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At Your Risii H&MM April 3, 2006
Risk management takes center stage, even backstage ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ H l ^ ^ ^ ^ ^ ^ ^ ^ ^ l rne m:)n who ff I unncanHi Tc\ re- TTiic amApr\r rp-iffirmpA tn (pnAintc rn citf
ti\iTHEdetaiis stage a safety intervention • No area is off-limits to safety • Remember your clientele " Enforce your rules
By Anthony
N Columnist
o one remembers the man's acceptance speech, but whar im-
mediately followed was unfor- gettable. Moments after accept- ing his award in front of 1,000 guests in the hotel ballroom, he lost his balance descending the steep stairs from the stage. His award—a tall, rather heavy, en- graved crystal vase—^went fly- ing. Seated guests screamed and leapt for safety. The projectile award flew past them and shat- tered into hundreds of pieces on the floor.
The fall was captured live and projected to spectacular ef- fect on two gigantic video screens on either side of the stage. Tlie award nominees had been wired for sound prior to the ceremony, and the sound now accompanying the picture was the dull thud of tbe award recipient's head striking the stairs being amplified through- out the ballroom. The audience watched and listened in smnned silence. Then someone flipped a cell pbone and called 911. As
tbe man wbo fell appeared to re- cover, one of the guests Felt bold enough to offer tbe comment, "1 hat's going to be a tough act to follow."
I thougbt; "Why were there no handrails?' T h e stairs were weil constructed but obviously not to code. T h e steps were odd- shaped and very steep.
T h e hotel's subsequent acci- dent report offered some illumi- nating details: It seems tbe well- intentioned botel executive committee, seeking to cut costs, voided the purcbase order re- quest for portable stage stairs and instead recommended the hotel's engineering department build them. Handrails wete omitted from the approved de- sign because the carpenters felt tbey would block the stage view of guests seated in tbe ballroom. Tbey got that part right, but were still recklessly wrong.
I also suspect the engineering personnel were younger than most of the award recipients. As such, it never occurred to them tbat most people receiving awards are usually older. After all, you need to work effectively most of your life before you can get a lifetime achievement award. And then you get it right around the time your knees stop working. Younger employees who are in charge of purchasing or requesting tbe construction of furniture, ftxtures and floor- ing, just don't get it; Senior citi- zens often need handrails to compensate for loss of agility ;md balance. And when they fall, they're more likely to sue.
Tbis accident reaffirmed to me that, too often, a hotels ball- room stage, front and rear, is off management's radar. This is par- ticularly true when the conven- tion group contracts with a pro- duction company. While man- c e m e n t may assume it bas dele- gated its duty of exercising "rea- sonable care" to the production company and/or convention group, tbe court may not agree. After all, the hotel guest simply knows be or sbe is being called on stage at tbe hotel to receive an award; be or sbe doesn't know about any such produc- tion company.
Knowledgeable management understands that, legally, the hotel's ballroom stage is not a li- ability-free zone. T h e common- law duty of exercising "reason- able care" for guest safety on premises means just that^—on premises. It doesn't exempt some areas and include others.
Sboeshine stands are anotber area that often are incorrectly treated by management as an oasis of non-responsibility. I view botel sboeshine stands without handrails as hazardous, and yet I bave never seen one with hand railings to assist its patrons mounting and dismounting the stand. With an aging popula- tion, what's "reasonable care" for the safety of guests may require re-examination.
A hotel guest injured by a fall ftom a ballroom stage or shoesbine stand will certainly look to the hotel's deep pockets, not a small-time independent contractor, when targeting de-
fendants to sue. Tbe common law does not
exempt hotel ballroom stages or lobby sboeshine stands from the duty of providing "reasonable care" for the safety of their patrons. Management's job is to establisb written inspec- tion proce- dures to
deteCT guest hazards on premises and eliminate them, or ade- quately warn guests to avoid en- countering them—front and backstage included.
Look behind the stage in tbe ballroom. Event participants often assemble there before going on stage. I can remember my last experience going from the ballroom to tbe green room just prior to being introduced to the assembled. I followed an es- cort tbrougb the backstage area, which was a hazardous mine- Field of electric cables, props, sound equipment, lights, com- puters wires and cluttered boxes.
No competent hotel manag- er would allow such conditions in the hotel's lobby, so why should backstage be viewed any differently? Hotel guests partici- pating in an awards ceremony do not waive their rigbts to "rea- sonable care" for their safety. Tripping over an electrical cable backstage and being injured will be pursued whether it happens there or in the entrance lobby. It's plain negligence as far as tbey are concerned.
A neat, orderly, clean and safe stage, front and back, occurs oniy wben management de-
mands it—and puts in place in- spections and procedures to se- cure it. Management gets what it manages to get, nothing more. O n e botel keeps its backstage area safe internally, and when a production company arrives, it presents a "Rules and Regula- tions" sheet, commanding spe- cific standards of care be ad- hered to while on premises at the botel.
There are blind spots in this industry when it comes to risk management and accident pre- vention. M a n ^ e m e n t should broaden its scope and provide "reasonable care" for the safety of allofks guests, wherever located on premises. There are no liabili- ty-free zones. Good manners know this and act accordingly. They are probably the same ones who will later be accepting life- time acbievement awards.
Anthony G. Marshall a professor at the University of Central Fbri- dds Rosen College of Hospitality Management in Orlando, has practiced hospitality law, focusing on issues of safety and security, jbr nearly 25years. He can be reached at [email protected].
Consultant's Corner What a difference a decade made for controlling hotel costs
iNTHEdetaiis Costs cause for concern -: Costs offset revenue for 10 years
» Don't celebrate too soon s Better job of overall cost control
By Susan Ernst
Columnist
any hotel owners rely on third-parry management com-
panies to oversee their opera-
tions and safeguard tbeir in- vestments. History suggests that tbis burden of responsibili- ty is wortb about 3 percent to 4 percent of total sales. So bow's that been working for them?
The expenses associated witb tbe day-to-day operation of a botel can be allocated to tbree main categories: departmental costs and expenses; undistrib- uted operating expenses; and fixed costs. Tbe m a n ^ e m e n t company has control over tbe first two cathodes but bas little say when it comes to the third. Thus, income before fixed cbarges is a barometer of man- agement's effectiveness.
Looking back at tbe recovery year of 1994, fiill-service botels acbieved tbe greatest growtb in average daily room rates among all property types, which led to a 19.6 per- cent increase in opera- tional profitability from the prior year. Tbis was great news for a seg- ment tbat had been burdened with old fa- cilities and non-profitable food- and-beverage operations.
In 2004, another recovery year, fiill-service hotels realized a 7.6 percent increase in total rev- enue over tbe prior year. Tbis led to an 11.4 percent growth in
ISHC ln[t'rnj[iondi^wnt\ ot Hi'spifaliiv Qin Bill lam >
operating profits and marked tbe first year of unit-level profit growth since 2000.
During the last 10 years, bealtby increases in revenue bave been ofSet by increases in operating ex- penses. Controlling operating expenses during recovery years can be a
greater challenge than usual.
Management must rethink staffing levels, as well as the ne- cessity for other amenities and/or services that were dis- continued during down times.
In spite of the challenges
cited, during 1994, income be- fore fixed charges amounted to $11,317 revenue per available room (RevPAR), or 27.3 per- cent of total sales. By 2004, bowever, this important gauge for management had increased to$13,334 RevPAR, or 33.4 percent of total sales. This is a direct result of a successfti! campaign to decrease operating expenses. Management, pat yourself on tbe back—but don't pop tbat cork quite yet. Here's wby:
Management fees, property taxes and insurance costs fall into the category of fixed charges.
Please turn to page 16
Columns H&MM April 3, 2006 HotelMotel.com
Costs Continue/:/from page 8 Other fixed charges include de- ductions for depreciation, rent, interest, amortization and in- come raxes. Comparisons be- yond the first three, however, are virtually meaningiess be- cause of wide variances in own- ership, depreciation methods, Financing bases and applicable income taxes.
In 1994, fixed costs equated to $2,719 RevPAR, or 6.6 per- cent of total sales. By 2004, these expenses totaled $3,350 RevPAR, or 8.4 percent of total sales, an increase of 23.2 percent.
Even with a 3.7 percent de- crease in revenue PAR over the 10 years between 1994 and 2004, there has been a 17.8 per- cent increase in income before fixed charges.
TTiis would suggest diar dur- ing the last 10 years, which couJd
Full service hotels in the United States A comparison of key indicators 1994 and 2004 Amount per available room (PAR) Year Inflated to
1994 2004 dollars*
Revenues $32,664 $41,483
Year Variation Percent 2004
$39,938 -$1,545 -3.7
Total operated departmental income $17,705 $22,485 $23,462 +$977 +A.3
Total undistributed expenses $8,794 $11,168 $10,128 -$1,040 -9.3
Income before fixed charges $8,911 $11,317 $13,334 +$2,017 +17.8
Fixed charges $2,141 $2,719 $3,350 +$631 +23.2
$9,984 +$1,386 +16,1Income before other fixed charges $6,770 $8,598
'Intlation based on United States CPi Source: PKF Consuiting - Trends in the Hotei Industry - USA Edition - 1995 and 2005
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easily qualify as some of rhe mosr challenging years in this industry, managcmenr has done a superla- tive job in controlling costs and maximizing the investments of U.S. hotel owners.
hmm@questex. com
Susan L. Ernst, a member of the Intenmtiorial Society of Hospitality Consultants, is president of Ernst & Associates in Lincoln, Calif e-mail- semst5046@aoLcom
Get ready Continued ft-om page 14 there will be a number of hotel owners who will have to bail out and sell. This will force up cap rates because investors will need a certain internal rate of return tar- get, and the rising cosr of capital will force them to become less a^ressive on pricing. A rising stock market also cotild cool off the real-estate market. Even a pop in the residential real-estate bubble could impact hotel real- estate because this ajuld cool off the condo-hotel craze, as well as the conversion of hotels to straight residential.
We should continue to expe- rience a continued "hot" market for at least the first six months of 2006 and possibly further. How- ever, hotel owners would l ^ well advised ro either refinance today to lock in niedium-mrn fixed- rate loans or consider stRictured deals, such as selling a joint ven- ture position in their portfolio. An outright sale is a good strate- gy if it fits your needs and you have a place to deploy the capital, but is not always required to take advantage of the current market. Buyers and sellers will continue to ptirsue hotel real-estate trans- actions because die fundamentals of the market remain strong.
Geoffrey Davis Is president of HREC Investment Advisors in New York. He can he reached at
(212)551-1775.
