The mindset around digital transformation in hospitality is shifting rapidly from acceptance to acceleration. Meeting with CFOs and finance leaders in the industry often, it’s clear that everyone is on board with the importance of modernization and that the cloud is where hospitality organizations are heading.
Likewise, we’re seeing eagerness to move quickly, especially as declines in discretionary spending compound existing economic challenges such as higher costs of living, inflationary pressures, and increased energy costs.
For CFOs, getting to insights faster remains key to helping the business respond to change while keeping tight control over increasing costs. Because as every hospitality CFO knows all too well — it might not be about finance, but it’s always about finance. Whether food and labor costs spike, or hotel occupancy rates decline, the impact of any unforeseen consequence or unexpected cost will flow directly to the bottom line.
This makes income statement optimization, i.e., improving the bottom line by way of increasing revenue and decreasing operating expenses, top priority for hospitality CFOs — who we see achieving this successfully via unified data, modern technology architectures, financial intelligence, and an appetite for creativity and change.
Unifying financial and operational data to untap greater cost savings
In an always-on industry, hospitality finance leaders remain under continuous pressure to anticipate and stay on top of business changes. As hospitality organizations look to abate tightening economic pressures, a closer partnership is forming between CFOs and their operational and HR counterparts. Because while labor or employee compensation decisions may be traditionally perceived as an HR or operations focus, the reality is that these internal business processes are far from linear.
For example, hiring, onboarding, and attrition have historically been treated as a cost of doing business, yet labor is often one of the highest costs for hospitality companies. Scheduling gaps and overtime costs alone can quickly snowball into large revenue losses for a company, with CoreSight Research finding that a third of hospitality organizations say poor forecasting and scheduling led to revenue losses of 10% or greater.
To this end, we’re seeing CFOs look across the business more holistically, and in collaboration with their business-unit peers, closely analyze the returns on employee investments and workforce spend. This is also where finance teams with a common data model for finance, operational, and workforce gain a significant advantage by better controlling labor costs and elevating finance-led decision making among HR and operations teams.
Driving faster insights with automation and financial intelligence
Driving faster insights via finance automation and intelligence is another key priority for CFOs — perhaps the biggest obstacle for organizations still running on legacy ERP systems. Inherently slow and rigid, these outdated architectures offer little, if any, visibility into other operational tools and data sources. According to the Lodging Technology Study 2022, nearly half of hospitality organizations say difficulty integrating with legacy systems is their top technology challenge.
In this environment, digital transformation and finance agility is anything but easy for finance teams. Extracting key operational insights from disparate tools is not only tedious in nature but it can push financial and reporting cycles out by days. Quickly changing business dynamics add more salt to the wound, making information out of date by the time it’s distributed. In other words: the antithesis of financial intelligence (and efficiency!).
This is a big reason why the shift toward modernization spells good news for hospitality finance teams. As more hospitality organizations embrace modern enterprise platforms and open architectures, finance will gain a unified data foundation for finance transformation and intelligence.
Amy Smith, chief financial officer of Drury Hotels, a hotel chain with over 150 locations in 26 states, shared that building a digital foundation with Workday lowered the barriers to finance transformation for the organization, making everything from scenario planning to cash-flow forecasting to cost allocation much easier. She said:
We have an ability to set everything as assumptions and then turn around and drive formulas for anything that’s variable on those assumptions.
Financial intelligence — by way of machine learning and artificial intelligence — further charts the course forward for hospitality CFOs. The focus of finance has always been backwards, looking to the past to gather business information and historical data, and then generating financial and operational statements that reflect business results from days, weeks, or months prior. Finance tools with advanced analytics shift the finance function to a real-time or even predictive accounting model, thus shifting the focus of finance to the future.
In hospitality, applying machine learning and artificial intelligence speeds and improves outcomes across all aspects of the finance cycle:
- data retrieval becomes automated and guided;
- reconciliations identify and flag exceptions and journal entry anomalies, as well as perform predictive matching in accounts payable and receivable;
- prescriptive recommendations, based on data trends, are served up automatically for suppliers, products, and expenses.
What this ultimately means for finance is less time spent on transaction processing in lieu of more capacity for value-add and strategic initiatives, such as evaluating the profitability of revenue or ancillary streams and closely supporting new market expansions.
Combining the right digital tools with a flexible mindset in finance
Any shift in finance tools or operational processes can introduce some initial uncertainty among finance teams. To get the most value out of modern technology, and to help their finance teams embrace this change, CFOs, controllers, and financial leaders must foster and encourage an open, flexible mindset among their teams.
While the words ’creative’, ’finance’, and ‘accounting’ weren’t often used in the same sentence in the past, a creative mindset and appetite for change has become an expectation for finance as hospitality organizations look to move and shift quickly. When this creative finance mindset combines with the right digital technology, the advantages for speed and scale are invaluable.
Consider the example of Shake Shack, which has over 300 stores around the world and uses various Workday products, including Financial Management, Human Capital Management and Payroll, to support its rapid growth and move quicker.
Shake Shack departments run budget and forecast cycles within Workday Adaptive Planning, which lets the company more accurately and efficiently forecast revenue and spending, depreciate equipment, and expedite the budget cycle. The tool has proved invaluable regarding the power of information to help make better decisions.
The technology has also been invaluable in speeding up the creation of board reports. Shake Shack’s internal audit team now has searchable access to all financial data through Workday, and so can quickly produce audit trails directly from the system. Jessica Kast, senior manager of Internal Audit at Shake Shack, says:
Before, we would have to ask people to give us account balances and show us the journal entries. Now, with Workday, we can see everything we need without asking other people to provide the information.
For hospitality CFOs, the traditional mindset of ’Well, we still get it done’ will no longer suffice in the years ahead as new industry competition emerges and existing competitors embrace modernization and digital tools. This requires a mindset shift to getting it done faster, more accurately, at lower costs, and in real time — something that can only be achieved with a unified business model, finance automation, and financial intelligence.