By Lynn Zwibak
Now that the hotel industry has moved away from siloed departments, you expect your commercial teams to work together. But that’s impossible when each department is still operating independently.
Team members outside the revenue-management department often feel mystified by the hotel’s pricing and availability decisions. And that’s holding your hotel back.
Picture this: The marketing team dreams up a brilliant marketing campaign. They design beautiful content with compelling text, get it in front of the public through all the proper channels, and then celebrate its success. But the hotel misses forecast and the STR report shows they lost share.
Or this: The Director of Sales sets the sales goals for the coming year. The sales managers collect their monthly bonus checks, but the hotel consistently misses the budget.
What went wrong? Each department was operating in a vacuum. The marketing team are experts at devising and selling campaigns. The sales team knows how to set revenue goals and achieve them. But neither sales nor marketing asked revenue management if their efforts would help the hotel achieve its goals.
Many hotel companies are moving from distinct Sales, Marketing, and Revenue Management Departments towards one unified Commercial Strategy Team. This is a massive step in getting everyone on the same page to implement the hotel’s revenue strategies. But if the head of the commercial strategy department is the only one who understands all three disciplines, they will have difficulty getting the departments to move in the same direction.
Let’s relook at some of the opening examples to demonstrate why all members of the commercial strategy team need to understand revenue management concepts and the hotel’s strategy.*
Marketing Campaigns: The Right Marketing for the Wrong Offer
When developing marketing campaigns, the team needs to consider not only what offers the customers will buy, but also which offers the hotel wants to sell. When the team develops offers based solely on creativity rather than need, they often focus on high-demand periods, when the hotel can sell out without investing in marketing or offering discounts. The campaign may sell well and appear successful, but the rooms sold are just traded down from the higher rates revenue management was trying to sell.
While living in Kenya, I was the Head of Revenue Management (what Directors of Revenue Management are called in much of Africa) with an ownership group, opening a second independent boutique hotel. The opening GM proudly told me that she had purchased a billboard promoting an opening rate equivalent to $99 (Kenyan currency is the Kenyan Shilling (KES), but this hotel only sold in USD)
The billboard instructed guests to use a specific promo code based on the hotel’s name. The problem was that our PMS only accepted 3-letter codes. (Not to mention that I thought a $99 intro rate was much too low- the hotel’s retail rate was in the high $ 100s). A simple conversation could have prevented the problem we were now faced with. We couldn’t find a solution and ended up paying to change the billboard. We kept the $99 rate despite my adamant objections.
Sales: The Right Group at the Wrong Time
Much of the inherent conflict between sales and revenue management results from the fact that, in my experience, the incentives of the two departments are completely misaligned (that is a subject for a future article). During five years as a sales manager/director in my early career, my bonus was based on hitting a set revenue target. This target is derived from the total hotel budget but exists in a vacuum relative to the rest of the hotel’s business.
The challenge this presents is that all groups are not equal, even if their projected revenue is the same. Consider a large group booked during the hotel’s peak season. How much revenue from higher-rated room sales will it displace? Now consider the same group booked during the hotel’s low season. This group is filling rooms that would likely have gone empty otherwise. The sales manager is credited with the same revenue amount, but which scenario would you prefer for your hotel?
I was the culprit in several of these situations during my sales days, back when I was you and naïve, not yet schooled in the revenue management principles I now espouse. I was selling the SMERF market in an office park outside of Washington, D.C., and had been pursuing a group that didn’t follow my usual Friday-Sunday pattern. But I had invested so much energy in the endeavor that I just had to book it. The Director of Revenue Management supported the low-rated weekend groups I usually sold, but I was unprepared for the resistance I encountered when I tried to book one of these groups mid-week. The Director of Sales went to bat for me, and the GM approved the group (she was an excellent DOS). I reached my sales goal, but the hotel fell short of that month’s budget. I now know what a mistake that was, and I still feel a little bad about it. Sorry, Dana!
Where Do We Go From Here?
Hopefully, I have convinced you that we have a problem. But don’t despair; there is a solution. First, we must step out of our comfortable, well-insulated departmental worlds and be open to exploring the worlds in which our peers exist. Start small: talk to your counterparts. Ask them how they spend their days, what excites them, and what keeps them up at night. How is their performance judged? Is there any overlap with how yours is judged? Can you attend one of their team meetings to see what they discuss internally? What data are they using, and what do they do with it?
You are now silently asking me, “Who has time for all this?”. The answer is that we have more time than we think. These discussions can occur over lunch, whether in the cafeteria or over Zoom (we all need to eat). Or we can schedule a short coffee chat to start even smaller. Or we can ask our peers to record their team meetings and watch the recording when we have some downtime or need a break from our own jobs. We can even play it in the background and multi-task. Some exposure is better than none.
You may also be thinking, “My relationship with my revenue management colleagues is so strained that they would think I am up to something if I approached them with this.” That’s fair. But would you rather continue glaring at each other in meetings or start working together to make more money for the hotel and yourselves? Show them this article and tell them you want to turn over a new leaf.
Once we leave our comfort zones and explore others’, we will find that we all have more in common than we think. When we embrace that idea, there is no limit to what we can accomplish together.
* I am sure that sales and marketing teams could provide similar examples related to revenue management. If anyone does write this article, please let me know. I would love to read it.