By: Lisa Bonanno
As hotel property management companies sit down to develop their 2020 budgets, they must consider their cost of acquisition for group and how it factors into their budget. With the looming uncertainty of the economy, many property management companies are not confident their properties’ “inbound RFP strategy” will work going forward. Smart property management companies are working with their properties to shore up proactive sales skills and doubling down on the solutions needed to support proactive sales strategies. They know that with rapidly diverse sales talent, the group sales approach must evolve or their investment will be at risk.
Here are five things every property management company should ask themselves during budget season:
1) What’s your group sales strategy and how does your budget support that strategy?
We are seeing more and more hotels adopting a Proactive Group Sales Strategy because they are seeing success even in the face of economic uncertainty. Developing a sales strategy that leads with proactive selling is how you gain control of pipeline development, build a stronger base of repeatable group business, and optimize profitability.
When building your 2020 budget, shift away from an over-reliance on third party sources of business and encourage your teams to source group business direct. Even if topline revenue stays flat, you would reduce acquisition costs paid to third-party intermediaries and bolster your bottom line. As hotels begin sourcing business directly, they find that this business turns into repeat business because of the fit for their properties. Similarly, the quality of the revenue improves as well, as this business is not based solely on the rates, space and dates decision by planners, but rather on the total experience the hotel can provide.
2) How reliant are your properties on group business to meet revenue goals?
If Group is 40% of more of your overall revenue, you must consider the resources needed to keep that optimized next year. Technology investments are table stakes of course, but what technology solutions and tools are you investing in to realize your group goals? Clearly the proliferation of inbound leads and eRFPs has created an untenable situation where hotels are inundated with leads.
In a recent Knowland poll with over 200 respondents from across the nation in a variety of roles, we learned that inbound RFPs are listing multiple cities more and more frequently. While some of this might be related to internal protocols requiring multiple bids, it could also be a meeting planner stacking the deck to make the market they prefer look especially attractive. This is why it is so important for your sales people to be able to understand the buying behavior of groups before they respond to these inbound RFPs.
Is most of your group business coming from inbound or third-party sources? Are these leads being prioritized for fit for your property, likelihood to win, and potential for winning other business from the Account? What is this source of business actually costing you – in return on staff’s time and in profitability? This is the year to shift from “need period” business sourcing, and to “optimized” business throughout the year.
3) How are your property sales teams positioned for success next year given the economic uncertainty?
In the event of an economic downturn hotels need more support to meet their group targets. Many are struggling to find new ways to approach group sales because the way they have been proactively selling is not yielding the right results.
This struggle only gets compounded as new hotels come online, adding to the already competitive market. While you want to keep budgets flat for that very reason, it stands to be argued that having a line item for training and selling solutions should be considered in your budget to make your property more profitable.
In one of our recent surveys, 83% of sales teams rated their proactive selling skills as rusty or average. Now is a great time to invest in proactive sales training to acquire or refresh those prospecting skills. Proactive selling allows you to build your group sales pipeline from business you are more likely to book based on the account’s past behavior and fit for your property, putting you in control of your revenue and profit potential. This will serve your property well, irrespective of economic conditions.
4) Are you looking at your property’s market data to know how well the market is performing overall?
Much like inbound RFPs come from a variety of feeder cities, you need to budget for solutions that allow you to spot market trends not just within your back yard, but also across similar markets. Your competition is not just around the corner; sometimes it’s across the country. Look to budget for those solutions that will provide meaningful market trends to aid your multitude of decisions including: investing, divesting, leasing, buying, building, rebadging, and renovating.
5) Are your hotels staffed for success?
As you budget for 2020 it is important to coach your property managers on how to hold on to star performers. Make sure incentives are aligned to retain and even attract team players and winners. Budget for investments in their success through proactive skills training and solutions they need to be successful. This will ensure that even though the turnover in hospitality sales is higher than most industries, your star performers are supported with the resources they need to thrive in all economic conditions.
Budget season is fun, said no one ever. However, it is necessary to set the strategy and align funding accordingly. Once you complete the budgeting process, the biggest mistake you could make is to file it away only to pull it out again at the end of the following year. The budget should be a living document that is adjusted as new facts come to light, and circumstances warrant. Contingency planning and assumptions should be part of the budgeting exercise, taking into account macroeconomic factors that are beyond the control of the asset manager but nevertheless can impact the budget projections. Thankfully, technology and data solutions exist to make budgeting season more efficient, and property management companies are encouraged to deploy them for more effective budgeting.