If your hotel is struggling with debt then it is not alone. The hospitality business can be cutthroat as many hotels are struggling in a market that is quickly evolving and diversifying constantly.
Of course, as the owner of a hotel, the last thing you want is to be shutting up shop because of poorly managed finances after all the hard work you’ve put in over many months and years.
With that in mind, here are a few ways that you can mitigate against any concerns and start looking towards a brighter future.
Cut costs and sell anything possible
The first step towards getting out of business debt should always be to pinpoint the reason you’re in this position in the first place. If you can identify what sparked the initial problem, you can tackle it head-on.
For example, your expenses may be high and with a growing debtors book, could be proving impossible to keep up with. If this is the case, you need to consider changing collection terms with customers and investing more time into chasing those that haven’t paid on time.
It might also be time to start looking at alternative suppliers for your hotel essentials. Sometimes a little bit of market research can reveal that you’re paying more than you should be for items you previously considered affordable.
A lot of older hotels can often be littered with out of date and unused equipment that is no longer necessary for the running of the business. Selling off surplus like this can be an easy cash boost and is well worth getting rid of if it is collecting dust or has become obsolete to what you are currently running.
Cutting costs is all about slimming down and increasing the efficiency of your business processes. If it’s taking up too much of your time or costing too much money, it’s probably time to either get rid of it or look for cheaper alternatives.
Reconsider your company budget
If your debt keeps rising after you have sought to consolidate all of your equipment and costs back to the bare minimum, then the budget you’ve set probably isn’t working.
Budgets should be based on the company’s current financial situation, not how it was years ago. Revenue should cover all fixed monthly costs. Variable costs (for example, the cost of stock) should then be accounted for within the budget.
Whatever’s left should then be largely used to minimise the debt level. This may sound simple, but old habits die hard, a refresh or a complete review is often what is needed in a situation like this.
Budgets can be easily set and managed using accounting software such as QuickBooks and Sage. If you want to get on top of your budget, take a step back and look at what you can realistically afford.
Debt payments should be prioritised (to a certain extent)
If you’re already paying back your debts, it’s a good idea to take a closer look at what you’re paying for. Your highest priority should be to pay the debt accruing the highest rate of interest – of course, most of the time, this will involve paying down credit card debt first.
Any amount that has been personally guaranteed will be collected from the guarantor if the company is unable to pay; this means that enforcement could be brought against personal assets if it is left for too long. Check your signed contracts if you are unsure.
There are many ways that hotel owners can protect themselves from a debt crisis, and the first is simply to not get into debt in the first place.
At the first sign of financial irregularity or a downward trend, it’s best to check your processes and look at your books. Sometimes, a pair of impartial eyes can spot things that are easily overlooked.
If you’re ever unsure, it’s always best to consult an expert.
This article has been contributed by Forbes Burton.