How Hotel Revenue Management Impacts Sales
By Shelley Maher Director of Business Development & Client Relations, Total Customized Revenue Management | May 05, 2019
This article was co-authored by Marcela Trujillo, Senior Revenue Consultant, Total Customized Revenue Management
"In the hospitality industry, Revenue and Sales leaders are two peas in a pod." This statement is likely to be disputed by professionals on both sides. Hospitality Revenue Management continues to evolve into an essential and finely-tuned art, with more data, more systems, and more advanced tools to assist in maximizing strategy and potential. This impressive development, however, should not overshadow the importance of the relationship between the Revenue Team and the Sales Team. To effectively optimize all of the revenue streams of an asset, there must be concentrated collaboration between various departments, especially Revenue and Sales.
What impact does Revenue Management really have on Sales? This is a common question, and has many different answers, depending on who is being asked. Isn't it true that the Revenue Department is really just the Revenue Manager sitting alone analyzing trends and adjusting pricing in a world all their own? And doesn't the Sales Team simply entertain customers in the restaurant or take them on site visits? While these descriptions are exaggerated generalizations, the reality is that neither Revenue nor Sales can achieve positive results alone. The level of expertise in each of these departments is invaluable to an asset when applied together to maximize profitability.
One of the most important ways that Revenue can impact Sales is by opening lines of communication. There is a reason why leaders are chosen for their respective departments, and each one brings a unique level of expertise. These skills and viewpoints are different for Revenue and Sales professionals. The Revenue Manager can offer the Sales Professional a deeper look into the world of Revenue Management, and can provide a new level of understanding of the reasons certain directions in strategy are suggested, especially when it comes to quoting rates for both individual and group travelers.
On the other side, a Sales Manager, looking at the bigger picture, may request a lower rate for a group or individual to lock in that piece of business. Communication regarding these factors can create a broader understanding and lead to compromise – key in these scenarios – so that Sales can continue to nurture the relationship and Revenue can garner reasonable rates.
This points to the progression in the definition of what the roles of Revenue Managers and Sales Managers should be. The goal is no longer simply to achieve topline revenues in Transient and Group segments. Today's goals involve working together to optimize every revenue stream that is touched by the two disciplines. Beyond room night production, ADR and RevPAR, there is the maximization of banquet and meeting spaces, catering and F&B revenue, as well as creatively utilizing Spa, Golf, and other revenue streams in order to bring those topline realizations to the bottom line.
For example, a corporate group will probably request sleeping rooms, but will also request meeting space, possibly AV, additional breakout rooms, plus food and beverage. Given the amount of potential spend on various revenue streams, the room rate provided can be more flexible to offer the group incentive to confirm their stay. This type of group is ideal, increasing profitability over a time frame that may otherwise have had only room reservations, without the additional revenue. This is how the most profitable decisions are made, working together for asset rather than for each individual department.
The DBR or daily business review process is a great way of increasing communication between Group Sales and the Revenue Management team. It is absolutely imperative for a hotel that has a fair amount of Group Business to conduct a Daily Business Review. The Group mix and the volume of leads will determine how often these meetings need to be held. Some hotels may need one DBR meeting daily and others may need a few. Regardless, without collaboration between Sales & Revenue on every group lead, a hotel is leaving money on the table.
During this process Revenue and Sales work together to qualify potential business. The purpose is to ensure that each prospective group will be the perfect fit for the hotel and will maximize revenue for that specific time period. There are many factors that go into evaluating each group, and this is the perfect example of how the knowledge and experiences of each department help choose the right fit. All of the information provides the revenue team with specific information to assist in evaluating the group and establishing the best rate to offer the group based on the given parameters.
In order to ensure that Sales Managers are considering all factors when analyzing a group lead, have the Sales Manager present the booking to the team. Some of the details that should be highlighted during this presentation include stay pattern, number of rooms, food & beverage contribution, budget parameters, history, future potential for account and prior year STR performance. Another key detail for Sales Managers to gather for every single lead is whether the customer is willing to accept alternate dates.
This question should be asked regardless of whether or not the hotel has availability over preferred dates. Putting the responsibility for obtaining this information in the hands of the Sales Manager ensures they are looking at all factors when reviewing leads and preparing proposals.
Once the Sales Manager makes their case, the Revenue Team can take it to the next level, looking at budgeted ADR, forecast, STR data, profitability and much more to determine if this is the best rate to quote based on all the data presented. Additionally, if the customer is willing to accept alternate dates, an incentive can be offered for the group to shift to dates that are more attractive to the hotel, making it a win-win for both parties.
During the DBR meeting, a healthy discussion between the two departments will likely occur bringing the two disciplines together for a common goal. It is important to note that while the DBR meeting is important, so is speed to action. Some leads will be urgent and require immediate attention, while others can wait for a meeting before presenting an offer to a customer. It is imperative to have a procedure in place to ensure all disciplines are available when needed to handle leads that require immediate action.
It is common industry knowledge that there can be some friction between Revenue and Sales. Revenue Professionals often have the reputation of focusing solely on ADR and RevPAR, while Sales Professionals tend to focus more on long term goals. Sales Managers ask themselves, "What is the potential for more business from this customer? Is this customer currently doing business in our comp set that we can potentially steal? What is the prior relationship with this customer?" But even with these differences in personality, viewpoint and focus, it is essential to remember that there should be one team, and that team should share common goals.
That's not to say that there will not be times when it becomes necessary to agree to disagree. Having a trusted ally, such as the General Manager, may be a good resource for tie breakers when Sales and Revenue have vastly different viewpoints. If consulting a 3rd party becomes necessary, once a decision is reached, it is important for both parties to remind themselves that this is not a personal win or loss, but it is ultimately a win for the property. The final step is to accept the outcome and move on to the next revenue opportunity. Collaboration between the two departments is absolutely vital to a hotel's success.
An on-going challenge is the discrepancy in the incentives offered to Sales versus Revenue. Sales is typically incentivized on room night production in both transient and group markets. This can be a challenge for a Revenue Manager if a sales person is solely focused on achieving their goals. This is through no fault of their own; the nature of the incentive encourages this desire to produce, which is rewarded with monetary gains on a personal level. However, this production can hinder the strategy that is being deployed by the revenue team, which is often not incentivized on production, but on the achievement of budget and RevPAR goals.
Having different targets negatively impacts both the strategy to achieve financial success and decreases the need and desire to work together. This classic conflict between departments and the nature of compensation need to be evaluated to ensure all parties are working toward a common goal. Both Revenue and Sales should be incentivized in ways that support achieving and exceeding overall profitability. This model of compensation based on a common goal inspires teamwork and increases the likelihood of on-going success.
There is a new level of responsibility that calls for increased cooperation between Revenue and Sales, as well as other leaders in Hospitality. To achieve the best outcome, the goals of the team need to be aligned. True collaboration between the Revenue and Sales Teams on all fronts, including goals and incentives, is the first step in producing maximum results.
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