Property Commercial Strategy: Why Independent Hotels Can Blaze the Trail
By Jack Lindemuth Consultant, Strategic Solution Partners | June 20, 2021
Independent hotels and resorts are notorious for being true trailblazers within the industry. This is due to the authentic brands at individual properties and smaller management companies with unique and entrepreneurial cultures.
The secret sauce in their culture truly empowers and encourages their teams to experiment, be bold and unscripted, and write their own playbooks versus waiting to be handed one to execute like the big brands do.
Unless you have been entirely off the grid for the past year, the terms "do more with less," "rethink everything," "level up," "break down the silos," and "embrace the change" have been wildly popular due to the negative impact COVID-19 has had on the industry.
While the pandemic has been beyond devastating, it has also delivered some positivity by opening the sticky "traditional way of doing things" door and forcing many to make notable strategic changes to improve the overall financial success of a property or company in the new landscape. The growing discussion of property-level commercial strategy roles have never been louder.
What is Commercial Strategy and How Does it Fit?
Commercial Strategy is a newer term and structure for many in our industry. The word "commercial" started popping up within some progressive hotel management companies' corporate office leadership titles four or five years ago. What was this new "Chief Commercial Officer" role in charge of, and why was it created?
This critical role of Chief Commercial Officer oversees Revenue, Marketing, Sales, and Distribution under one umbrella, which makes up the Commercial Division. This individual is the new, holistic internal strategist and spokesperson that CEOs can lean on to help shape the organization's bigger picture and to better understand how the company should drive both revenue and profitability growth. This role greatly improves alignment, creates efficiencies, breaks down the former silos, and is ultimately a key driver for financial success.
Another interesting part about this newer role is that there have been predictions that President and CEO roles will start to see Chief Commercial Officers move into them versus the traditional candidate almost always coming from finance or operations. It will be interesting to see how this plays out over the next few years and if it will become a trend for the property-level GM role as well.
Key Benefits of an On Property Commercial Strategy Leadership Role
Commercial leadership positions at the corporate level have continued to grow and shine over the past few years due to the previously mentioned items. Implementing this progressive structure at the property level as well would provide the following three key benefits.
- Cost savings: total commercial division team member compensation and recruitment fees.
- Total asset revenue and profit improvement driven by aligned and holistic strategies.
- Expanded career path and elevated recruiting pool: this new senior level property role provides an expanded career path within the commercial division, which in return should also improve the overall candidate pool for commercial division roles. It should also allow for improved average tenures of on property leadership positions.
5 Reasons Hotels Object to Commercial Strategy Realignment
The hotel industry is well known for taking its time to catch up on new trends already implemented by other industries, such as modern technology and progressive organizational structures, so why would the progressive property level commercial strategy leader structure be any different?
There are five common reasons that hotels, hotel companies, and ownership groups object to this realignment.
1. Fear that there are not enough qualified candidates
This role requires a dynamic individual that is analytical, has great business acumen, and embraces change and continuous learning. A unicorn is not required, and these candidates do exist. If you think back to pre-COVID times, the industry had a talent crisis across many divisions, and this talent crisis will resurface as it becomes safe to travel again and the world reopens.
There are also many leaders within the commercial division that left the industry due to COVID-19, and do not forget about the steady stream of hotel folks moving over to the rapid growth short term rental/alternative accommodations sector.
Analyze your commercial division turnover ratios and total costs prior to COVID-19 and be open to recruiting and developing internal talent a bit differently. Being creative and figuring out how to lessen a talent crisis issue versus continuing to run in an expensive hamster wheel of turnover and lost revenues is the recruitment and development playbook of the future.
It is also no secret that general perceptions of the hospitality industry are mixed when it comes to college graduates. Multiple hospitality programs within the US saw enrollment declines prior to COVID-19. Recalibrating the commercial division organizational structure to have a property-level leadership role will likely help hotel career paths become more appealing to business graduates and professionals that never considered the industry because of the lack of growth opportunity outside of operations. A commercial strategy leader role is another step added to the top of the ladder that will draw great candidate interest.
2. Concern that an individual revenue, marketing, or sales leader will be in fear of losing their job or be demoted
A property level commercial strategy leader role provides team members further career growth opportunity. For those that do not want to grow further and are happy being a specialist in one area, there will still be many places for them to shine, either at more complex or larger properties, at their current property in a recalibrated role, or if it is a portfolio, by specializing and supporting certain elements for multiple hotels.
3. The "nobody else is doing it" mentality and overall fear of notable change
If our industry has learned nothing else in the last year, we have at least learned the truth of that old standby, "The only constant in life is change." If the hotel business refused to evolve every time fear reared its ugly head, we would still be collecting cash at the Front Desk and forcing guests to climb several flights of stairs instead of using the elevator. Embrace it!
4. Bruised egos for some traditional General Managers
The commercial division is more sophisticated and complex than ever, and this complexity will only continue to grow. The "old school" GMs that believe in micromanaging all divisions and making most final strategic decisions are creating a recipe for underperformance. The days of only having a few methods to make a reservation, regularly wining and dining clients while using a pen to sign a contract, having little and basic technology, and using an annual marketing plan primarily consisting of arranging a few print ads and community outreach events are long gone. General Managers have more than enough on their plate and deserve a quality of life too; therefore, it is critical for them to have a commercial strategy leader on property to carry this large torch.
5. Market and/or property complexity
Concern about managing larger and more complex hotels in challenging markets has some merit because it will require a top tier and dynamic commercial leader and that candidate pool will be smaller. However, if the General Manager is not experienced enough to lead today's sophisticated commercial division, or does not have the bandwidth, are the traditional silos within the commercial division still providing the best net result? Likely not.
Why Independent Hotels and Resorts are Poised to Trail Blaze
It is rare for truly independent properties and management companies' leadership to use statements like "that is against brand standards." Instead, you hear "great idea and supporting data, let us talk further and see about experimenting with it." The ability to move quickly without having to cut through layers of red tape over extended periods of time can produce amazing financial and team member growth results. Additionally, those already accustomed to the independent environment typically exude a more dynamic skillset and entrepreneurial spirit. All of this clears the path for quick implementation of the property level commercial strategy leadership role.
In contrast, the big brands are not able to allow as much freedom and entrepreneurial behavior from the properties because of the companies' massive size and scale, global contract agreements with various vendors and revenue generating partnerships, and their franchise models.
Technology and travel trends have changed substantially and are continuing to change at an exponential pace. The hotel industry should embrace a continuous evolution within their commercial division structure to stay aligned with these ongoing changes that will ultimately ensure optimal revenue generation and profitability. A few properties have begun to trailblaze this new commercial strategy leader path, and it will likely become a common property-level structure for independent hotels and resorts within the next 12-18 months.
Commercial Strategy Help On-Demand
It is important to note that property-level commercial strategy leaders will need the appropriate support across revenue, distribution, sales, and marketing which can vary by property size, complexity, market, and the commercial strategy leaders' core areas of expertise.
There are many agencies and highly experienced individual consultants that can provide a flexible and customized support program to fit your commercial strategy leader's needs, even develop a current team member to transition into the role. This allows your team members to stay focused on the bigger picture when a supporting FTE in the commercial division is not warranted. Keep in mind these revenue, marketing, and sales consultants do not require the extra benefit costs associated with full time team members, typically 35-40% of their annual salary, not to mention they typically use their own equipment and free up on property office space for others.
There are many small to mid-sized properties that have a bloated commercial leadership team with three or four costly salaries and full compensation packages that are not warranted for the revenue generated by the asset. Additionally, many of these teams are mis-aligned and executing strategies and spend in isolation, not towards one holistic goal.
This problem of "too many chefs" in the commercial division kitchen develops because they are all positioned as equals, resulting in debates that end up at the GM's door. When a General Manager with an operations background is forced to make the ultimate commercial strategy decision, skill and expertise in revenue, marketing, sales, and distribution can be ignored. Additionally, some of these larger teams are still outsourcing several areas because they do not have the skillset or desire to learn the skillset, further hindering profit margins.
Yes, big changes can be nerve-wracking, but those leaders and companies that refuse to embrace large strategic changes for the betterment of the business will be left behind.
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