Two tips CFOs can use to cut costs

BY CHRIS BAYSDEN
June 11, 2014

Nearly every industry has had to deal with dizzying changes in business models over the past couple of decades because of the technological revolution that is the internet. The hospitality industry is no exception.

Hotels, for instance, once counted on having to pay travel agents a 10% commission for bookings. Now, online travel sites take 15% to 50% off the top. And that’s not all: The major online players, such as Expedia, require rate parity, meaning that a hotel can have its listings kicked off an online travel site if the prices are as little as a dollar more than on a competing site.

That puts a lot of pressure on a hotelier’s margins. And now there are rumblings that online travel sites are looking to pass credit card fee expenses off to the hotels, too.

“On the revenue side, we’re getting killed,” said Adam Remis, CPA, the CFO and chief human resources officer for InnSuites Hospitality Trust in Phoenix. “And from an expense standpoint, we’re getting squeezed because there’s more and more competition and more and more hotels are giving more and more amenities.” InnSuites operates five hotels, including four under the Best Western flag. The trust, whose stock is listed on the New York Stock Exchange under the symbol IHT, also provides management services for three other hotels. The company has about 400 employees and generates about $15 million in annual revenue.

Given the fierce environment, hospitality CFOs have to be proactive about helping their colleagues cut costs. In a recent interview, Remis offered a couple of tips on how to do just that. While he spoke specifically about the hospitality industry, his suggestions also can be broadly applied to help CFOs in other sectors. 

With that in mind, here is Remis’s advice on what hospitality CFOs can do to help cut costs:

Use technology to be a more engaged partner with other executives, especially general managers (GMs). One way to do this is by developing custom reports to help hotel GMs better manage their properties. Remis cites rooms, which is a huge, extremely variable expense, as an example. While hotels always have to maintain some staff, the number of people working varies widely depending on whether the hotel has 100 rooms booked or a mere 30. Sometimes a company’s various software programs don’t integrate with each other. Remis advises bringing in a programmer who can create custom fields in reports to GMs. That way a GM can receive a report that shows the number of rooms booked for the coming week right next to the number of housekeeping hours scheduled. Adjustments to those hours can be made as needed to cut costs. CFOs in other industries likely can use similar types of reports that go to site or regional managers.

Here’s another example of how Remis and his team are using technology to cut costs and generate revenue: InnSuites has created a new division called the Independent Boutique Collection, or IBC Hotels. IBC Hotels, a network of nearly 5,000 hotels, is a hospitality technology company that has developed a mobile solution, application, and website to serve independent hoteliers and their customers. Just as in the old travel agent days, the commission for reservations is 10%. The goal is twofold: To put some of the top-line revenue back into the hotels’ pockets and give travelers an option for booking unique, independent hotels worldwide.

Think broadly and get outside your silo. Start by developing a broad skill set—a process that begins early in a CPA’s career and continues until retirement. “I think a person who is well-rounded is an ideal fit,” Remis said. For instance, a CFO at a public company not only needs Sarbanes-Oxley audit experience but also should have deep tax knowledge. That’s because CFOs sometimes make financial audit decisions that make sense under GAAP but are “nightmares” that will cost a tremendous amount of money on the tax side. He also advises taking HR classes and seeking out risk management and insurance training.

Editor’s note: Remis will present at the 2014 AICPA Hospitality Industry Conference. The conference will be held at the ARIA Resort and Casino in Las Vegas June 18–20 and also will be available virtually.

Chris Baysden ( cbaysden@aicpa.org ) is a JofA senior editor.

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