Conference, NYU, Columbia University Real Estate Roundtable, Baruch College's Zicklin School and ALIS. President and ceo of New York City Hotel Association since January 2017.

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