Benchmarking operation and maintenance costs of luxury hotels

Purpose – Tourism is a pillar of the service industries in Hong Kong. Its growth entails quality hotel accommodations where cost-effective operation and maintenance (O&M) of their facilities are essential. A benchmarking study was carried out on ten luxury hotels with the aim of identifying the significance and performance of various O&M cost elements. Design/methodology/approach – A benchmarking club was set up for the practitioners participating in the study. A template was piloted and then refined for use in collecting data, which include the hotels' characteristics, their expenditures on maintenance and project works, in-house manpower and payroll, contract maintenance costs, and utilities costs and consumptions. Findings – Energy cost dominates the O&M expenditure of hotels. The cost for maintaining lifts and escalators constitutes a major part of contract maintenance costs. Larger hotels can enjoy a lower unit O&M cost. Research limitations/implications – Quality, age and occupancy rate of hotels are factors which warrant further work to investigate their effects on O&M costs. It is also necessary to study what cost-sensitive parameters are appropriate for use in normalising the costs of different trades of O&M work. Practical implications – It has been shown how a benchmarking curve can be constructed for identifying the performance of utilities cost. This approach can be taken to develop similar curves for benchmarking other cost elements, as well as other aspects including processes and values of O&M works. Originality/value – Sensitive O&M cost data are seldom disclosed. The study has overcome the difficulties with their collection and the cost benchmarks presented are useful references for hotel practitioners.