The consequences of mistaking tactical initiatives for strategic ones may in extreme circumstances mean you disappear from the business scene forever.
Are you risking that?
I will lay out a strong argument for not ignoring the forest in the quest for the trees.
In the process, I will back up my argument with benefits of remaining sustainable in business - something all of us would want.
In this blog post, I will compare hotel operations analysis with asset management and reinforce the need to be strategic.
The blog post will cover the following areas:
- Steven Covey and Sharpening the Saw
- Being Strategic Vs Tactical
- Significance of Being Strategic
- What is Hotel Operations Analysis?
- What is Hotel Asset Management?
- Are you behaving like an asset manager?
- Why is this critical?
- The Owner Perspective
- Your Takeaways
Sharpening the Saw
There is rarely an individual who has not read the ageless classic of Steven R Covey - The 7 Habits of Highly Effective People.
It is a life enhancement treatise.
Among numerous gems which have long become principles embraced by millions, one gem is when he talks about Sharpening the Saw.
Sharpening the saw is about ensuring that the tools you use are always sharpened and ready enough for the projects you embark on.
Imagine you have driven 400 miles in a 1000 mile journey only to discover that the 400 miles was in the wrong direction!
In fact, even Abraham Lincoln is said to have remarked that if he was given 6 hours to chop down a tree, he would spend 4 hours sharpening the axe!
Being Strategic Vs Tactical
Are You Being Strategic Minded?
As a metaphor, the sharpening the saw principle can also be utilized in the debate of being strategic vs tactical.
Well, that is the same as putting in place tactics without first determining what the overarching strategy is!
What is being strategic actually then you ask?
Well, strategy is the WHY of your business (or for that matter any endeavor, personal or business!) enterprise?
It is the philosophy that guides you.
Let me quickly bring back that journey metaphor.
Imagine you have driven 400 miles in a 1000 mile journey only to discover that the 400 miles was in the wrong direction!
Here strategy is the direction or the GPS.
Where you are headed.
Tactics on the other hand are the nuts and bolts of how you will execute the strategy.
In the journey metaphor, it is:
- how you actually map out the trip,
- will you take the shortest distance or shortest time?
- how many stops will you have?
and so on.
Without knowing where you are headed (strategy), tactics may not really cut it.
Significance of Being Strategic
What is the big deal of being strategic despite the journey metaphor, sharpening the saw etc?
Being strategic minded is a business leadership skill.
It is the Big Picture Overview.
You must have heard of the principle of focusing on the trees and missing the forest.
Stepping back and taking a wider perspective is all part of strategy.
Consider that what separates leadership roles from other roles is the percentage of time invested in decisions.
Leaders invest 90% or more of their time taking decisions.
Decisions are about strategies, direction, philosophy, vision and all those overarching priorities.
For example, let us say your hotel did not have an overall strategy or vision for the business.
Simply, tactically raising occupancy or adjusting average daily rate in the short term (or even in the long term) is not going to see you in market leadership positions.
In modern day business contexts, being strategic is becoming even more critical.
As we still go through the covid-19 pandemic, it is strategy, philosophy and direction which are getting looked at totally differently.
It is no more about just being tactical.
The principle of Balanced Scorecard is becoming even more central.
Operations Analysis
So why are we discussing operations analysis in the context of strategy you ask?
I am getting to that.
But first, what is operations analysis?
Operations analysis can loosely be termed as looking at the components of the business operation.
For example, components could stand for the departments, say Rooms, Food and Beverage, Sales & Marketing and so on.
Broadly operations analysis will cover:
- Property Management
- Revenue Management
- Market Share Management
- Cost Management
- Profit Management
There you go, operations analysis defined.
You look more puzzled!
Let me clear the air.
I will do that by bringing in another role in the hotel (or any other) business.
Asset Management
Now you are looking totally baffled.
Possibly the word “asset” triggered that.
Unfortunately, it is thought that the word asset should only be a priority for accountants.
I am going to prove how wrong that presumption is.
But I have digressed.
Let me come back to our discussion.
What is asset management?
Loosely, asset management is about the assets used in the business operation.
Moreover, asset management will cover:
- Property Management
- Revenue Management
- Market Share Management
- Cost Management
- Profit Management
What, I have repeated what is covered in operations analysis!
What is going on?
I know, I know, it sounds weird.
But it is not.
Apart from those five elements, asset management includes some more elements:
- Asset Utilization
- Asset Financing
- Brand Management
So, what is the big deal you ask?
Notice anything different about these three elements compared to operations analysis.
You are giving me that questioning look.
Now, let me bring things together.
Hotel Operations Analysis Vs Asset Management
Or, as the legendary late Steve Jobs would say: let me connect the dots.
The five elements of operations analysis are short or medium term priorities.
The three elements of asset management are long term priorities.
Operations Analysis is the nuts and bolts.
Asset Management is the Big Picture.
In other words, Operations analysis is tactical.
Asset management is strategic.
Noticed something about what asset management covered.
It also covered the five elements of hotel operations analysis.
Thus, you could say operations analysis is a subset of asset management.
But the key point is that asset management has a strategic role.
Are you as a hotelier being strategic or tactical?
Are you behaving like an operations analyst?
Or are you behaving like an asset manager?
Why is Asset Management Critical?
Let me make one point clear.
It is not as if operations analysis is not important.
It is and has a role to play.
However, in our earlier metaphor, operations analysis is the trees.
You need to step back and look at the forest.
In other words, look at asset management.
This broadly means treating each hotel asset as a value creation source.
Unfortunately, many hotel general managers do not bother to know what is the total cost of assets in their balance sheet.
Assets are the source of revenue generation.
And value creation.
Moreover, another important concept [for discussion on another day, perhaps!) is that of monetization of space.
This is from a real estate perspective.
Treat every square foot of hotel space as real estate space.
Treat every square foot of hotel space as real estate space.
To be monetized.
And now let me come to the final argument why you should be behaving like an asset manager before I wrap up.
Hotel Owner Perspective
This argument is a no brainer.
Your hotel owner has pumped in millions of dollars into your hotel property.
Your hotel property, as in hotel asset.
What do you think keeps them up at night?
Of course, how well their asset is performing.
Hotel owners are forever focused on return on investment.
That is return on their hotel asset.
See, why, you should behave like an asset manager?
In another blog post, I will discuss what exactly are hot buttons your hotel owner is obsessed with.
Your Takeaways
What do you think about operations analysis and asset management?
Are you being an asset manager?
Are you being strategic?
Do you know what your hotel owners are focused on?
Comment below, I will be curious to hear your side of things.
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