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HSMAI Global recently launched its Certified Hotel Sales Leader (CHSL) certification. This new program is designed to recognize the expertise of hotel sales leaders, emphasizing the most up-to-date sales and commercial principles, practices, and strategies.
The CHSL certification is tailored for hospitality sales leaders who are proficient in leading high-performing teams, demonstrating overall commercial acumen, applying best practices in hotel sales to drive revenue growth, and more.
“We are very excited to add the CHSL certification to HSMAI’s distinguished family of commercial certifications, including the CRME, CHDM, CRMA, and CHBA,” said Robert A. Gilbert, CHME, CHBA, president and CEO, HSMAI. “This new certification underscores our commitment to empowering hotel sales professionals with the vital skills and recognition they need to excel as successful commercial leaders.”
Approved applicants will receive a digital copy of the study guide, The Hotel Sales Playbook: Winning Strategies for Success, and complete an online examination covering essential functions of hospitality sales. Read on for excerpts from the first chapter Chapter 12: Hotel Distribution Essentials for Sales Leaders, contributed by Andrea Daniels.
Chapter 12 – Hotel Distribution Essentials for Sales Leaders
Contributed by Andrea Daniels
Understanding Distribution Costs
As the cost of acquiring customers continues to climb, and with third-party commissions and other fees historically known to be significantly higher than the cost of sale through a direct channel, it is imperative that sales teams understand the strategic and financial ramifications of their distribution-related decisions. Focusing all stakeholders on obtaining a profitable channel mix and a balanced distribution approach is the first step toward ensuring that you are optimizing revenues at the lowest costs. In addition, ensure that your sellers are going after profitable new opportunities versus just shifting share.
The rising cost of customer acquisition is top of mind for many hoteliers — owners, asset managers, marketers, sales professionals, and revenue professionals. It is no secret that the cost to acquire customers is rising while hotel margins are shrinking. This is not a sustainable model. As more and more entrants come into the picture, each one wanting a “piece of the pie,” existing players continue to create new ways to drive customers to book through them. Today there are more pay-to-play ways to distribute hotel inventory, acquire new customers, and drive traffic to brand.com than anyone could have ever imagined. There is no silver bullet to completely turn the tide of rising acquisition costs, but there are a variety of strategies hotels are instituting to help. A combination of strategies may lead to increased margins.
Know the Cost of Commissions
Commission costs are nothing new for hoteliers. However, the rising commission payments hoteliers see on P&Ls today are a cause of angst. But what about the costs of commissions that do not show up on the P&L? How are they being accounted for?
One of the largest overall reservation cost drivers is “…bookings where the revenue is collected by third parties, such as wholesale, opaque, and merchant model OTA, [where] the commission is taken ‘off the top’ which means that only the portion paid to the hotel by the third party is recorded on the P&L, but not the fees paid that were included in the total rate the guest paid to the third party. Since the commissions are taken out of the rates paid by the guest, these mark-up commissions represent a customer acquisition cost from the hotel’s perspective and must be tracked and considered.”1
Few hoteliers would ignore an expense item that equals 15% to 35%. That’s why it is important to thoroughly monitor and examine acquisition costs by channel and then determine the most optimal channel mix possible.
At the same time, it is important to know all the costs required to drive direct bookings — paid search, display media, affiliate marketing, metasearch, social media, etc. See Chapters 9 and 10 (Digital Marketing) for more on these topics.
For sales leaders, ensure you and your teams understand the total cost of every booking. Factor in commissions paid to third parties whether paid before or after a booking in order to track actual costs. Don’t forget to consider the cost of points or other loyalty costs, value adds, and other fees.
Determine the Optimal Channel Mix and Focus on Profitability
In an interview with HSMAI2, Cindy Estis Green shared that, “Hotels have spent so much time optimizing the overall revenue stream that it is a new way of thinking to optimize sub-sets of that overall business volume by channel. This will require some attention on the channel mix patterns and trying different methods to test which ones yield the best results in different market conditions.”
Finding optimal channel mix requires several factors:
- Knowledge of the demand patterns in a market for each channel and segment
- An understanding of consumer’s perception of the hotel, and how it compares to its competitors
- A realistic assessment of how well each channel performs and is evaluated by consumers compared to the same for the hotel’s competitors (e.g., website, call center, GDS)
- An understanding of the costs of varying channel mix combinations to calculate how much contribution there is toward operating expenses and profit
Once a hotel puts a stake in the ground regarding its channel objectives, the revenue team can carefully track costs to be sure they are moving toward an optimal mix.
Focus on Profitability
Hoteliers need to understand the profitability of the bookings coming into the hotel, taking distribution and other variable costs such as housekeeping and supplies into account.
The goal of the analysis is to evaluate different parts of business in relation to each other to get insight into profits. Different sources have different flow-through to profit, so hoteliers need to analyze them with all costs in mind.
Part of that analysis relates to the circumstances in which hoteliers should and should not take low-margin business. Hoteliers should consider taking low-margin business in the following instances:
- To create a base for compression
- To bring in business when it would otherwise not come
- When ancillary spend is high
- To fill a hole
- To hit a threshold
- To cover cash flow
On the other hand, hoteliers should not take low-margin business in certain scenarios. For example, it is best to steer clear of low-margin business when:
- It becomes too large a percentage of the property’s overall channel mix.
- It diverts financial or staff time and resources from finding higher-profit business.
- It erodes the overall rate strategy of the property.
- It feeds a downward price spiral in the comp set and does not bring in enough demand to make up for the rate reductions.
- It reroutes customers who would otherwise book through higher-profit channels.
- It is promoted close to arrival and trains customers to wait until the last minute to book for the best deal.
Calculating the flow-through for each business type assists in estimating the profit contribution from the planned mix of business.
HSMAI members who attain the CHSL certification will gain professional recognition, career advancement opportunities, and the ability to contribute more effectively to their organizations’ success. For more information, visit hsmaiacademy.org/certification-hotel-sales-leader or contact Kathy Tindell at kathy.tindell@hsmai.org.