Starting from Square One

RAR Hospitality (RAR) was tasked with taking a hospitality asset that had been mismanaged for years and had never hit full stride and turning it around in 120 days. “No problem,” according to Marc Potash, RAR Corporate VP. “We just dissect assets into bite size pieces and proceed to turn around each business unit.” As background, RAR has taken assignments from litigation support for troubled partnerships, bankruptcy cases, receiverships, lender foreclosures, emergency management, and more traditional hospitality industry consulting and management.

While we have enjoyed tremendous success turning around assets for over 20 years, perhaps our most recent success is our most impressive. The assignment was to evaluate and turn around a hotel in the U.S. The asset includes an Olympic-sized swimming pool, over 130 hotel rooms and suites, a leased restaurant and bar, an in-house restaurant and bar, a large catering and banquet facility, and a nightclub.

Step one was to interview all of the managers. Some walked, some stayed until we replaced them, and some thrived. The Human Resource Department was non-existent. There were personnel files but they were in terrible order, there was no consistency to team member reviews and wages, and nobody knew who reported to who. RAR’s Corporate Director of HR, Jessica Woolfrey, conducted a comprehensive audit of the department and did a complete overhaul that did several things:

  1. Elimination of legal liabilities in regards to employee wages and overtime
  2. Clarity as to job functions and job descriptions
  3. Organization of team member reviews and wage levels
  4. Training systems set up to include sexual harassment prevention classes
  5. Hiring a new General Manager, new Director of Sales, and new Chef

Step two was to write a business plan and budget that was executable and rational. The original budget was based on owner desires only and was not achievable. Further, the business plan had the wrong competitive set and goals that were unclear and not measurable. Our new Director of Sales, with guidance from our corporate executives, initiated a comprehensive overhaul that included the following:

  1. Reorganization of sales processes from demographic and psychographic target markets
  2. Training of sales managers in new target markets
  3. Initiation of comprehensive digital marketing strategy
  4. Complete review of all marketing lists for executable e-blasts
  5. Comprehensive overhaul of all social media markets
  6. Elimination of contract employees and retraining catering and banquet executives

Step three was cleaning up the operations. The new GM began the following objectives:

  1. Clean the hotel and set new paradigms for cleanliness – the place was filthy
  2. Inspect every guestroom for capital needs, pest infestation, and maintenance needs
  3. Implementation of a manager on duty program
  4. Development of an accountability process by department
  5. Complete overhaul of all menus in the restaurant
  6. Review of the leased nightclub and restaurant/bar

Step four was to overhaul finances. After 30 days, our controller saw a trend that would wipe out cash within 60 days. We implemented the following measures:

  1. Cash controls
  2. Check writing controls
  3. Purchasing systems
  4. Reduction of staff by 15 percent and effectively managed labor hours
  5. Development of a weekly cash flow report and owner conference call
  6. Monthly in-person owner meeting

In addition to the above, upon taking over the hotel, RAR executives worked shifts as manager on duty, caterer, sales manager, waiter, bartender and acting GM until we were able to secure the services of a top GM.  The turnaround has been a total success and a few months after takeover and after the implementation of our more realistic yet aggressive budget for the property, the hard work resulted in the room revenue budget being exceeded for the first time in several years.  The budget and business plan we spearheaded with the GM and team members on property includes a complete review of many capital expenditure needs. The budget includes a cash flow report that provides for the exact timing of the capital needs so that all needs can be completed without an owner cash call…a miracle for a late summer takeover of a severely troubled asset.