Cost reduction ideas for the Hotel Steiner

So I promised to come back with a tenuous procurement story following our recent holiday in Austria. Here it is...

I invite you to consider how we might apply the principles of tough cost management to the Hotel Steiner, Obertauern. Let’s look at the main spend categories and examine how we could reduce costs and declare a nice big procurement savings number at the end of the year.

Start with the largest cost area – staff. Their appears to be little use of contingent labour, which given the seasonal nature of the business, must bring some opportunities. But we won't labour this (no pun intended) for today, so let's focus on the true external costs.

Food is the largest. Now it would be clear after just a day in the hotel to anyone that that there are both demand management and cost reduction opportunities. Indeed, as soon as you see the buffet at dinner, you might question why around 20 different oils and vinegars are provided to dress the extensive salads on offer. Think of the stock-holding costs there as well as the chance to aggregate demand and spend and get a better deal on maybe just two or three oils.

And what about the cheese board? Surely it is not necessary to offer around 15 fine cheeses every night – again, a bit of subtle demand management and leverage should yield substantial rewards. That's particularly true as the menu provides 6 courses – and is that really necessary? And at breakfast, no-one will notice if the freshly squeezed orange juice jug disappears – the main juice dispenser offers a decent quality but at half the price. So all in all it seems quite feasible to look at taking 20 or 30% out of food costs without too much effort.

The staff uniforms also appear unnecessarily extravagant – several times a week, they dress in full traditional Austrian dress, which we estimate costs around 5 times as much as simple functional catering workwear from a generic supplier. There are also obvious reductions in specification that can be made to towels, furniture and fittings and the tea served in the spa relaxation room (and should that really be free to guests – a small charge could raise substantial sums over a year)?

You get the drift and by now you have probably picked up the note of sarcasm. The Steiner is a large hotel, with around 100 bedrooms and a 7-figure turnover I estimate, but it is still family owned and run, and I suspect Herr Steiner would have us out of the door within minutes if we came with these cost reduction ideas.

The hotel is superbly run, one of the very best I've stayed in, without being horrendously expensive (it has a 4 Star rating) and has the top rating on Trip Advisor for the resort. And of course it is made by the touches like the amazing cheese board, the free spa (with interesting teas), the staff who look and feel like they are part of the family – that's what brings a very high level of repeat business and I suspect occupancy levels.

Our organizations are obviously not hotels, and the spend areas to which we apply cost management maybe don't have such a direct read-across as this to the ultimate customer and their satisfaction with our product. But I guess the key message is this - inappropriate cost reduction would pretty quickly destroy the Steiner's reputation.

Now that’s not to say cost management isn’t important (Herr Steiner I'm sure does not want to pay more than he could or should for the delicious cheese), but it should not necessarily mean cost reduction. It is about value – even if Gerard Chick points out in his comment here, quite rightly, that value is in itself difficult to define! But as a Steiner guest, you know it when you experience it.

And all of that might also take us back also into the long-running issue of measuring procurement performance of course. But that's for another day...

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