Revenues and Optimize Sales Productivity
|by Brenda Fields, July 2004
Catering sales in small, boutique hotels can conservatively, represent 50% of the total food and beverage revenues. So achieving catering revenues can make the difference between food and beverage profitability and food and beverage loss, and can significantly impact total GOP.
One of the biggest challenges in small hotels is to clearly define catering responsibilities. Does it belong with Food and Beverage or does it belong with Sales? Is it an operations function or a direct sales function?
Over the years, customer needs and tastes have evolved, and new competition has emerged with demand for free standing restaurants, lofts and penthouses, and tourist attractions. With the many venue choices for customers, it is important to understand how to drive business into your venue. And with the impact on GOP, it is critical to maximize those revenues generated.
Therefore, in order to drive market share and maximize revenues, it is necessary to:
Many times, we refer to “Catering Sales Managers” as sales people, when in reality the catering sales manager handles only inquiries that come into the property, sends out contracts and event orders, and oversees the functions in an operations capacity. “Sales” is really just order taking and takes a back seat to operations.
1. Establish a Strategic PlanOperations
Small hotels, in particular, tend to have limited staff. Therefore, it is typical to have one catering position with sales and operations functions combined. But, it is wise to analyze the pros and cons of having two positions vs. one position which have two responsibilities. Sometimes, a direct sales function can generate substantially more revenues than the cost of the two positions of sales and operations. But that analysis can only be done effectively if a strategic plan and specific goals and have been established.
Lastly, it is important to have a clear understanding of roles and responsibilities, regardless of the number of positions.
Once the position in the market place has been established, then all standards, operating and pricing philosophies are established. The quality and look of all collateral, web site, and in-house signage establishes an identity. Once that identity is in place, a plan should be devised and implemented to cost effectively reach the targeted markets. The marketing efforts will support the direct sales effort as well as reach other segments such as weddings and social functions cannot be solicited through direct sales. Demand from these segments is generated through targeted marketing programs and initiatives.
The Web is rapidly becoming the most cost effective means to reach potential customers, and is the great equalizer. High profile hotels, large, small, independent, or chain-affiliated hotels, all have the same opportunity on the Web when done with expert planning and implementation.
Pricing is established based on the product offered and an understanding of the marketplace. Those responsible for booking business should have information on costs in order to negotiate. For example room rental could represent 75% profitability whereas, food could represent 33% profitability. The catering sales person will understand where discounting is less likely to impact profitability.
Knowledge of demand periods is key for negotiating effectively as well. Understanding these two elements places the catering person in a position of strength and confidence when dealing with customers, ensuring that the best financial interests of the hotel are met as well as inspiring customer confidence.
As in rooms, each segment for catering sales has its own booking trend and demand period. Therefore, by understanding each segment’s patterns, the hotel can proactively establish selling guidelines to ensure that the space is sold effectively. For example, if wedding demand is high for weekends in June, it is important keep the space available for that lucrative business, rather than selling out to low rated business prematurely. Or if October is high demand for corporate meetings, monitor the selling of the space so that by capturing the natural demand, space is sold effectively. Booking a one-day group meeting on a Wednesday in peak periods would displace the potential revenues of a four-day meeting, which would be in high demand.
Additionally, it is critical to budget and forecast catering revenues on a daily basis, broken by meal period, and/or by market segments. Many times, owners and managers will project increases based on percentages, without looking on a daily basis. This can lead to faulty projections. For example, there could be greater revenue opportunities from weddings because of an additional weekend in June from the previous year. Or a mid-week holiday could decrease the corporate group business potential, compared to the previous year.
Even though there is software available for yield management, in my opinion, nothing replaces the good judgment of an experienced, competent professional.
A thorough understanding of where the business falls will lead to booking business which gives the highest return. And a proactive plan to generate business for low demand periods will create financial success.
Having an in-depth understanding of each component and how to successfully integrate each one into a strategic plan, will ensure that an owner/manager will cost effectively drive catering revenues, and ensures profitability regardless of market conditions.
This article cannot be published or reproduced without the written permission of the author.
About the author:
Brenda Fields is a management and development specialist in the lodging industry. Her twenty-year experience includes serving as Vice President of Marketing for a luxury hotel and conference center in Manhattan, owned by Harry Macklowe, real estate developer and owner of the General Motors building in NYC.
Brenda has had extensive experience in pre-openings and repositioning and was responsible for the successful opening and stabilization of Paramount Hotel in New York City by developing and executing a direct sales and yield management program as well as a national and international marketing campaign. Paramount Hotel was one of the first “boutique hotels” developed by Ian Schrager. The strategies and structure developed and implemented are used as the prototype for new acquisitions.
With a “who’s who” roster of clients, Brenda has worked with a number of industry leaders and real estate investment companies including Starwood Lodging Corporation, Vornado Realty Trust and Planet Hollywood, John Hancock Mutual Life Insurance Company, Olympus Real Estate Corporation, Gotham Hotels and Apple Core Hotels, among others. Her consulting practice for independent properties includes clients such as The Kitano Hotel, New York; Morongo Casino, Resort, and Spa in Palm Springs, CA; Lajitas Resort, Lajitas, Texas: Founders Inn and Conference Center in Virginia Beach, VA; Woodlands Resort and Inn, Summerville, South Carolina; Bel Age Hotel, Los Angeles, CA; Mondrian Hotel, West Hollywood, CA; and many others.
Brenda serves on the Advisory Board of Boutique Hotels and Resorts International; is on the Editorial Board of National Hotel Executive Magazine; and is a member of HSMAI.
A native of Kentucky, Brenda holds a B.S. in Psychology and English from Murray State University. She is lives on Manhattan’s Upper East Side and enjoys cooking and entertaining in her cottage in Millbrook, New York.
Fields & Company is located at 500 East 77th Street, Suite 1101, New York, NY 10162; 212-734-2152; 212-734-1617/fax; firstname.lastname@example.org.
500 E. 77th Street, #1101
|Also See:||The New Market Segmentation and Pricing Model for Independent Hotels / Brenda Fields / May 2004|
|Boutique Hotels: Rethinking the Fundamentals in a New Business Environment / Brenda Fields / February 2004|
|Room Configuration - Are Your Rooms Configured for the Best and Highest Use? / Brenda Fields / January 2004|
|Direct Sales - What to Expect from Your Hotel Sales People and How to Get Results / Brenda Fields / August 2003|
|Boutique Hotels: How to Survive in a Down Market - Getting Back to Basics / Brenda Fields / May 2003|
|Industry Marketing Pro Brenda Fields Opens Consultancy Focusing on Independent Properties / January 2003|