HSMAI PERSPECTIVE: Why Cutting Sales, Marketing, and Revenue Optimization Is Short-Sighted

By Robert A. Gilbert, CHME, CHBA, President and CEO, Hospitality Sales & Marketing Association International (HSMAI)

As the hospitality industry does its part in the global response to coronavirus, hotel owners and asset managers are looking for areas to conserve cash. Some companies have already made the decision to furlough employees. Recently I received an email from an HSMAI member who had to furlough her entire sales team for four-six weeks due to the sudden drop in demand that we’re witnessing across brands and destinations.

There is no denying that this is a crisis situation of possibly unprecedented scope. The U.S. Travel Association estimates that total travel spending in the United States will drop by 31 percent — $355 billion — for the year, while the American Hotel & Lodging Association is projecting a loss of 3.9 million hospitality jobs over the next few weeks. During such a time, each hotel company and property has to balance its own unique set of demands, with the greater good being everyone’s top priority. While I understand that liquidity is a challenge for some owners with this dramatic drop in business volume, decisions on where to cut need to be weighed carefully. In my opinion, any decision to disrupt the vital roles of hospitality sales, marketing, and revenue optimization professionals is ill-advised. Why?

1. This is your revenue infrastructure. Sales, marketing, and revenue optimization are the front line of every current and future revenue stream for every hotel or hotel company. They are communicating with your active and potential customers, ensuring your brand messaging is appropriate for the current environment, and leveraging every distribution channel available to capture market share. These functions are essential to any business that intends to participate in the recovery, whenever it happens.

“When there is a sudden drop in demand like this, it affects the entire operation. It can be tempting to cut costs uniformly throughout a hotel when the financial situation declines, but that might just exacerbate the problem,” said Ed Skapinok, immediate past chair of HSMAI’s Sales Advisory Board. “In the past I’ve seen hotels cut all department expenses by the same percentage to contain costs. This might seem equitable, but furloughing salespeople or cutting revenue-generating activities makes it that much harder to rebound when the recovery happens.

“Now is the time to bolster those activities that capture new business and grow market share,” Skapinok said. “As a rule, the longer the lead time it takes for your hotel to book business, the stronger your sales effort needs to be now in order to recover more quickly.”

2. You know what not to do — just look at history. Like I said, there is much about this situation that is unprecedented. But while we might not know exactly how widespread the disruption will be or the most effective way to respond to it in the moment, we do have a pretty good idea of what hasn’t worked in the past.

“As revenue and commercial strategy leaders, now is a time to step up in a big way to show leadership with how you approach, pricing, policies and analytics,” said Timothy R. Wiersma, president and CEO of Revenue Generation LLC and chair of HSMAI’s Revenue Optimization Advisory Board. “We are in uncharted territory in many ways. Making knee-jerk decisions on pricing may have long-term implications on your recovery and beyond. We can take elements from past downturns to learn what worked and what not to do.”

From the past recession, we know that hotels that dropped their rates first were the last to recover while those that held steady were the first to recover. And, as STR’s Carter Wilson explained during a recent presentation for HSMAI’s Confronting Coronavirus webinar series, those hotels also experienced a less significant drop in RevPAR.

3. The recovery isn’t as far off as it seems. Even though a recovery date may be uncertain, we know from previous crises that the travel industry is resilient. Leisure, corporate, and group business all will return. NextGuest founder Max Starkov, a hospitality and online travel technology strategist, thinks that global tourism and hospitality will recover from the coronavirus quickly thanks to the expansion of the middle class, which by 2030 is expected to reach 5.3 billion people. That will translate into explosive growth in travel and tourism over the next 10 years.

A new survey of American travelers by Longwoods International likewise contains some good news for the short term. According to the survey, while 58 percent of people with travel plans in the next six months plan to postpone them, only 28 percent plan to cancel their trips completely — and 22 percent will change from international to domestic travel. In other words, 72 percent of these travelers will still require a place to stay, meaning you’ll need to have sales, marketing, and revenue optimization strategies in place to capture that market.

4. There’s a still a lot of work to do right now. During this period of decreased demand, it’s a good time to deploy your sales, marketing, and revenue optimization teams in areas where they can be productive. Make sure someone is available to respond to current requests and opportunities. Clean up Delphi. Refresh your prospecting plan. Touch base with every client, whether they have an upcoming piece of business with your or not. Look at your strategic plan for Q3 and Q4 in 2021; what needs to be updated? “We spend so much time working in the business, we don’t have time to work on the business,” said Cindy Novotny, managing partner of Master Connection Associates. “This is the time to work on the business.”

And as the sales director who emailed me about having to furlough her team noted, if your people aren’t working for you, maybe they’ll go to work for your competitor. Or they may leave the industry altogether. If you’ve got seasoned talent that has a proven track record, the cost of turnover will only increase in the long run and slow down your ability to recover — when it happens.

Your sales, marketing, and revenue optimization professionals are just that: professionals. Now more than ever, you need to take full advantage of their expertise.

For additional information, insights, and tools, visit HSMAI’s Global Coronavirus Resources page.

Categories: Sales
Insight Type: Articles