Cynthia and the Rate Floor

Cynthia was a front desk supervisor at a 137-room airport hotel. Her GM was the most likable guy on the property — donuts for the day shift, pizza for the night shift, remembered every guest's kid by name.

He was also stealing. Not from the cash drawer. Through a rate code.

Then one Tuesday morning at 7:14, an email landed in Cynthia's inbox that was never supposed to reach her. What she did next changed her career, ended his, and cost the property somewhere north of $700,000 it will never get back.

This week's story is about rate floors, comp controls, and the boring daily reports that catch a problem when it's one rate code old — not three years old. Because here's the thing about a rate floor: nobody is below it by accident.

Cynthia got the email at seven-fourteen on a Tuesday morning in March of 2018, and three months later she had a different job, two of her coworkers were no longer employed, the GM she had worked under for three years was in the middle of cutting a settlement check, and the property she had just left was on a brand performance plan. None of that was on her mind that Tuesday morning. What was on her mind was whether she was going to open the email.

Let me back up.

She was twenty-eight years old. Front desk supervisor at a one-hundred-and-thirty-seven room limited-service hotel near an airport in a mid-size city in the South. The property had a flag I am not going to name, which is funny, because by the end of this story everybody who works in that flag in that region knew exactly which hotel I was talking about. She had started as a front desk associate at twenty-two. She was good with guests, fast on the system, and unflappable. Three GMs had come through the property in her time. The third one was Rodney.

Rodney had arrived in 2015 with what he called his “relationship hospitality” pitch. He was forty-eight years old, a glad-hander, the kind of GM who brought donuts to the day shift and pizza to the night shift and remembered the names of every guest’s kid. The team loved him. The owner, who lived six hundred miles away and ran several other small businesses, loved him too. The first quarterly P&L Rodney delivered was the best the property had seen in years. The second was even better. The third dropped a little, but Rodney explained that they were “investing in the relationship base,” and the owner accepted it.

The relationship base, as it turned out, was a rate code in the PMS called RDFRD, which stood for “Rodney Friend Discount.” Anyone Rodney decided was a friend could stay at the property for fifty-nine to seventy-nine dollars a night. The published rate at the time was running between one hundred and fifty-nine and one hundred and eighty-nine. Friends, in Rodney’s world, included a regional sales rep at a nearby car dealership, the owner of three local restaurants, the manager of a small landscaping company that did the property’s grounds, a regional director at a competing brand, and a man who owned a small tour wholesaler an hour up the highway called Sunset Getaways. The friend rate ran roughly forty to sixty room nights a month. Sometimes more in shoulder season.

In exchange, Rodney’s car was serviced for free at the dealership. Rodney ate at the three restaurants, with his wife and his kids and sometimes his guests, and the bill never came. Rodney’s lawn was mowed every other Tuesday. Rodney played golf on a private course that ordinarily had a five-figure initiation fee. The regional director at the competing brand was, separately, paying Rodney’s wife in cash at her hair salon for steered business. And Sunset Getaways, the tour wholesaler, was running weekend packages at the property at eighty-nine dollars a room, paying Rodney directly in cash, never going through the PMS as a corporate account or an OTA channel. About four thousand five hundred dollars a month, in cash, on the way to nowhere recorded.

Cynthia had been told by Rodney, the first week he was there, that the RDFRD rate was “GM authorized” and not to ask questions about it. He had said the same thing to the other supervisors. He had said it casually and warmly. He was the kind of person who was easy to believe. For eighteen months Cynthia did her job, watched RDFRD reservations come in and go out, and did not think too hard about it. She told herself she had been told it was authorized. She told herself it was not her problem. She told herself a lot of things.

In March of 2018 the brand rolled out a new tool. It was called, by no committee that had ever named anything well, the RevPAR Diagnostic Bulletin, and it was an automated weekly email comparing each property’s RevPAR to its local comp set. Because of a recent change to the property’s distribution list, three people received that email instead of the usual one. The GM. The director of sales. And, accidentally, the front desk supervisor on the morning shift, which that month was Cynthia.

Cynthia got the email at seven-fourteen on a Tuesday. She poured a coffee. She opened it.

Her property was running fourteen percentage points below comp set on weekday business and twenty-two points below on weekends.

Cynthia knew what RevPAR was. Every front desk supervisor knows what RevPAR is, even the ones who say they don’t. She did the math in her head, in a way you do not need to be a controller to do. One hundred and thirty-seven rooms, fourteen points down, on average. That was a number with three commas in it before the year was out.

She did not say anything to anyone that day. She finished her shift. She went home. She did not sleep well. The next morning she came in early and pulled a stack of reports she had never pulled before. Specifically, she pulled the Night Audit Exception Report, which is the report that lists every rate sold below the published rate floor, every comp, and every adjustment over twenty-five dollars. Section Five of the manual that corporate had quietly distributed to property leadership the year before said the GM was supposed to review that report every morning before nine. Cynthia had never seen Rodney touch it. The report from the previous ninety days, when she finally printed it, was a stack of paper as thick as a paperback novel. The RDFRD code was on almost every page.

That was the moment the story turned.

Cynthia did not call a hotline. She did not write an anonymous letter. What she did, that Wednesday afternoon, was email the regional director of operations directly, a woman named Patricia she had met once at a brand conference and remembered as someone who looked you in the eye when she shook your hand. Cynthia attached three pages of the report. She wrote four sentences. She asked Patricia if she could come down.

Patricia drove down the next day.

She did not bring lawyers. She brought a regional revenue manager and a regional operations director, the two people in her organization who could read the situation in real time. They sat in the back office and pulled, in this order: the Rate Authorization Log (empty), the Comp Authorization Forms (none on file), the Monthly Comp Log (also empty), the Reservation Audit Log (intermittent), the Night Audit Exception Reports (overflowing), and the PMS Daily Adjustment Report for the past ninety days (interesting reading). They asked the brand’s central revenue team to pull the source coding for every Sunset Getaways stay over the past twelve months. The Sunset Getaways stays did not exist as a corporate account anywhere in the brand’s system. They had been booked through the PMS only, at the RDFRD rate, with no source code, or with the wrong one.

By Friday, Rodney had been suspended. By the next Friday, he had confessed to most of it. The cash piece — the money that came from Sunset Getaways every month — took longer, because cash is hard to prove unless somebody else admits to handing it over. The wholesaler eventually did, in writing, in exchange for being able to continue doing legitimate business with the brand at other properties. The total recoverable damages the property eventually settled with Rodney for came to about forty-two thousand dollars, paid over four years. The far bigger number, the suppressed RevPAR — the rooms sold cheap that should have been sold at rate, the demand that walked across the street because the property’s ADR was where it was — was money the property would never see again. That number was somewhere north of seven hundred thousand for the year, and you cannot send a letter to recover it.

Two of Cynthia’s coworkers were let go for actively booking RDFRD stays after they had been told what the code really was. The director of sales, who had not actively participated but had been on the same email distribution as Rodney for three years, took a voluntary separation. The brand put the property on a six-month performance plan, which is a polite way of saying the next GM was on a short leash.

Cynthia was offered the assistant general manager role at a sister property in a city about two hours up the interstate. She accepted. She is a GM herself now.

Here is what Section Five is really about.

It is not about the dramatic comp scheme at the center of this story. The dramatic comp scheme is the symptom. Section Five is about the daily, almost boring, deeply protective rituals at the front desk that catch a problem when it is one rate code old, not three years old. The Rate Authorization Log signed by the GM at the start of every month, with the rate floor written in. The Night Audit Exception Report the GM reads every morning before nine — a piece of paper, by the way, not a glance at a screen on the way to a meeting. The Comp Authorization Form completed for every comp before or at check-in, which would have rendered Rodney’s friends impossible. The Monthly Comp Log reviewed by the owner at the financial review. The Reservation Audit Log that catches a missing or wrong source code while the booking is still warm. The PMS Daily Adjustment Report that lists every change to a folio after the fact and makes the front desk’s keyboard a little less anonymous.

And one more thing while I have you. The brand’s comp set comparison — RevPAR Diagnostic Bulletin or whatever your flag calls it this year — is one of the best free internal control tools in this business. If your property is running fourteen points below comp set on weekdays, the question is not whether something is wrong. The question is what kind of wrong it is. There are honest answers to that question. There are also very dishonest ones. You will not find out which one applies to your property unless you open the email.

Cynthia opened the email at seven-fourteen on a Tuesday. The rest is just a long story about what happened next.

The thing about a rate floor is that nobody is below it by accident.

About This Book and the Manual Behind It

Hotel Franchisees' Guide to Everyday Internal Controls is a companion to the full-service Hotel Financial Coach Finance & Accounting Policies Manual — it has twenty sections, one hundred and forty-four numbered policies, and roughly fifty supporting forms, all built on USALI, U.S. GAAP, and the COSO internal control framework.

The manual is the working document. The book is the way you actually understand it — one chapter per section, one true story per chapter, each one walking through what goes wrong at a real property when the controls in that section are missing. Cash. Accounts receivable. Payroll. Night audit. PCI. Brand compliance. All twenty.

The operating arm of the manual is the Internal Control Review — a twelve-month rotating self-audit that puts every section on a calendar and keeps it there. The First Hundred Days Implementation Checklist gets your property from day one to the start of your first ICR rotation, in five phases, with a signed artifact at every milestone.

The central idea is simple: most of what goes wrong at a hotel goes wrong because nobody was looking at a calendar. The manual is the calendar made permanent. The ICR is the calendar made annual. The book is the calendar made memorable.

If any of this sounds like your property, send me an email. I'm happy to point you in the right direction.