Watch what you’re cutting

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Newly appointed Sheraton Dubai Creek Hotel and Towers general manager and area manager of Dubai for Starwood Hotels and Resorts, Heinz Grub, outlines the company's plans.

How is business going so far this year at the hotel?

Business in Dubai, like everywhere else, is not [the same] as we knew it in September and October last year. Like other businesses, when we delivered our budget in September last year we had other intelligence than we have today.

With that intelligence that we had at the time we prepared the budget and then events turned around in October and November.

If you talk about our feeder markets, Dubai has feeder markets like England and central Europe, and we all know very well what is happening over there.

If those feeder markets are scaling down then obviously Dubai is going to be affected as a whole.

Year-over-year, how does the region's performance compare?

Over the last couple of years - in fact for 10 or 15 years - business has been going up in Dubai. In fact, it has been going up in an amazing way with year-on-year growth factors that were unheard of in any other part of the world.

Now all of a sudden it has come to a grinding halt and has turned the other way - it is on a downturn.

The next question is ‘what are you doing about it?'.

At Starwood hotels we always pride ourselves on having good business arrangements and good business relationships with our suppliers, our customers and our associates.

In an upturning business [cycle], a lot of hotels get cocky and say ‘I don't need you' and increase prices to a ridiculous level, which is fine when there is more demand than supply and hoteliers can pick and choose.

But in today's economy you are really talking about how well you treated your customers and suppliers previously. This is where we can say today that we have wonderful relationships and it pays off. In this hotel we have a tremendous regular customer base, one of the biggest I have seen in our industry. That obviously helps.

It is not all doom and gloom, let's face it. The Dubai government is still running promotions and events, which is a very good sign.

From an operational perspective, many hoteliers are talking about cutting costs. What areas of the hotel are going to be streamlined?

You have to be very careful when you talk about cutting.

If the guest starts to feel you are cutting on services and products you are going to get into a spiral that it is very difficult to get out of.

It is the same thing with your pricing strategy. If you are going to start dumping your prices, you have to keep two issues in mind. How are you going to explain that to your customer if you [hypothetically] cut your prices by 50%? If you told someone the last time that the room was US $2000 and now you are offering it for $1000, what would they think? They would think that you cheated them last time.

The other side of the coin is that if the economy picks up - and it hopefully will pick up in the latter part of this year - how dare you increase your prices back?

You have to protect some price. You can still yield downwards but one has to be sensible about it. If you start price gouging then nobody is going to win in that sort of exercise.

If you are looking at cost curtailment, the biggest area is obviously human resources but again you have to be very careful.

In a hotel one of your biggest and most important assets is your people. It is not me who makes a hotel profitable or enjoyable for guests, it is the waiter, the front-desk clerk, the concierge, the bellman. The managers just make sure the staff have the right skills and we have the right measurements in place to measure performance, but it is not us who takes care of the customer.

The easiest thing is to go out and say if business goes down, based on my ratios I do not need this position or that position. But you have hired this individual, so there are hiring costs; you have trained them so a lot of time has gone into that.

You have built up knowledge and skills and now you want to throw it away? I would be very careful about doing that.

There are other ways around it. We have sat down with our individual staff members and said that over the past years they have always requested extra holidays and days off but we were too busy. Now there is the opportunity to take extra weeks of unpaid vacation, or take a couple of days a week.

It is done with a mutual understanding that we can lower costs.

We have gone to our suppliers and said that during good times we have paid the price increases of 15% or 25% each year. Now things are cutting back and we have this relationship going back 10 years, we can sit down and work out how we can do things together and how we can mutually benefit if we keep the prices stable for the next year.

And we will continue doing that process until we are comfortable with our cost structure and where we want to go.

How do you define success in the year ahead?

Success can be measured in different ways. There is financial success, you can measure it by how well you take care of your customers and you can also measure it in 2009 in terms of how well you get out of the slump. This is how I would measure our success in 2009.

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READERS' COMMENTS

We were cheated
Posted by Dan, Stockholm, Sweden on Saturday 14 February 2009 at 19:01 UAE time


"How are you going to explain that to your customer if you [hypothetically] cut your prices by 50%? If you told someone the last time that the room was US $2000 and now you are offering it for $1000, what would they think? They would think that you cheated them last time."

We were cheated for 3 years. Unrealistic pricing really hurt us. Go back to the real pricing and stay there. People are not stupid.

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