Using EFTE's - Equivalent Full Time Employees
By David Lund Hospitality & Leadership Expert, The Hotel Financial Coach | November 12, 2017
If You Can't Measure It, You Can't Improve It. Management thinker Peter Drucker is often quoted as saying that "you can't manage what you can't measure." Drucker means that you can't know whether or not you are successful unless success is defined and tracked.
In the hotel business payroll is the number one cost. STR recently reported that labor made up 50% of revenues for a sample of over 4,000 hotels of all types and sizes. This should not be even a little bit of a surprise to anyone. Many hotels are well north of the 50% mark. We have all become accustomed to serious REVPAR growth year over year which has taken the bight out of wage and expense increases. But what happens when the REVPAR bubble bursts. We all know it's not a matter of "if" it bursts it's when will it burst. When it does burst not only will REVPAR stop growing there is a 90% chance it's going to go backwards. Like it always has in past cycles. When it happens, it will be devastating to many owners. Overnight your ability to drive revenues will not only stop growing, it will start to shrink. So, what can you do about this inevitability?
The most impactful move you can make in your hotel is to have both hands on the "payroll" steering wheel. I know by what I read that our industry is awestruck by the potential impact of revenue management. And, rightfully so, with the right strategy, people and technology the revman in a growing market can have a huge win. Like the man said, a full tide floats all boats. But what happens when the pressure in the pipe drops and demand evaporates. What cards do we play then?
Hopefully you don't wait for the party to end before you plan and execute your strategy. Having an efficient and reliable way to measure payroll is critical in any business. In hotels, the impact of payroll is amplified considerably and the need to have something you can measure is the key. Without these payroll tools your lost. May I introduce the secret weapon and the star of the show? EFTE's!
Abbreviations.com defines the acronym EFTE as "Equivalent Full Time Employee". I know from my experience that most hotels do not use EFTE's on their daily reporting and the use of EFTE's on their financial statements is not prevalent. The creation and use of this powerful statistic is not difficult. All the information you need, you already have, it's all at your fingertips. You just need to organize it and let it tell you what's going on inside your hotel. Measuring the dollars of payroll in your hotel is very important but understanding productivity is the most powerful tool you have. Getting to understand and measure productivity leads to the comparison of like data, this is where the EFTE is so powerful, it's like a power tool! Many industries use this statistic, and therefore it's not unique to the hotel world.
First off let's define the use of the EFTE. EFTE's measure the number of "equivalent" full time employees. This is where most people get hung up. In the hotel business; we have full time employees, part time employees, salaried employees, hourly employees, unionized employees and even contracted labor. What the EFTE calculation lets you see is what's the total of these pieces of our hotel labor by area, department and in total. It also allows you to see the same information for a day, month or year in a comparable way. This is very useful and once you get started with EFTE's you're going to be hooked.