CHICAGO— Ernst & Young’s Hospitality Services Group has unveiled the Hospitality Operational Enhancement Service— a new practice designed to help hoteliers improve operating efficiencies, generate higher profits, and maximize cash flow during times of increasingly difficult access to capital. Maximizing Cash Flow As noted by Scott Steilen, the E&Y Group’s central region practice leader here, this new flexible and scaleable offering was rolled out expressly “to maximize cash flow in today’s capital-constrained markets.” The new practice is said to provide owners and operators with greater ability to: assess and identify improvements; implement and monitor these improvements; increase profits from streamlined operations; maximize value potential while minimizing overall risk; and build greater confidence in asset performance. Steilen explained that the new service has been laid out along three separate lines to address what has become the lodging industry’s primary financial paradox: How does one quantify an investment in good service? Noting that that “there’s plenty of money to be made— and saved— through traditional means and methods,” the E&Y executive pointed out that his group’s professionals are trained to: • Fully immerse themselves within the client hotel property’s operations. • Identify “true” improvement opportunities, especially in the areas of revenue generation and expense reduction. • Develop an all-encompassing implementation plan, put it in place and set up procedures to monitor it. Seeing the new program as “an investment, not a cost,” Steilen maintained the Hospitality Operation Enhancement Service “absolutely improves/generates new or incremental cash-flow, typically to the tune of a multiple of two to 20 times the fee.” As a case-in-point testifying to the new service’s effectiveness, mention was made to the Seaside (Florida) Community Development Corp.’s need for assistance in the creation of a strategic lodging development and operating assessment program for a 270-unit cottage rental property in that Sunshine State destination town. According to Chase Burritt, the E&Y group’s national director, the company “delivered a comprehensive strategic plan to help guide the future of the lodging operation, [identifying]significant near-term cash-flow improvements, executive staffing evaluations and long-term profitability enhancement.” Noting that accessing and implementing programs of this type might well “help spell the difference between operational success and failure today,” Steilen said that— in the Seaside example— reliance on the Hospitality Operational Enhancement Service was credited with helping “avoid a loss.” As he noted: “A $2 million-plus turn-around in cash-flow helped [the client]go from a projected loss in 1999 to more than $2 million in profit in 2001.” Designed To Aid Owners According to Burritt, “Hospitality owners are searching for select ways to align their assets with their return expectations. [Our] Hospitality Operational Enhancement Service will help these owners partner with management to enhance the value of their lodging assets.” As Steilen pointed out, the E&Y Hospitality Services Group’s new practice took some 12 to 18 months to develop. At this time, he said about a half dozen lodging entities are taking advantage of it, with several more engagements of the firm’s services already in the pipeline.
