Hospitality Financial Leadership – The Russians
By David Lund, The Hotel Financial Coach
When heads of state come to visit your hotel they usually make a bit of a show. The Russians are no exception, they even bring their own warship, the KGB and a wad of cash!
The first and previous last time a Russian warship entered San Francisco Bay it was almost 150 years earlier during the American Civil War. The Russians sent two warships to America during the civil war to show the Union their support at a time when the English and France were thought to be supports of the Southern Confederacy.
The Russian Presidents team took over two whole floors of the main building of the hotel. Almost 100 rooms in total for his staff and hangers on. Upon his arrival, the President was greeted in the lobby of the hotel by former secretary of state, George Schultz and the then current California Governor, Arnold Schwarzenegger. The Russian President arrived with a rather long line of military and support staff including a couple of beautiful younger ladies. It was quite a show and I was quite surprised that it all took place in the very public lobby. Usually, these meet and greets are behind closed doors. The typical modus operandi is the head of state arrives at the hotel and he or she is usually greeted by the General Manager and then quickly escorted to their private reception where the politicians and public figures greet them. The show that day was very public and there was no press, just unassuming hotel guests that were now witnessed to the international meet and greet.
The Russians stayed 3 nights and racked up a pretty good bill, just north of $600,000. Most of the bill was for food and beverage with some incredibly lavish items. When groups come to your hotel they quite often ask for credit. In the hotel business, this is a common practice that is one of the hallmarks of our industry. Direct billing, we like to call it and we still do this and it's a direct result of our business being so old and competitive. All hotels would love to stop granting credit but we can't because we would lose a competitive feature. In order to ascertain your group or companies credit worthiness, we use certain credit reporting agencies and also our own sister hotels credit history. Having a group like this in-house can be high risk as it is political in nature and anything can happen. Having no deposit, no credit references and no credit card on file would normally be a potential disaster waiting to happen. When its government, especially a government with the label power of the Russian President you just hold your breath.
Word came after day 2 that the account would be paid upon departure, in cash. This is incredibly unusual for an account of this size. In my entire 30+ plus year career I only had one other group pay their group account in cash at it was $250,000. The Russians had requested a simple receipt for their payment in the form of a hotel folio with the total amount indicated and an embossed stamp that said, PAID. We actually had such a one-handed stamp that looked like a pair of pliers with what would appear to be two large coins on each end. they were not interested in the reams of paper that would normally accompany the master account. All they wanted was this one piece of embossed paper!
On the day of departure, our chief of security informed me that the money would be delivered to the executive office at 3:30 pm. Subsequent to learning this I arranged to have our bank on notice that we would be making a large cash deposit that afternoon and they were ready to receive it. Banks today do not have much cash on hand and the manager was quite intrigued by our call asking if it would be OK to deposit $600,000 in cash. My communication with the Russians was through our hotel's chief of security. He, in turn, would speak with the American secret service officer in charge of the visit who would, in turn, speak with the head Russian presidential security service, their version of the secret service.
Three PM came and went and no money and no word from the Russians. At this point, the President was gone, off on the next leg of his journey to Washington and with him went the delegation of hangers on that stayed in the hotel. I am beginning to feel the burn. Five PM came and went and still no Russians and no money. I knew it, you can smell these a mile away, especially once the customer fails on their commitment, in this instance 3 pm. Nothing but silence permeated from the Russians through our security department and in turn through the secret service. At 6:30 my office phone rang and it was our chief of hotel security. He informed me that word had come that the money would be delivered at 7:30 pm and that he had requested the meeting take place in the executive office. He said the money would be coming from the ship and the KGB would be the one's delivering it. Holly crap! What to do now?
At 7:30 at night having 600k in cash in my hotel is not a good thing. The bank is closed and I must keep this money overnight in the hotel. My imagination quickly gets to work and I can see the Russian underworld at 2 am strong arming my night staff, jumping the desk and quickly getting the cash. We have limited facilities to keep a small amount of cash, it's called the safe and its way to obvious a place to leave the cash. The safe is in the general cashier's area behind the desk and it's a small modern safe. Easily taken by a couple of determined thieves. The hotel has a huge safe that's over 100 years old that we use for safety deposit boxes, the main door to the safe is 6" thick and the safe is 7 feet tall and 4 feet wide, the problem is the safe is locked out, combination and working life long gone. One of the safety deposit boxes could work but popping these boxes is child's play for a gang of determined thieves that know the hotel just got a large payment.
That's it, that's the game they are playing, it's all clear now! Pay in cash, pay late in the day so we cannot get the money to the bank, set it up with their Russian Mafia friends and get all the money! It's so simple and easy. The hotel is such a soft target we don't stand a chance. Putting the night staff in jeopardy is a bad idea. What to do? It's 7:30 and my credit manager and I are waiting in the executive office.
7:45 and still no visitors and suddenly the door to the office opens and it's our chief of security with two heavy set gentlemen in suits and a little old lady who was dressed in a vintage pencil skirt and suit jacket, Audrey Hepburn style. She is the one with money. She comes unescorted from the reception area in the office to the inner office and closes the door. She sits down and opens her purse. The purse is the shape of a small doctor's bag and its vintage Louis Vuitton. She opens the bag and with one hand pulls out $600k, still wrapped in plastic you can see the open end of the package that once held a million. She plunked the $600k on the desk and asked, "how much more". I replied, "39,000". She pulled another smaller wad out and started counting $1,000 bills. She counted to herself and then passed the small stack to me. I passed them to my credit manager and I, in turn, said to the Russian lady, "do you mind if I have a look at the package?" "No, I don't mind, it's yours now…" With that, I examined the package closer and it had 6 stacks of factory bound $1000 dollar bills. I held this package which was barely the size of a box of salt. An incredible site to see.
My credit manager confirmed the count of 39 and I, in turn, handed her the folio which was presented in a hotel letter envelope. She opened it and look at it quickly and said, "Thank you, this is all we need." With that she stood up, nodded her head, I thanked her and she turned and left the office. There were some quick words in Russian to her escorts and then they were gone.
We're left in the office with the money and I have a very strange feeling that this is just too easy, too simple. Who shows up at 7:45 pm at night to pay a hotel bill for the Russian President in cash to the tune of $639,000 dollars, all with $1000 bills and it's all done by a little old lady who is a KGB agent.
Now I need to decide what I do with money. I contemplated taking it home but that would be risky and anything could happen on the way home and back, not to mention that's not something I want in my home. I thought again about the safe, the safety deposit boxes. If we're are going to be hit tonight its way to obvious, they will get the money, it's like you're robbing a house, you're going to look in the top drawer of every dresser. With our business complete I put the money in my bicycle side bag and we left the executive office. The immediate feeling, I had walking down the corridor to our offices was, we could be a target any moment. This is crazy. Once in my office my credit manager was not long getting ready to leave, she asked me what was going to do with the money. I am going to drop in in the night wallet, I said. OK, see you tomorrow. She left and I'm now alone with more than a half a million dollars in brand new, unmarked cash.
I unpacked the plastic and moved the stacks of $100,000 through my hands. I thought about Mexico or a South American country where I could hide out and live life on the lamb. Na! That's crazy, I would be too paranoid. I thought for a moment and then I turned my office chair around and stared at my waste paper container. I reached out and picked it up, it was half full of paper, a couple of coffee cups. I turned it upside down and dumped its contents onto the floor. I placed the cash, all of it, all 639 - $1000 bills in the bottom of the trash can. I then picked up the paper and cups and placed it back in its spot beside my side desk. Having changed into my riding clothes it's now time to go home. Forty blocks across town in the night air feels good. It's down, down down Nob Hill, across the tenderloin and the western addition and then up to Diviz and through NOPA and home. I sleep well. Up at 5:30 am, out the door on my bike at 7:30 and I'm back to work…….. Just another normal day in the hotel business
The Hotel Financial Coach