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Lessons from the Field
A Common Sense Approach to Success in the Hospitality Industry
By Dr. John Hogan, CHA MHS CHE, August 4, 2009

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Hotel Common Sense –

Effective Sales Management: Short and Long-term Planning,
Forecasting, and  Expense Budgeting
Part 1 of 2


By Dr. John Hogan, CHE CHA MHS, August 4, 2009

When managers make decisions, they think forward and backward whether they know it or not. Thinking backward means looking for patterns, linking events, and searching for metaphors that explain causes and effects. Thinking forward entails weighing variables, making calculations, and preparing alternative plans. You will think backward well if you use more than one metaphor to describe a situation, resist the temptation to infer a cause from just one clue, and sometimes look for unexpected causes to explain effects…………. 1

“In complex situations, we may rely too heavily on planning and forecasting and underestimate the importance of random factors in the environment. That reliance can also lead to delusions of control.
        Hillel J. Einhorn (1941-1987) Pioneering scholar in behavioral decision research. 
In uncertain economies such as we are facing globally today, performing long-term budget planning is often viewed as a luxury, rather than as an essential business practice.  In almost every kind of economy, however, the need to anticipate financial boundaries is essential to ongoing business success.   We need to know where we are going and why, be it to greater successes or to overcoming challenges.

Understanding and monitoring the inflow and outflow of cash must be a top priority for every hospitality business owner, operations manager and sales team member.   Many sales teams are not given enough information on the overall business cycles and needs to allow them to be as engaged and effective as possible. Planning ahead for seasonal fluctuations and unexpected emergencies allows for dealing with challenges and at least partially reduces stress. 

In a down economy, the potential for a shortfall in business resulting in diminished cash flow is of real concern. The ability to deal with this underperformance in advance will definitely help address the challenge.

The need for thoughtful and responsive planning is more significant than ever and the quote from Einhorn says it all – it takes conscientious efforts to address the situation and begin to turn the state of affairs around.

This 2 part series is very direct and applies common sense in approach. 

  • The first part addresses Mapping out Your Sales Plan and Preparing and Revising Your Sales Forecast.
  • The second will examine Aligning Your Expense Budget With Your Forecast and Sales Plan  and Practical Approaches to Opportunities in the Market.
While these steps may appear very basic and uncomplicated, I have found they are often overlooked by both newcomers and at times by experienced staff who feel they need to focus more on the latest technology marketing and unfortunately do not pay enough attention to the fundamentals.

It's not enough these days to hire a salesperson and say: "Get out there and sell."  As an industry and in each particular hospitality business, we must work to do a better job communicating, developing, training, motivating, planning, organizing, directing and controlling.   This applies to both people and process.

Engage in these sales guiding principles when soliciting/booking business and servicing existing accounts:

1.  Mapping out Your Sales Plan

A.  Acquire and use good selling knowledge.  There are a series of fundamental questions that are essential for long term success. These include details on finding out who your customers are: 

  • Their points of origin or where are they coming from – we can identify this by the reservation, the registration card, our PMS system or other sources.  This information can be essential to measuring the effectiveness of a marketing campaign or to quantify changing demographics.
  • How did they come to select your property? Were you their first choice? Were they referred by an area business, another hotel, or because their 1st choice was not available? Are the loyalty programs encouraging them to choose your location?
  • Why do they stay at your property ? Are they there for a meeting, an overnight, a vacation, a reunion, in response to an advertisement?  Your front desk staff can qualify this very important information and the sales team can then use this to update their future forecasts and proactive planning
  • How long do they stay ?  Obviously multiple nights are desirable if the rate and revenue are properly set .
  • How much do they spend?  Total revenue is also a contributing factor to useful knowledge.
All of this data should help to focus your sales effort.  Using the above information can also help you in understanding and addressing cash flow.

Another fundamental is Attentiveness To Selling Costs.  In any business, spending more than you take in, of course, is dangerous. Cost effectiveness in selling for a hotel is very important. As total sales expenditures start to creep up, you must continue to expect a greater return from your sales effort. Budgeting for sales and monitoring the sales budget against results are essential.   This means pricing properly, including the costs for loyalty programs and measuring the effectiveness of special advertising or marketing efforts.

B.  Plan A Good Market Mix.   Which there are clear differences in markets, there are also overlapping ones, such as a corporate client today that may be a vacationer tomorrow or their company might have extended stay needs that your hotel can serve.   It is extremely difficult to be all things to all people all the time, which means knowing your proper customer base.  While one does not want to turn away potential revenue or clients , understanding the mix of business reflects how much of what type of business you're doing. 

Look at your records and daily reports and assess the following: What percentage of my total room sales comes

  • from meetings at your hotel or nearby centers ?
  • from youth groups or sports related activities ?
  • from the transportation center (airport, bus, cruise lines, trains, etc) ?
  • from seniors and why?
  • from the brand reservation center and at what rates and plans?
  • from the nearby community college, university, large high school?
  • from the medical center or offices?
  • from the chamber of commerce or convention/visitors’ bureau activities?
  • from transient business, walk in guests and other categories?
Your daily reports should have this or similar information documented.  If you do not, you are missing a major piece of the sales and marketing process. 

Now assuming you do have the above information and after you review the past 3-6 months to accurately see trends, what decisions do you need to make in your selling activities?   What mix of business would be most profitable?  Which mix can you actually obtain?  What changes need to be made in your selling activities?

C.  Innovate - try something new.  Remember: most successful entrepreneurs would not be where they are today if they didn't take a chance and try new things. Come up with fresh ideas to promote business and don't be afraid to put them into action. 

  • Focus on People. You want and need sales professionals who are sincere, believable, down-to-earth, friendly, committed, well dressed and well mannered; in other words, individuals who will represent your property well.   In an effective sales mind-set, the common ground is a commitment to anticipate guest wants and needs,  and to engage every associate from the owner to the general manager to all guest contact staff to understand the shared accountability for contributing to the overall hotel sales effort.
  • Develop new sales techniques to book more rooms and new proposals to land more group business. Every veteran hotelier can recall in their career examples of hotel sales teams that were very creative and innovative.  The brands, markets, cities, and specific approaches were different but the spirit of these creative people is what contributed to their success. Realize that only a percentage of the  new ideas will fully work, but that percentage will contribute to the hotel’s overall success.   A dynamic sales culture is an atmosphere where all guest contact staff proactively seek to service guests’ needs, which will produce satisfied customers and likely revenue improvement for the hotel. 
  • Don’t ignore technology – embrace it!   Almost all branded hotels have systems that heavily address online bookings and promotions, but they require the hotels to willingly support the programs.  As most brands today genuinely are focusing on everyone’s success (or in some cases, survival), there is a greater sense of partnership than at some times in past relationships within the industry. If you are an independent, there are many services available to assist you, including through your state, provincial or national hospitality associations.


2.  Preparing and Revising Your Sales Forecast

Hillel J. Einhorn, whose quote was in the opening section, was not a hotelier but a scholar who researched how managers made decisions.    Occupancy and rate continue to stagnate in many locations globally, yet we must address both the specific and random factors Einhorn mentioned.

A.  Know Your Competition and specifically your direct competitors.   I continue to read and hear more than one brand CEO warn that  there are “going to be more empty rooms at the hotel across the street from you and they are going to be scouting your customers.”  The current heavily debated discounting by some brands globally is another challenge to be addressed, but this is a personal battle fought at individual locations. 
A thorough knowledge of the other properties near you and that compete with you can help you size up your property and determine the areas in which you can compete the best, whether it is location, price, size, product, service or amenities. The idea, of course, is to sell your positives and to expand your market share.
 

B.  Research and qualify your multiple price policy.  Selective discounting has its place in our industry. Hotels have been doing it for years, with special off-season, corporate, group, senior citizen and military rates, among others. 

  • Do you know which special rates are generating business for you? A periodic review of all your rates will help you establish the multiple-rate policy that's right for you. 
  • There are many 3rd party sites that may or may not help your profitability and/or cash flow. If you make the decision to work with a discounter such as Hotels.com, Expedia, Hot-Wire, Orbtiz, Booking Buddy,  PriceLine, Travelocity or the new "hot" service, track your actual demand (rooms used, rooms denied because you were full, rooms declined for reasons of rate, location, etc.) so you can evaluate intelligently the business decision.
  • Determine what your competition is doing by these organizations as well so you can make the correct decision for your hotel.
  • Evaluate what your brand’s programs are contributing to your top and bottom line, if you are part of a system.  Set your prices accordingly and support the programs that help both you and the other members of your system.
C.  Sell Aggressively.  Aggressive and assertive are not synonyms. One means hard hitting and the other confident – in challenging economic times, those professionals in sales must have some of both attributes to book the business. One can be aggressive while still being friendly, credible and sincere. Being tenacious, following up and ensuring customer confidence all add up to success. 
  • Pick the low hanging fruit   A Google search of this often-heard term will offer literally dozens of examples of this phrase, including this explanation: “Choose the easy deals or sales.  ” On occasion, a quick boost in your sales and marketing efforts can be to bring someone in with a fresh perspective. This fresh set of eyes can be someone from another department in your hotel or company or a consultant on a short term assignment.  This activity, if executed properly, can solicit suggestions, remove unintentional biases and then choose and implement a number of small action plans that may cost little but show noticeable revenue gains. 
  • Make high-quality Business Contacts And Make Them Work For You. Getting good business contacts is the first step, and making sure they're bringing business into your property the second. Make sure your contacts are frequent users of either the area and/or your property and then ask them to provide you leads.
  • Set Realistic Growth Plans.   Yes, even in down economies, there must be some stretch goals.  These should assess where you where you are today and honestly project where you expect and want to be next year, the year after, and so on.    Group, corporate or any other market segment  may have fallen off from previous years, but there remain ways to maximize potential with better planning, timely follow-up or selective selling based on the information identified in 1C above – planning your market mix. 
FORECASTING STRATEGY: Each month following the close of the previous month,  REFORECAST for the next 90 days and for the month just completed 12 months in advance.  If you just finished June, the factors that supported or weakened the June performance will never be fresher in your mind.  When it is time to create an annual budget, you will be much more comfortable and flexible in your analysis and projections , and very likely more accurate as well.

1 Harvard Business Publishing Decision Making: Going Forward in Reverse  by Hillel J. Einhorn, Robin M. Hogarth 
5 pages. Publication date : Jan 01, 1987. Prod. #: 87107-PDF-ENG



 

I was invited by Lorman Education Services  to offer a teleconference on this topic and they have agreed to offer a $50 discount for any of my readers that mention discount code Z7745121 when they register online.

Feel free to share an idea for a column at johnjhogan@yahoo.com anytime or contact me regarding consulting, customized workshops, speaking engagements …………. 
And remember – we all need a regular dose of common sense.

Autographed copies of LESSONS FROM THE FIELD – a COMMON SENSE APPROACH TO EFFECTIVE HOTEL SALES can be obtained from THE ROOMS CHRONICLE www.roomschronicle.com and other industry sources. 

All rights reserved by John Hogan and this column may be included in an upcoming book on hotel management.   The opinions expressed in this article are those of the author and do not necessarily reflect the views of this publication

John Hogan, a career hotelier and educator, is frequently invited to participate at franchise meetings, management company and hospitality association industry events.  He is a successful senior executive with a record of accomplishment in leading hospitality industry organizations at multiple levels, with demonstrated competencies as a strong leader, relationship builder, problem solver and mentor. He conducts mystery-shopping reviews of quality in operations and marketing, including repositioning of hotels.

Expertise and Research Interest
• Sales Management and training
• Turn-around and revenue management
• Professional Development & Customer Service
• Hospitality Leadership and Executive Education
• Making Cultural Diversity Real
• Accreditation & Developing Academic Hospitality programs

He writes weekly columns for a number of global online services and has published more than 400 articles & columns on the hotel industry.  He co-authored (with Howard Feiertag, CHA CMP) LESSONS FROM THE FIELD – a COMMON SENSE APPROACH TO EFFECTIVE HOTEL SALES, which is available from info@smartbizzonline.com, ROOMS CHRONICLE www.roomschronicle.com  and other industry sources.  He resides in Phoenix, Arizona and expects to publish in 2009 his 2nd book based on his dissertation – The Top 100 People of All Time Who Most Dramatically Affected the Hotel Industry.

Hogan’s professional experience includes over 35 years in hotel operations, food & beverage, sales & marketing, training, management development and asset management on both a single and multi-property basis, including service as Senior Vice President of Operations in a specialty hotel brand for six years.

He holds a number of industry certifications (CHA, CHE, MHS, ACI) and is a past recipient of the American Hotel & Lodging Association’s Pearson Award for Excellence in Lodging Journalism, as well as operational and marketing awards from international brands.  He has served as President of both city and state hotel associations.

John’s background includes teaching college level courses as an adjunct professor at three different colleges and universities over a 20-year period, while managing with Sheraton, Hilton, Omni and independent hotels.  He was the principal in an independent training & consulting group for more than 12 years serving associations, management groups, convention & visitors’ bureaus, academic institutions and as an expert witness.  He joined Best Western International in spring of 2000, where over the next 8 years he created and developed a blended learning system as the Director of Education & Cultural Diversity for the world’s largest hotel chain. 

He has served on several industry boards that deal with education and/or cultural diversity and as brand liaison to the NAACP and the Asian American Hotel Owners’ Association with his long-term involvement in the Certified Hotel Owner program.  He has conducted an estimated 3,200 workshops and classes in his career. 

Service to the Industry and Hospitality Education includes working with the Educational Institute Certification Commission of the AH&LA, the Hospitality Industry Diversity Institute, the AH&LA Multicultural Advisory Council, the Accreditation Commission for Programs in Hospitality Administration, the Commission for Accreditation on Hospitality Management Programs, the AH&LA and AAHOA Education and Training Committees, the Council of Hotel, Restaurant and Institutional Educators (CHRIE), the International Hotel Show and the Certified Hotel Owner program for the Asian American Hotel Owners’ Association.
 

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Contact:

Dr. John Hogan, CHA MHS CHE
johnjhogan@yahoo.com

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Also See: Hotel Common Sense -Recognizing There is More than One Approach to Ongoing Success in Building Revenues / Dr John Hogan / July 2009
Hotel Common Sense – A New Look at Awards and Recognition / Dr John Hogan / July 2009
Lessons on Brands and Discounting / Dr John Hogan / July 2009
Hotel Common Sense Using Business Social Networks Productively / Dr John Hogan / July 2009
A Common Sense Review Process for Capital Investments / Dr John Hogan / July 2009
Understanding Values: The Challenge to Identify and Keep Them During Tough Economic Times / Dr John Hogan / June 2009
Personal Stories of Delivering Hospitality and Pride / Dr John Hogan / June 2009
What is Your Definition of Leadership? / Dr John Hogan / June 2009
Examining Why Do We Really Do What We Do? / Dr John Hogan / June 2009
Delivering Hospitality and Pride / Dr John Hogan / May 2009
Act As if You Are Number Two / Dr John Hogan / May 2009
A Baker’s Dozen of Fundamentals for Retaining Quality Staff / Dr John Hogan / May 2009
Customer Relationship Management Requires a Blending of High Tech and High Touch for Optimal Results / Dr John Hogan / May 2009
Do You Know Where Your Customer Is? Or Knowing Where Your Business Originates / Dr John Hogan / April 2009
Understanding what we measure and making it count! Strategies for Hotel Controllers / Dr John Hogan / April 2009
“A Bakers Dozen” of Strategies for Hotel Controllers / Dr John Hogan / April 2009
A Different Appraisal of Our Biggest Challenges in 2009 / Dr John Hogan / April 2009
Reflections: Mentors and Friends - Vermont Hoteliers Borden and Louise Avery and their Son Allen / Dr John Hogan / March 2009
Remember to Embrace the Essentials in Sales; Revenue and net profits can often depend on how one of the most fundamental practices in sales- how incoming phone calls are handled / Dr. John Hogan / March 2009
Getting the Most Out of Your Hotel Franchise Investment; Working With Your Hotel Franchisor for Everyone’s Success / Dr. John Hogan / March 2009
Getting the Most Out of Your Hotel Franchise Investment; Evaluating the franchise business model as a potential franchisee / Dr. John Hogan / March 2009
Getting the Most Out of Your Hotel Franchise Investment / Dr. John Hogan / Dr. John Hogan / March 2009
Four Steps: How to Make More Sales Calls than Any Other Way Or Trade Shows Can Be Invaluable If. . . / Dr. John Hogan / February 2009
A Baker’s Dozen of Strategies for Hotel Chief Engineers / Dr. John Hogan / February 2009
"A Baker's Dozen" of Strategies for Hotel  Banquet Managers / Dr. John Hogan / February 2009
Making New Year's Sales and Marketing Resolutions Real and Practical / Dr. John Hogan / January 2009
Planning in a Challenging Economy - Probing Hotel Expenses / Dr. John Hogan / December 2008
Planning in a Challenging Economy - Fundamentals of Hotel Sales Planning / Dr. John Hogan / December 2008
A Message for Hoteliers: Giving Thanks - and Not Just One Day Each Year! / Dr John Hogan / November 2008
Hoteliers Must Remember the Lessons of Reasonable Care! / John Hogan / November 2008
Enthusiastic and Sincere Attitudes Will Pay Off For Hotel Salespeople / Hotel Common Sense / John Hogan / November 2008
Unleash the Potential! Recognize the True Value of Your Front Line Sales People / Hotel Common Sense / John Hogan / November 2008
Defining Hospitality - Readers Respond with their Insights / Hotel Common Sense / John Hogan / October 2008
Understanding the Value and Power of Breakfast / Hotel Common Sense / John Hogan / October 2008
A Bakers Dozen of Strategies for Hotel Restaurant Managers / Hotel Common Sense / John Hogan / October 2008
A Bakers Dozen of Strategies for Hotel Food and Beverage Directors / Hotel Common Sense / John Hoganv/ September 2008
My Definition of Hospitality. What’s Yours? / Dr. John Hogan / September 2008
Principles for Success as a Hotel Manager: 6 Observations on Finding and Employing Problem Solvers / Dr. John Hogan / September 2008
10 Hotel Sales Action Steps to Succeed in Today’s Competitive Marketplace / Dr. John Hogan / September 2008
10 Hotel Sales Mistakes to Avoid in Today’s Competitive Marketplace / Dr. John Hogan / August 2008
Ways to Identify and Build Repeat Guests / Dr John Hogan / August 2008
Principles for Success As a Hotel Manager - Maintaining Relationships Throughout the Organization / Dr John Hogan / August 2008
Principles for Success As a Hotel Manager - Part four: Communicating with Clarity and Candor / Dr. John Hogan / July 2008
Principles for Success As a Hotel Manager - Part three: Using your management style effectively / Dr. John Hogan / July 2008
Principles for Success As a Hotel Manager - Part Two: Motivating the Team / Dr. John Hogan / July 2008
Principles for Success As a Hotel Manager Part One: Understanding the Organization / Dr. John Hogan / July 2008 
Updating Hotel Marketing and Sales Strategies Mid Year NOW Is Essential / Dr. John Hogan / June 2008
Don’t Underestimate the Impact of the Hotel Sales Office / Dr. John Hogan / June 2008
Factors for Successful Interviewing Potential Hotel Sales Candidates / Dr. John Hogan / June 2008
The Importance of Meaningful Sales Team Job Descriptions / Dr. John Hogan / May 2008
For Hotels with Limited Service, Fewer than 100 Rooms - How Do You Determine if You Need a Person Dedicated to Selling / Dr. John Hogan / May 2008
Extending Your Sales Team or Make Travel Agents A Regular Part of Your Sales Programs / Dr. John Hogan / May 2008
Finding Business Leads Can Be Easier Than You Think / Dr. John Hogan / May 2008
Understanding the Differences Between Marketing and Sales / Dr. John Hogan / April 2008
Identifying Your Customers / Lessons from the Field A Common Sense Approach to Success in the Hospitality Industry / Dr. John Hogan / April 2008
...

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