REVENUE MANAGEMENT AND GROUPS SALES – THE PARTNERSHIP NOT THE DISCONNECT

Groups and conventions are booming – a significant increase over previous years. Competition is stiff and the window to submit proposals is shortening. Evaluating the quality of a group booking for all profit centers is critical.

For those of you with sophisticated revenue management systems this process is not as difficult as for some hotels who are doing revenue management the ‘old fashioned’ way and there are more of those than you might think – even among large group houses and companies!

However, even some sophisticated revenue management systems struggle with the integration and analysis of the value of catering revenue and it’s impact on the overall revenue management strategy. I often hear that catering revenue has a high cost associated with it and is therefore not as important as rooms with a lower cost. Until someone develops a formula for evaluating the cost of room sales from all channels as a factor in revenue management decisions, catering revenue must be considered.

Sales managers now not only have to sell the client or meeting planner but also sell the revenue manager on the ‘worthiness’ of a piece of business. This has always been the case to some extent but it is more critical than ever that sales understands the revenue management strategy and process.

We have discussed in prior articles the tension and sometimes (sometimes?) disconnect between the two departments. That is not the issue here – it is the partnership of the two functions that will produce the greatest maximization of revenue for the property. It is imperative that we get beyond REVPAR and evaluate the revenue potential for all profit centers, not just rooms.

Below are a few considerations for sales managers to evaluate a group if you don’t have a sophisticated revenue management system to work with. In making a case for a specific group whose rate may fall at or below the RM parameters but has a significant impact on the other profit centers requires research and diplomacy. It is also a valuable process when you want to make a case for an ‘exception’ for a group.

• Evaluate Past Revenue History of the Property. Pull the revenue history for all profit centers, rooms, catering, F&B outlets, spa, etc., for the past two years. Were there groups in house that influenced this revenue and, if so, what was the revenue profile of the past group in terms of room rate, etc.? How does the current group’s revenue contribution compare to previous groups? You will also need to source the rest of the sales department in relation to group bids others may be working on for the same dates and which may have better overall revenue potential for the hotel.

• Understand the Revenue Goals of Each Profit Center. Here is where diplomacy plays a major role. Each profit center may become an ally if you know how this group is going to make a significant contribution to their revenue goals for the period. Helping other departments get what they want is a great way to get what you want.

• Obtain the Group’s Past History. Most companies and organizations know exactly what they spent on this meeting or similar ones in the past in terms of rooms, F&B, catering, etc. If the history varies significantly from what they have told you they anticipate, it should set off a ‘red flag’ – ask them why they believe this group or meeting will be different from past ones.

• Qualify for Future Potential. This requires that you completely qualify the account for future business prior to booking this group. Be careful – it’s like the contractor who went to purchase 5 refrigerators for a development he was building but told the salesman he needed five hundred. The salesman put together his best deal. The contractor took only the five and never went back for the other 495. We’ve all been on the short end of this tactic at one time or the other. If they are asking for concessions on this group, tie it to a contract on a future group – have them sign both contracts.

• Be Prepared to Walk Away. This is a tough one. Good sales people love to book business and then there is the question of the quota and/or bonus for the period. The faster you walk away from a piece of business that is not aligned with the hotel’s revenue management strategy the faster you can move on to other prospects. In addition, if the bonus or incentive system is not aligned with the revenue management strategy, and many are not, it is a huge source of contention and the source of the ‘disconnect’ between sales and revenue management, therefore making the sales person even more reluctant to walk away.

The incentive system should reward revenue (notice I said revenue and not rooms) booked during opportunity periods at a higher value than business booked in peak season. It doesn’t take a great deal of talent to sell business in periods of high demand and, if the bonus is based on rooms not revenue, that business may be sold at a lower than optimal rate and still be rewarded. Total disconnect with the revenue management strategy!

Carol Verret And Associates Consulting and Training offers training services and consulting in the areas of sales, revenue management and customer service primarily but not exclusively to the hospitality industry. To find out more about the company click on www.carolverret.com. To contact carol send her an email at carol@carolverret.com or she can be reached by cell phone (303) 618-4065.