There has been a lot of publicity recently in relation to the carbon tax, interest rates, Europe’s financial status, the depressed state of the economy and the list goes on and on.
So what can you as an accommodation provider do to weather the financial storm that these adverse factors have on your business? That is why everyone needs to look at risk planning. This can have a huge impact on the critical factor of profitability.
Risk planning is fairly self-explanatory. It is simply planning for the risks that could have a negative impact on your business if they occurred. These may be small or large. It is important to have a plan in place that covers both the small and large issues.
It is important that business owners dedicate some time to try and identify the risks you can foresee that may negatively impact on your business and decide what you can do now to prepare yourself for such an occurrence.
Some issues that need to be considered are:
• Occupancy rate decreasing – review your marketing and work out what is working and what isn’t. If you can see a low month coming up, do you offer a special rate to your existing database? Do some forward planning to ensure you don’t get caught out.
• Costs are increasing – particularly in relation to direct costs, what is the best way to pass this on to my guests / unit owners. Review your charges on a regular basis.
• Loss of units in the letting pool – determine why this has happened. Ensure you don’t make the same mistake twice. Is there a possibility of enticing other units to join the letting pool?
• New competition entering market – if a new complex opens next door, how do I differentiate my business from that one? What makes my resort/motel better than theirs?
• Competitors offering lower prices – Do I drop my rate as well or do I keep my rate as is and add on services such as a free hamper or massage.
• Market shrinking – If your market has traditionally been a drive market, do I have to look at international guests? Where is a new market opening up?
• Computer crashes – what happens when the computer goes down and you have guests about to turn up? Our reliance on computers is such that we fail to have a manual back up when computers fail. Think about what you can do to be ready when this happens.
This is just a sample of things that need to be considered. You will no doubt have a more specific list of risk factors for your business depending on your personal circumstances. Make sure you think of a back up plan in case any of these occurrences take place.
It is also a good idea to document what to do when something goes amiss. That way, there won’t be any panic when the problem occurs as you have already written down the answer.