Arthur Lupashko, the founder of the Ribas Hotels Group, the hotel and restaurant complex management company, speaks out about the complexities of the hotel operator's work and gives some advice for entrepreneurs-beginners in this domain in the author column for Rusbase.
I got into the hotel business accidently
My first project was a small recreation center in Zatoka. As 2012 went on, I was trying to find myself and what will be best for me. I graduated from the Odessa State Academy of Civil Engineering and Architecture and received a diploma in civil engineering.
Like many aspiring businessmen, I didn't even think of working in an office. This means, that I was trying to set up my own business a hundred times.
I was most attracted to marketing and sales — that's what I emphasized when I was creating my projects. And I still believe that a modern CEO or founder should be an expert in sales and negotiations.
The business will stand firm on these three fundamental elements:
Accordingly, these three areas are forcing the business owner to be like a duck in water. Everything else, to varying degrees, is important as the business develops and within the interests of the entrepreneur himself.
To be honest, I came into this sphere by accident. The owner of the hotel with more than a hundred rooms in the famous resort Zatoka in Odesa region turned to me for assistance.
How I raised the income of the first hotel to $70 thousand a year
I was able to assemble a small team of like-minded people: a booking manager and a marketer (at the time, it was a one-man band. There was no other financial opportunity). And we began to work hard on the marketing strategy and plan for its implementation during the next two years.
This was not yet under the patronage of the management company. At that time it was purely my business activity. At this point, our goal was to increase downloads and revenue.
The task seemed simple enough: a ready-made object in a recognizable resort location, which was 7 years old at that time. But while digging deeper, we realized that all this time his annual income had been unsatisfactory.
My rule at the time was simple: make basic things better.
There was no magic. Just at all points of contact with guests we had to create the maximum convenience:
- Fast enough web-site and social media
- Hiqhquality content
- Online maps with up-to-date information
- Understandable navigation
- Hotel Navigation
- Regulations for reception and staff of a budget hotel in a suburban resort
It was only after building a quality basic service that we began to fill the emotional component: I added animation for children and adults, greetings and farewell letters for guests, desserts on departure and other small pleasures.
We invested no more than $5,000 in marketing, standardization and emotional filling of the hotel. And during the first year we made $70,000 income. At that time, our commission was 30% of our profits.
I realized that I knew almost nothing about this area and decided to correct it.
This is how my ‘romance’ with the hotel sphere began. As I got to know the segment more deeply, I realized that I knew almost nothing compared to my European and American counterparts, for example. And it needed to be fixed immediately. I realized: I have to invest in myself.
My first goal was to get to know the experts. I wanted to become their friend and colleague and quickly absorb all the information they could give me. All year long, I went from one conference to another, from one seminar to another. Between them he attended various trainings. This is how I came across some useful acquaintances.
My friends were pleased to share important and relevant information and contacts. So, in just a year, I gained the practical skills and numerous acquaintances that helped me to find and recruit the best people in my team.
The best knowledge and skills have been gained through trials and mistakes. We also got new knowledge through our direct communication and sales channels:
- Participated in exhibitions
- Used printed and outdoor advertising
- We cooperated with railway and bus carriers in our direction
- Held network marketing
- Engaged opinion leaders
- Promoted and advertised the hotel site and with the help of various aggregators
- Tested different booking scenarios
- Self-phoned all guests from existing databases
- Bought databases of neighboring hotels
In this first project, in the first year, we tried different ways, spending small amounts. This helped to realize that it was more profitable in terms of return on investment. Thanks to this experience, we continued to develop and improve our strategy for the next year.
What we are doing is a new niche for Ukraine
In 2013 in Zatoka we took over the management of two neighboring holiday resorts. Under the contract, we have redeemed the management of all the numbers. So, it was the first time, we tried ourselves as a hotel operator.
Our commission was between 20% and 30% of hotel revenue. But this cost included all marketing and booking costs.
At the same time we realized that simply accommodating guests, while not providing worthy service, is detrimental to both us and the hotel. In 2014, we went to Odessa and began to take over the management of the hotel, highlighting the service and, accordingly, the whole management as a mandatory point.
Our services are a new niche for Ukraine and quite widespread in Europe or USA. We have studied materials on business models of foreign companies. Especially I’d recommend reading ‘The New Gold Standard: 5 Leadership Principles for Creating a Legendary Customer Experience Courtesy of the Ritz-Carlton Hotel Company’ and ‘Four Seasons: The Story of a Business Philosophy’.
Sometimes we face difficult tasks
Here are some advises I can give young entrepreneurs:
- Either hire an inexperienced employee and create an expert from him, or hire an expensive professional and require him to accomplish clear goals.
Tertium non datur. In both cases, much depends on you. Mentoring is also a job, and setting clear and measurable goals is a skill you need to develop. A developing company should always resort to one of these two options.
- First give and only then take.
Many aspiring entrepreneurs eagerly sell their services, extolling their expertise. It's not interesting to anyone. Always give test period, samplers, tastings and so on. And, of course, any communication with partners and customers is built solely on its benefit from working with you.
- Count the money.
As I wrote above: one of the fundamental elements on which a successful business stands is finance. Clear financial control and accounting of your money flow, analytics and forecasting are what will either make you rich or ruin your business.
Rockefeller and Rothschild came up with a proverb ‘Thread off the world shirt for naked’. They claimed in their autobiographies that the finance department is the heart of the business and the money is its blood. Partly, they are right.
As a result, we opened our aparthotel
These were our very first steps for integrating the management. And at the same time we launched our aparthotel. In the heart of Odessa, on the main street, Deribasovskaya, we’ve opened hospitable doors of Ribas. $300,000 was spent on the purchase of the premises, and another $60,000 was needed to repair and to purchase the equipment we needed. In time, it took for about six months.
I recommend to pay attention to this sphere, because today there are perfect conditions for launching such projects. Many developers offer to buy a floor in new homes by installments up to 3 years. And the moratorium on audits, which has been in force in Ukraine since 2014 and continues every year, provides a great opportunity to learn, make mistakes and not be afraid of business-deadly audits and fines.
The government is not helping to grow the business. But the fact that today it does not interfere with his news is great. According to our research, hotel real estate is the most profitable of all types (10-12% per annum versus 5-6% for residential, 7-9% commercial and office).
The project should be commissioned by experienced architects and hoteliers. Working together gives birth to bright hotel products that have maximum profitability, efficient use of each square meter, cost savings when choosing equipment, furniture and other contractors. We had projects like City Hotel Bortoli, Hostel Friday and Business Hotel Wall Street.
The annual income from our projects is more than 150 million UAH.
Currently, the Ribas Hotels Group manages 24 hotel facilities and 1 sanatorium. The room fund of all hotels, recreation centers, hotels and sanatoriums is 2192 rooms. The total annual revenue from our projects amounted to 150 million UAH.
Before the season, most of the time we prepare. I mean full planning, budgeting and marketing plan. All risks must always be spelled out and foreseen.
When discussing all possible nuances and difficult situations, the owner or director is aware that the management company has prepared a small ‘airbag’, communicated the risks and discussed together how to solve a particular problem.
Never trade. It is best to have the patience and make the most of what is guaranteed to lead you to the goal.
I just make a to-do list for the next day and figure out which ones will lead me to the desired result.
Delegate what you can, remove excess, and most importantly, leave. I am still learning to give away some of my tasks and try not to be ‘sprayed’ on small problems that can be solved, for example, by a hotel manager.
The net profit increase of the company managing the Ribas Hotels Group for the year was + 540%. We invest them in further development.
At the moment, we have begun an active preparation for the new season: reviewing the old and learning new advertising tools, because (let's not be sly) advertising really plays an important role in business.