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Performance-based Sales Compensation Strategies
for the Hospitality Sales Professional
By Tory Parks
Director of Sales & Marketing for Del Lago Resort, a Benchmark Hospitality Property
February 2003

Most hospitality sales professionals earn a straight salary with a small to moderate incentive compensation program. Commissions or bonuses do not make up a large percentage of their overall compensation package. I believe this has been to the industry's detriment.  Good salespeople perform better when given a reward for their performance.  The rewards for those who rise to the challenge should be commensurate with their efforts and unfortunately, incentiveless packages encourage mediocrity.  Shifting to more aggressive incentive strategies will challenge your sales staff to perform at a higher level, resulting in increased revenues for both the property and the sales team. 

Every employee, regardless of title, feels that they should be rewarded justly for the amount of work they put into a job.  A compensation plan that offers employees the opportunity to control their level of income in relation to their level of effort creates a highly productive workforce.  James Coumbe, a sales representative from Del Lago Resort sums it up nicely.  "The beauty of a performance based incentive plan is that if one works hard enough, one can surpass the market average.  That's what's great about being in sales, you have a direct impact upon your income based on the amount of energy and commitment you are willing to put in.  You produce, you get paid.  My opinion is that under a straight base or a limited incentive plan, your control of your income dwindles, which may lead to complacency affecting the bottom-line of the property but not that of an individual sales person."    

Importance of incentives 

Let's face it:  Financial compensation is the most widely used means of motivating employees.  Whether compensation equates to commissions, bonuses, paid vacations, gifts, stock options, etc., incentives play a major role in the sales team's motivational environment. 

According to Stanton/Buskirk/Spiro, authors of Management of a Sales Force, "A sales force cannot be considered well managed unless there is a well-developed and well-administered compensation plan. 

The pay plan is important because of its impact on the sales force, the company and customer relations."  Further, based on a team perspective, a strong and fair incentive plan motivates salespeople without creating an adversarial environment.  When every team member has the potential to win, then one person's victory does not eliminate the ability for others to win the same rewards.

So why has the hospitality industry shied away from incorporating some of the more performance-based compensation programs that have seen great successes in the technology, pharmaceutical and telecommunications industries?  If management is looking to minimize their capital outlay by keeping sales expenses down, it could be a reluctance to fund the incentive plan itself.  However, a well-defined compensation plan can accelerate sales to a point that they surpass the plan's intrinsic costs.  

How to design an effective plan 

Jay R. Schuster and Patricia Zinghaim conducted a series of surveys that showed that "companies that perform best typically integrate their sales compensation plans with their organizational goals."  So the first step in creating a strategic compensation plan is to figure out what your property's goals are.  Increasing occupancy levels?  Securing new accounts?  Developing a new territory or changing the mix of business staying at your property?  

If your property already has a plan that is not garnering the results you are looking for, first examine your original objectives.  Is it possible that your existing plan was not designed to meet your objectives to begin with?  Then ask yourself if your plan is competitive with what other properties are offering and do you have buy-in from your sales team?  After those questions have been answered it may be apparent that your plan needs some adjusting, but doesn't necessarily require a complete overhaul. 

Designing a plan that meets the needs of both management and the sales team requires a series of compromises.  In order to keep employees motivated, an effective plan must balance the benefits of a guaranteed steady income with the power of incentive income.  If you set the base salary too high, you may encourage complacency.  If you set the base salary too low, then your sales team may begin to worry about how to meet living expenses during off-seasons. 

The ultimate goal is to eliminate order taking and encourage aggressive sales.  At Benchmark Hospitality we are initiating a performance-based approach to sales compensation.  In fact, a proposed highly incentivized compensation program is scheduled to roll out in 2003.  The plan is designed to fairly compensate the property sales personnel and is based upon the performance of the individual, the team and the total property budgeted revenue achieved.  It incorporates a base salary, a commission on business booked and annual incentive potential for both the individual and the team.  "Higher production levels equal higher pay.  Yet should their production levels be seasonal based on their market, our sales team can still count on a consistent amount of monthly income and at the same time have the potential for a significant incentive check," explains Jack Schmidt, vice president of sales and marketing at Benchmark Hospitality.

As all business is not created equal, different types of bookings result in higher realized revenues for the property therefore a good compensation plan should be structured to pay out accordingly.  One way is to create a value rating system in which business booked with a greater return to the property results in higher commissions paid.   Examples of variables to consider include need periods, patterns, rate, etc.  The goal is to maximize occupancy levels based upon the unique needs of the individual property.  This hierarchical structure motivates employees to seek out the type of business that is most profitable for the company.  It should also be noted that a good plan is also flexible because what works for one property may not work at the next.  The idea is to create a plan that can change as conditions warrant, without having to change the basic plan itself.

For a plan to be successful, it must be well received. Hence employee buy-in can often make or break the best compensation plans.  Collective ownership ensures acceptance, fosters teamwork rather than competition, and contributes to a strongly motivational atmosphere.  Additionally, a good plan must be simple for the sales team to understand and the property to administer. "Fairness can be ensured by striving to base the plan on measurable factors that are controllable by the sales team," explains Management of a Sales Force authors.
  
Good incentives = good employees 

An attractive compensation plan is an extremely powerful recruiting tool. Strong plans help build dream sales teams by attracting the caliber of employees desired.  Above average performers seek out companies at which they can excel.  

Additionally, a strong plan assists in strengthening tenure.  Under a performance based compensation program, there is a significant difference in the total incomes of the top performers since they understand that if they sell more, they can earn more.  If they feel that their earning potential is greatest at your property, that's where they'll stay.
    
Upon implementing alternative incentive programs, properties will quickly discover which employees have the skills necessary to be effective salespeople.  Top performers will be excited about the opportunity to increase their earning potential.  Marginal and poor performers will naturally be much less enthusiastic about the change.  

Why the industry needs to change 

In order for properties to stay competitive, we'll need to be able to adapt our selling strategies to meet market conditions.  A highly competitive selling environment calls for highly motivated salespeople.  Performance-based incentive strategies encourage top performers to rise to the challenge.  Incentive plans are future focused, which keeps the sales team selling.  A strong plan impacts not only the sales team, but the company's bottom line and customer satisfaction. 

At Del Lago Resort, history has shown a performance based incentive plan enhances motivation and produces results.  In today's marketplace, there is no room for complacency.



Tory Parks is director of sales & marketing for Benchmark Hospitality at Del Lago Resort, a 300-acre self-contained retreat nestled along the shores of Lake
Conroe.  The all-suite resort is an IACC approved conference center and features more than 300 guest accommodations, including the 21-story Tower, 35 Golf
Cottages and 13 Lakeside Villas.  For additional information call 1-877-627-2414 or email Tory Parks at Tory@dellago.com.

Benchmark Hospitality, an international hospitality management company based in The Woodlands, Texas, operates luxury resorts, hotels, and conference
centers throughout the United States, in Canada, Japan, and Southeast Asia.  For locations of Benchmark Hospitality properties and for additional information,
visit Benchmark's Web site at www.benchmarkhospitality.com.
 

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Contact:
Tory Parks
Director of Sales & Marketing
Benchmark Hospitality
Del Lago Resort
877-627-2414
www.dellago.com


 
Also See Never Underestimate the Power of PR / Tory Parks / December 2002
Sales & Conference Planning - Teaming up to Maximize Sales / Oct 2002
Safety & Security Issues Surrounding MOD Programs / Aug 2002


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