In less than a year the world has changed significantly. It is understandable that in unprecedented times we must look for business in an entirely different way.
During this time of financial budgeting and reviews, it is important to look deeply at how our teams are preparing for next year.
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In the aftermath of 9/11 and after the Great Recession, there were opportunities within revenue performance teams to pursue growth. Were we successful? There are many statistics that illustrate lackluster performance in times of disruption. Cost of acquisition skyrocketed, average daily rate was more than sluggish, yet at the same time we were at an all-time high in occupancy. Profitability and revenue effectiveness deteriorated significantly as a result.
Profitability is no longer an operational issue as hotels operate at razor-thin levels. It is time to take a harder look at how sales, marketing and revenue management must elevate their level of play to be effective.
What we have found is that there are little to no efficiencies to be gained within operations, leaving us with the question, “How do we become more effective in achieving topline revenue?”
Here are five questions that leaders must ask themselves to ensure they are taking a deep look at what is necessary to be effective in today’s new world:
1. Will your current budgeting strategy be effective in the new economy to meet financial obligations?
After the financial crisis, 9/11 and other economic downturns, we have seen inefficiencies in rate strategies that led to higher cost of acquisitions and less-than-stellar rate recovery. In many cases, some of the same strategy is being used today that was already proven ineffective in the past. Although no one can define what the future looks like, teams may not have relationships with the right customers, and this could lead to a less-than-robust impact in the marketplace.
The current strategy should be vastly different than it has been in the past. Be cognizant of the wait-and-see approach. In conversations with teams there is a tendency to wait for the recovery rather than looking at how to pivot business.
2. Are your teams using the same approach they used in the past?
Within the new economy, we know that what worked in the past won’t work in the future, yet we see people retreating to tactics that elicited less-than-desirable results. We consistently see teams implement a back-to-basics approach because it feels comfortable. In reality, very few know how to equip their marketing, sales and revenue teams to be truly customer-centric.
If leaders don’t know how to pivot or what to pivot to, how will teams know what to do? In many cases, we see sales leaders not sure of how to lead their teams differently and instead they retreat to doing what they already know. Unfortunately, the status quo is a losing strategy.
3. What percentage of time are your sellers focused on selling to third-party intermediaries rather than directly to customers and organizations?
Profitability is always top of mind for all. However, sales and marketing teams may not consider profitability when crafting their revenue strategies, nor how profitable a targeted client actually is. Profitability is not solely an operational concern. In many cases, revenue teams focus their work on catering to the least-profitable customers. In these cases, we find that sales teams are unclear how to market or sell differently.
Sales teams must focus on the consultative sale. If they are selling transactionally, they are selling to product and price. They then compete against online travel agencies, increasing the costs of sale and driving down prices.
4. Do you see your marketing teams creating promotions or investigating the customer buying journey of your most profitable customers?
Like the sales process, marketing teams must be involved much earlier in the customer buying journey. If teams are focused on building promotions or marketing at the point of sale, you are underutilizing what marketing should be doing for the establishment and the asset.
We have seen the rise of OTAs and the cost of acquisition increase four times in recent years. Recently, we have seen an increase of ad spend going to OTAs. This is one of the least-profitable distribution channels, and it ends up building customer loyalty for the OTA instead of the establishment. People get confused, they see marketing’s role as primarily involved in promotions and believe that revenue management can take that responsibility. Promotions are only a small percentage of what marketing should be doing for you, whether you are branded or independent. Revenue management’s role is to manage established demand; It doesn’t create demand. Sales and marketing create demand. Pushing revenue management to do the work of marketing is akin to hiring a plumber to do electrical work.
5. Have you thought about business mix moving forward, and do your teams have the competencies to pivot where you need them to go?
Move away from the meta-segment focus of group and transient segments. Revenue teams should be able to pivot and sell within the most profitable and optimizable segments. Segments aren’t solely owned by one discipline, e.g., revenue management is responsible for retail, sales is responsible for corporate negotiated and group, etc. Look at segments that do have opportunity and position the team around those segments.
We have heard of hotels letting go of group sales teams, given that group business is slow to rebound. However, salespeople should be creating customer relationships in many different segments, not to mention that sales effectiveness goes way beyond just group sales. The issue lies in leadership not knowing how to direct sales in other areas.
One of the last questions you should be asking is, “Do we need a different perspective to help us through a very different time?” What we know is that today’s marketplace is vastly different from last year’s, and much of what we had done in the past will not work today. Bringing outside thinking inside of your organization can make a paramount difference in how you set strategy and achieve results in such a disruptive environment. It is time to look at things completely different than before—use insights and foresights from outside the organization.
Kate Burda, an ISHC member, works alongside organizations to accelerate and achieve greater revenue performance.
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