September
Today, e-RFP channels are enabling meeting
and event
planners to flood the market with a tsunami of “leads” that has left
hotels
struggling to keep up with the demand, according to an article
published in Business Travel News.
“It’s broken,” said Hyatt Hotels Corporation
senior Vice
President of Sales, Jack Thorne. ”The whole thing got out of control
almost
overnight with us.”
The e-RFP explosion largely is a result of
the growing
popularity for the mechanisms offered by electronic lead channels such
as Cvent and StarCite, the
article goes
on to state, and the use of those tools by meeting planners and
site-selection
third parties. Users of those tools have the option not only to ask
more than
100 questions of a potential meeting site, but also to forward that
request to
dozens of venues. The result is a far higher number of leads for
properties.
Hotels have few options in dealing with such
an influx, said
Dave Lutz, managing director of Velvet
Chainsaw
Consulting and former president of the event planning and
registration
division of meetings-management third-party Experient. “It’s a very
inefficient
model and it’s not sustainable,” he said during the Cvent conference.
Hyatt notes that the conversion rate is
approximately two
percent of meeting leads from the major e-channels as well as their own
site,
Hyatt.com. Hyatt also suggests that such converted leads comprise only
six
percent of Hyatt’s business but replying to them can take up hours of a
salesperson’s day.
The cost to respond to leads and the
associated cost per
sale are staggering.
Lead Assumptions and Cost Analysis
I estimate that a hotel sales manager will
spend
approximately two-hours on each lead that they field, respond to, and
monitor
(this time estimate was also confirmed by other hotel sales managers
who I have
contacted).
If this is true, the following assumptions
can be made.
Sales Manager’s annual salary – $50,000.00
(sales manager’s
annual salary not including benefits and bonus based on 50 weeks).
Sales Manager’s hourly salary – $25.00
($50,000.00/50
weeks/40 hours – FICA and benefits estimated to add an additional 30
percent to
the base salary and could raise the hourly salary to $32.50.
Lead assumptions based upon 30 leads per day
received by a
hotel
- 30 leads a day
- 150 leads a week
- 7,800 annual leads (based on 52
weeks)
- $25.00 to $32.50 base hourly
salary of a sales manager
- $50.00 to $65.00 cost to hotel
to respond, monitor, and track each lead (two hours per lead)
- $390,000.00 to $507,000.00 total
cost to a hotel to respond to all leads
If you are a hotel owner or GM, read on.
ROI Analysis Assumptions
Let’s assume, based upon the lead volume
above, that a hotel
will convert two percent of the leads received from e-channels as
referenced
above.
- 30 leads a day
- 150 leads a week
- 7,800 annual leads (based on 52
weeks)
- Average Daily Rate (ADR) of
$150.00 per room per night
- Average lead @ 60 peak guest
rooms (30 guest rooms/2 nights)
- Total guest room revenue per
lead – $9,000.00 (60 nights @ $150.00)
- 2 percent conversion rate of
annual leads
- 156 annual leads converted
- Total guest room revenue from
total converted leads – $1,404,000.00
- Cost to a hotel to respond to
leads – $390,000.00 to $507,000.00
- Cost per sale to a hotel – 28
percent to 36 percent
I’d like to hear from you, on or off the
record, to see what
you think about these numbers and how they affect your hotel.
Tom Costello is the CEO and Managing Director of iGroupAdvisors, a performance improvement consulting firm that specializes in the hospitality and travel verticals. Connect with him on LinkedIn, Facebook, and Twitter or contact him by email.