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Open Sales Positions: Can You Afford Them?

By Bill Scanlon
June 2012

There is an old adage that states: "You have to spend money to make money." Never will truer words be spoken than over the next several years. Virtually every industry and every operation has been cut to facilitate shareholder value, operating capital conservation, or owner return.

So where, you may ask, is revenue coming from?

Your sales channels and your sales teams — the same teams that have seen their leadership eliminated, their FTE's reduced, their travel curtailed, their customer centric funding lost, their training eliminated over the last three to four years, and who have struggled to become proactive after our "fun run" of 2002-2008.

With demand beginning to show signs of life, and occupancy still the driving factor in REVPAR growth, you are likely having to fill more rooms at nominal rate growth with a smaller staff who are more than likely underfunded, under trained, and probably not as efficient or productive.

Simple math in today's dollars tells us that the cost of an open / unfilled sales position is nearly \$2,300 a day or \$1,300 in profit (See table 1). Annually, that could represent \$850,000 in top line revenue and almost \$500,000 in profit. Who can afford that?

Table 1

Sales Manager annual goal of 5000 room nights
Catering contribution per room night of \$38
Ancillary revenue per room night of \$22
ADR per room night of \$110
Total contribution per room night = \$170.00 x 5000 room nights = \$850,000 in revenue x %58 house margin = \$493,000

Conversely, should you opt to keep that position open for an entire year (See table 2) your savings will equal a mere \$81,400.00 providing you with a net profit impact of (\$411,600).

Table 2

Sales salary of \$55,000 per annum
Benefits calculated at 38% = \$20,900
Normal bonus budgeted 10% = \$5500
Total dollars avoided by maintaining an open sales position annually = \$81,400

For every month you leave that position open you are losing \$34,000 in profit.

Naturally there is a point of diminishing returns in sales staffing but as you re-energize your capital spending you should also be reevaluating your sales productivity and return versus loss.

With new supply filing the pipeline, a shrinking labor pool as our population ages, more specialization within our industry, a sales environment where many people came of age in an "order taking" economy (and who stumbled in a proactive selling environment) the questions are: who will lead, who can sell, how good are they, and do I have enough of them?

We have all seen the impact of discounting as our sole means of demand/revenue generation. Now with demand growing how will you shift your mix to become more profitable by bringing back the higher paying customers? Correct sales staffing and deployment are the keys. Utilization of interim solution partners such as Strategic Solution Partners allows you to address the dynamic environment of change we face with aggressive and experienced personnel.

So as you look to improve you future revenue performance, assess the following:

• Your selection processes. Do they ensure the best candidates for the job?
• Your training. Does it provide for constant improvement and productivity?
• Your compensation and retention. How do they measure against your competitors? Against top Sales organizations?
• Your staffing levels and deployment. Are you "fishing where the fish are?" and are "your aces in their places?"
• Your own paradigms and biases: Are you excluding potential talent and or alternative solutions?

"You have to spend money to make money"

 Bill Scanlon Bill began his career in hospitality with Marriott, spending 20 years moving through a series of progressive assignments on regional, national and international levels, culminating with his role as Vice-President of Sales and Marketing Caribbean, Central and South Americas. Bill left Marriott to join HEI Hotels and Resorts as their Senior Vice-President of Sales & Marketing. Bill then moved to Wyndham Hotels and Resorts as their Senior Vice-President of Sales & Marketing where he spent 2.5 years growing revenue for their \$1.5B portfolio of companies. Bill now operates his own consulting firm, Strategic Solution Partners, where he works very closely with industry organizations to transform their businesses and drive revenue growth. Bill can be reached at bscanlon@strategicsolutionpartners.com.

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Cayuga Hospitality Advisors Articles of Interest:

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