Trends in Hospitality Sales Incentive Compensation

HSMAI partnered with ZS to conduct a sales enterprise incentive compensation benchmarking study in Q4 2021 and then refreshed this research in Q2 2022, featuring participation from several major hospitality brands. This study investigated top-of-mind emerging themes in above-property sales compensation and talent management across hospitality and other industries to highlight common challenges in sales culture, talent retention, pay compression and inflation.

In 2020, many brands’ sales organizations and incentive compensation plans were upended, requiring challenging and swift decision-making. In 2022, we see brands adapting their organizations and plans to meet the “return-to-travel” moment. We have tracked some key year-over-year trends here:

While we see a major rebound in incentive compensation in 2022, significant issues and challenges remain for hospitality brands, including:

  • Difficulty forecasting and setting accurate goals for sellers, especially for an entire year
  • Reinstating individual plan weighting to refocus incentive compensation on the factors under a rep’s control
  • Frequent goal setting throughout the year, which requires more effort from limited sales support staff
  • The priority to hire and retain flexible talent to adapt to uncertain business climate and segments
  • The need to support team culture by retaining some team-based plan components

These challenges may be a temporary result of COVID-19-driven market dynamics, but the changes that brands made to adapt to the new environment may be here to stay in the long run. Hospitality is not alone in facing these challenges. Even in industries that were not as directly affected by the pandemic, we see that their sales teams and ways of working have evolved. Some universal themes across sales organizations we’ve observed include:

  • Pay compression: ZS has consistently observed sales pay compression in hospitality and other industries over the past several years. Pay compression is a narrowing range of variable pay for reps, with fewer high and low outliers in pay and more sellers centered close to the mean. Initial hypotheses for pay compression include:
  • Companies are becoming more risk averse and are avoiding high variation in variable pay, while also setting more accurate goals for sellers.
    • Sellers are becoming more risk averse and want to know the range of take-home pay to expect with a higher degree of certainty.
    • Sellers also have less marginal impact, thanks to support tools like sales playbooks, automated lead generation and next-best action engines to guide them.
    • Companies have started to place floors to maintain talent and lower caps to protect themselves fiscally due to COVID-19.
  • Efficiency and flexibility: Hospitality brands continue to find value in flexible, generalized seller roles. They also have shifted their focus to new customer segments and reduced seller headcounts as legacy segments reduced travel. But now that legacy segments are returning, brands are maintaining new segments that emerged during COVID-19, continuing to grow the seller team size and maintain generalist roles.
  • Hiring trends and culture: As business stabilizes in 2022, brands continue to prioritize investing in talent. Flexible and adaptable sellers who can be redeployed across multiple customer segments (e.g., group or SMB) are sought after by hospitality brands, as team sizes look to return to 2019 levels by the end of 2022. Brands also have found investing in culture necessary for the sales organization’s health, leading them to focus on talent development, elevating team morale with contests and SPIFFs, and rewarding loyal, tenured sellers fiscally.
  • Salary changes and inflation: As inflation continues, hospitality brands’ on-property cost increases have been largely passed to customers so far. There is concern, however, that inflation will continue to shape 2023 strategy as brands eventually grapple with ways to lower expenses to maintain their margins. While inflation impact has not been top-of-mind in sales incentive compensation yet, brands expect it to be a balancing act between retaining talent in the broader market and returning to profitable growth.

ZS and HSMAI frequently lead similar studies to help hospitality brands better navigate these uncertain times. If you are interested in participating in future research, please reach out to Bob Gilbert (bob.gilbert@hsmai.org) and Mike Francis (mike.francis@zs.com).

Trends in Hospitality Sales Incentive Compensation

HSMAI partnered with ZS to conduct a sales enterprise incentive compensation benchmarking study in Q4 2021 and then refreshed this research in Q2 2022, featuring participation from several major hospitality brands. This study investigated top-of-mind emerging themes in above-property sales compensation and talent management across hospitality and other industries to highlight common challenges in sales culture, talent retention, pay compression and inflation.

In 2020, many brands’ sales organizations and incentive compensation plans were upended, requiring challenging and swift decision-making. In 2022, we see brands adapting their organizations and plans to meet the “return-to-travel” moment. We have tracked some key year-over-year trends here:

2020 2021 Today
·         Headcount falls approximately 40%

·         Many brands suspend incentive compensation plans

·         Total compensation declines for reps and managers

·         Total compensation grows in other industries:

o   +7% for pharma

o   +10% for medtech

 

·         Headcount rebounds approximately +20%

·         Incentive compensation plans place more focus on team and firm performance

·         Quarterly goal setting and payouts become the norm

·         Total compensation rebounds above 2019 levels for reps and managers

·         Headcount sits at approximately 90% of 2019 levels

·         Incentive compensation plans add back individual components

·         Semiannual goal setting and quarterly payouts common

 

While we see a major rebound in incentive compensation in 2022, significant issues and challenges remain for hospitality brands, including:

  • Difficulty forecasting and setting accurate goals for sellers, especially for an entire year
  • Reinstating individual plan weighting to refocus incentive compensation on the factors under a rep’s control
  • Frequent goal setting throughout the year, which requires more effort from limited sales support staff
  • The priority to hire and retain flexible talent to adapt to uncertain business climate and segments
  • The need to support team culture by retaining some team-based plan components

These challenges may be a temporary result of COVID-19-driven market dynamics, but the changes that brands made to adapt to the new environment may be here to stay in the long run. Hospitality is not alone in facing these challenges. Even in industries that were not as directly affected by the pandemic, we see that their sales teams and ways of working have evolved. Some universal themes across sales organizations we’ve observed include:

  • Pay compression: ZS has consistently observed sales pay compression in hospitality and other industries over the past several years. Pay compression is a narrowing range of variable pay for reps, with fewer high and low outliers in pay and more sellers centered close to the mean. Initial hypotheses for pay compression include:
  • Companies are becoming more risk averse and are avoiding high variation in variable pay, while also setting more accurate goals for sellers.
    • Sellers are becoming more risk averse and want to know the range of take-home pay to expect with a higher degree of certainty.
    • Sellers also have less marginal impact, thanks to support tools like sales playbooks, automated lead generation and next-best action engines to guide them.
    • Companies have started to place floors to maintain talent and lower caps to protect themselves fiscally due to COVID-19.
  • Efficiency and flexibility: Hospitality brands continue to find value in flexible, generalized seller roles. They also have shifted their focus to new customer segments and reduced seller headcounts as legacy segments reduced travel. But now that legacy segments are returning, brands are maintaining new segments that emerged during COVID-19, continuing to grow the seller team size and maintain generalist roles.
  • Hiring trends and culture: As business stabilizes in 2022, brands continue to prioritize investing in talent. Flexible and adaptable sellers who can be redeployed across multiple customer segments (e.g., group or SMB) are sought after by hospitality brands, as team sizes look to return to 2019 levels by the end of 2022. Brands also have found investing in culture necessary for the sales organization’s health, leading them to focus on talent development, elevating team morale with contests and SPIFFs, and rewarding loyal, tenured sellers fiscally.
  • Salary changes and inflation: As inflation continues, hospitality brands’ on-property cost increases have been largely passed to customers so far. There is concern, however, that inflation will continue to shape 2023 strategy as brands eventually grapple with ways to lower expenses to maintain their margins. While inflation impact has not been top-of-mind in sales incentive compensation yet, brands expect it to be a balancing act between retaining talent in the broader market and returning to profitable growth.

ZS and HSMAI frequently lead similar studies to help hospitality brands better navigate these uncertain times. If you are interested in participating in future research, please reach out to Bob Gilbert (bob.gilbert@hsmai.org) and Mike Francis (mike.francis@zs.com).

HSMAI Customer Insight: Record-High Gas Prices Disrupt Travel Plans | Longwoods

According to the latest Longwoods International tracking study of American travelers, 41% of them say record-high prices at the pump will greatly impact their decisions to travel in the next six months, up from 32% in May.  And 36% of travelers report that higher fuel costs and ticket prices are reducing the likelihood of booking air travel for the rest of this year.

Even with these price and cost concerns, 91% of travelers do have trips planned in the next six months.  And only 16% of them say that coronavirus will greatly impact their travel plans in the next six months, the lowest level since the beginning of the pandemic more than two years ago. Insights for HSMAI from Longwoods President & CEO Amir Eylon:

 

Read the full report: American Travel Sentiment Study – Wave 62 Record-High Gas Prices Disrupt Travel Plans

HSMAI Top 25 Profile: Jamieson Asselta

HSMAI recently honored the 2021 Top 25 Extraordinary Minds in Hospitality Sales, Marketing, and Revenue Optimization — recognizing leaders from hospitality, travel, and tourism organizations for their accomplishments in the preceding 18 months. Jamieson Asselta, director of global enterprise sales at IDeaS Revenue Solutions, is one of these honorees.

Jamieson Asselta is a senior hospitality industry leader with more than 20 years of experience in both sales and revenue management leadership. He has been with IDeaS for six years and leads IDeaS’ Global Enterprise Sales strategy with expertise and passion, enabling large organizations to take their profitability across the enterprise. Prior to joining IDeaS, Jamieson held various sales and marketing leadership responsibilities with Marriott, Omni, and Destination Hotels in New York City, Boston, Orlando, and Washington, D.C. Jamieson has served on the Americas HSMAI Sales Advisory Board and New York HSMAI Chapter and enjoys speaking regularly at industry events and at several hotel schools, including NYU and Johnson & Wales.

Key accomplishment: In 2020, Jamieson completed the largest sale of his career and one of the four largest sales in the 33-year history of IDeaS. At the end of the client’s implementation timeline, IDeaS will have grown the number of hotels using and IDeaS technology by 25% (or about 5,000 hotels). The results of Jamieson’s leadership created a significant expansion for IDeaS’ client base.

What inspired this nomination? “Jamieson is an exceptional friend and colleague. He deserves to be recognized by his industry peers.”

Asselta on what has kept him motivated over the past year: “I’ve always been fueled by a desire to solve client problems. That has been amplified during this pandemic period. This led to a greater excitement to problem-solve and deliver for current and prospective clients.”

Asselta on his silver lining this year: “The strength of long relationships within the industry continued to remind me how critical the time we invest into others is. It lays the foundation for what everything is built upon. This could not have been more evident over the past year.”

 

HSMAI Special Report: 2021 Top 25 Minds – Lessons in Leadership, Creativity & Innovation

HSMAI’s Top 25 Extraordinary Minds in Hospitality Sales, Marketing, and Revenue Optimization program recognizes leaders in sales, marketing, and revenue optimization from hospitality, travel, and tourism organizations for their accomplishments in the preceding year. This special report profiles each individual in this distinguished list of hospitality superstars, selected by a panel of senior industry executives based on their recent work.

 

 

 

 

 

 

 

 

 

 

Access the Special Report

HSMAI Customer Insight: Price of Gas & Plane Tickets Impacting Travel More Than COVID | Longwoods

According to the latest Longwoods International tracking study of American travelers, the rising cost of gas and plane tickets has replaced the pandemic as a major concern entering the summer travel season. See Longwoods President & CEO’s take on the results, exclusively for HSMAI.

 

Read the Full Report: American Travel Sentiment Study – Wave 61: PRICE OF GAS & PLANE TICKETS IMPACTING TRAVEL MORE THAN COVID-19

Renewing the Talent Pipeline: State of Talent Report

By Karen Wollard, Ed. D., CHDM, HSMAI Foundation Research Manager

The hospitality labor shortage is real, and there are few easy answers. Talent was lost in 2020 to furloughs and layoffs, but also to individuals who chose to retire, transition to other industries, or downsize their household income to accommodate diverse needs. Globally, the pandemic has changed visa rules, and immigrant workers who are essential, especially in operations, have not returned. Hotel Management magazine posed this question in late May 2021: How can we market the career potential and the core purpose of the industry to a new base?

The shock of the coronavirus pandemic has cost the travel industry 8 million jobs. Three million of those are hotel jobs, of which half a million were not expected to return by the start of this year, according to the American Hotel & Lodging Association. The Bureau of Labor Statistics reports a dramatic drop in the accommodation sector in the United States in 2020. Many hotel employees who have weathered 20 years and multiple downturns have questioned whether they should look for a career opportunity in a different industry. “Consider all options because the firm [you worked for] has shown their true opinion of you by furloughing you,” offered one consumer marketing executive with more than 20 years of experience at a major hotel brand. At this point, it is hard to imagine that there is a global labor shortage, but consider this analogy: Weather is not climate.

Employees who were separated for a year or more sought positions in other industries and chose not to return. The reputation of hospitality and tourism organizations was that they did not support their people in a crisis. This was a major reason 60% of 30,000 job seekers said they would not consider a hospitality job, according to a survey conducted by Joblist.com. Even with incentives such as higher pay, more benefits, signing bonuses and free food, 69% said nothing would change their mind about considering a hospitality job.

Hospitality Schools

Hospitality schools have traditionally been the source of talent for career-oriented interns, management trainees, and first-level supervisors. Declining enrollment in hospitality programs began in 2016, when demographic changes resulted in fewer college-aged students. In 2020, management training programs were abandoned, and new hires were few, so new graduates had to seek other sources of employment. HSMAI Foundation’s academic roundtables found that the top area of concentration in hospitality schools is event planning, followed by operations and then food and beverage management. Marketing, sales, and revenue areas never rank above fourth place.

For sourcing sales, marketing, and revenue management rising stars, the number of skilled graduates isn’t likely to improve, since 49% of hospitality schools still offer no sales classes, and 44% offer no revenue management courses. Most schools offer a general marketing course for hospitality, using a marketing principles concept. This means that hoteliers must either completely train new people for these commercial positions or offer incentives to lure trained talent from other companies.

Faculty told us that most of their students have no exposure to commercial hotel career positions until they take a course in one of the disciplines. Students don’t know how to learn more about these jobs, and hotels rarely expose interns or management trainees to the work in these departments, so there is not a clear career pathway for students to follow. It can be hard for those who have interest to get information or a foot in the door. To make matters worse, the operations departments often have and foster negative opinions about the sales department.

Looking beyond hospitality schools to fill commercial positions is one option many hotels pursue. Business, computer science, accounting, math, and other majors can often be a good fit with appropriate training. Hotels have historically been hesitant to hire people from other industries, preferring to nurture their own talent within the organization, yet necessity is likely to broaden recruitment prospects.

The world is entering a talent migration that’s bigger than anything we’ve seen before, as many employees found their skills were transferable to other industries and that many jobs could be done from anywhere with a reliable internet connection.

The talent shortage is also driving up wages, with new hires being paid, on average, 20% more. Some operations job openings are at the highest levels in history. This is causing HR staffers to commit all their time to recruiting line-level operations people, leaving most commercial executives to source their own talent.

Some hotels have begun applying the sales and marketing strategies usually used to attract guests to the staff recruitment process. Creative advertising design and placement, along with robust sales efforts at job fairs and college recruitment events, are just a few examples of how sales and marketing skills are being applied across new markets.

Commercial executives must help their organizations better sell the dream if they are going to attract and/or retain top talent who will address the challenges of building back business. No longer will the right talent be looking for us. Hotels need to be creating talent workgroups who can ask the tough questions: Do we have clear career paths? Are our salaries competitive? Are we offering the right incentives? Are our supervisors respected, knowledgeable and liked? Are our expectations in line?

This is an excerpt from the HSMAI Foundation’s State of Hotel Sales, Marketing, and Revenue Optimization Talent: 2020-2021 special report. To learn more about the HSMAI Foundation and its mission, visit the Foundation website.

Reevaluating Talent and Performance KPIs and Incentive Plans

By Karen Wollard, Ed. D., CHDM, HSMAI Foundation Research Manager

The strong economy of 2019 brought with it record-setting group business. As the pandemic took hold, companies of all sizes cut meetings and travel. Bookings fell off and new bookings stopped. How can you keep sales, marketing, and revenue staffers when their quotas and expectations cannot be met through no fault of their own? The HSMAI Foundation’s State of Hotel Sales, Marketing, and Revenue Optimization Talent: 2020-2021 special report dives into this topic.

Knowing the key metrics that matter to various stakeholders and adjusting them based on the shifting realities of the pandemic became an important way to keep employees focused on driving profitable business. The pandemic taught everyone that reliance on systems and historical data is no longer enough. There are so many other components that can change the outcomes in a volatile environment.

One hotel company’s approach was to create an analytics workgroup that was tasked with identifying and defining 30 metrics. In doing so, it became clear, for example, that the value of the salesforce is in talking with the customer and that the paperwork, coverage expectations, and follow up on planning they were doing undermined their key contribution. In the past, the expectation was that sales would just go up. Now, there is a need to make and justify changes in strategy to drive sales. Revenue managers and marketers must provide the data to right-size expectations for their sales goals. One CEO added that while the measurements haven’t changed, the benchmarks have. For some resort properties, 2020 and 2021 were their best years ever, while city properties have yet to recover. Leisure travel is fueling demand and growth worldwide, as attendees at the Americas Lodging Investment Summit heard in January 2022.

Commercial teams need to have realistic goals and feel like they can win, even when the old indicators aren’t useful. Setting goals once a year may no longer be effective. HSMAI has begun to look at the impact of COVID-19 on the attraction, motivation, and evaluation of front-line sellers. Hospitality saw a lot of sellers leave for other industries such as medical devices, pharmaceuticals, technology, and others whose compensation, benefits and work schedules were preferable.

Sellers are motivated by incentives; they are competitive by nature. This drive was thwarted as travel halted. In 2019, many hotels and brands worked from annual plans, adjusting in 2020 and 2021 by suspending incentive plans or shortening the plan period. Setting quotas became a moving target as forecasts were recast. Many organizations moved away from individual incentives to team incentives in 2020 and 2021 to adjust to volatile markets and smaller headcounts. Organizations that want to retain their top sellers will have to continue to tweak and monitor compensation to ensure that sellers are working to reconnect with previous clients while reaching out to new targets and markets. There is increasing attention on “hunters” versus “farmers” as salespeople are hired back, a direction that HSMAI and the Foundation will continue to watch.

Increased coordination across sales, marketing, revenue optimization, and IT have been hallmarks of the pandemic response. Shifting specialized individuals toward broader segments to target priority potential markets required coordination and integration. Account management became more of a team effort. Commercial executives had to demonstrate support for their teams and build a culture of collaboration that may have otherwise taken years to evolve.

Sales teams are expected to do more than ever, including performing the tasks of their previous support teams. Hiring will be challenging. The layoffs of early 2020 were aimed at reducing the low performers or consolidating positions; now new hires will be expected to not only be top talent, but they must be able to take on additional accounts and work across a broader spectrum of markets. Where these exceptionally skilled individuals will come from and how organizations will attract and retain them will be a focus of HSMAI’s advisory boards and the HSMAI Foundation’s research activities. In the past, tenure has correlated with improved performance to goals, suggesting that planning to bring aboard new sellers may require a different mindset and development strategy.

The overall impression is that hospitality salespeople are not as well compensated as those in other industries. This may mean that base compensation needs to be increased and that incentives should be competitive to compete with other industries. Finding the balance to attract top new talent while retaining existing top sellers will be challenging.

This is an excerpt from the HSMAI Foundation’s State of Hotel Sales, Marketing, and Revenue Optimization Talent: 2020-2021 special report. To learn more about the HSMAI Foundation and its mission, visit the Foundation website.

HSMAI Customer Insight: Travelers’ COVID-19 Fears Continue to Recede | Longwoods

Longwoods International’s tracking study reveals many reasons for optimism in that COVID-19 fears among travelers continue to recede, even as travel sentiment is being impacted by higher gas prices in ways that may alter traveler behavior.  Add in the recent news regarding the lifting of most mask-wearing requirements in the U.S for travel, and a new wave of optimism is likely to be seen among travelers. Exclusive insights on the findings for HSMAI from Longwoods President & CEO Amir Eylon:

 

Read the Full Report: American Travel Sentiment Study – Wave 60 Travelers’ COVID-19 Fears Continue to Recede

In the ‘New Normal,’ Interdepartmental Silos Continue to Disappear

By Karen Wollard, Ed. D., CHDM, HSMAI Research Manager

Within the hospitality industry, the pandemic has changed the way we recruit and attract new talent as well as what we’re looking for when hiring. The new job description for commercial teams is evolving quickly, as agility and the ability to capitalize on short-term changes become key skills. When historical data is no longer appropriate or sufficient, teams must let go of what was working and look for what will work now. This combination of innovative technologies and new challenges has created a need for learning and development that has outstripped the abilities of many organizations.

According to a summer 2021 Hospitality Upgrade article written by Jennifer Hill and Cindy Estis Green, organizational structures are changing so the hotel’s revenue generation team is one unit, combining revenue and commercial analysis, sales deployment, and digital marketing spend. This has necessitated changing budgets and performance expectations. Smaller and more nimble teams were necessary to address the impacts of the pandemic. It will take time to determine whether this realignment continues. Commercial departments were slowly merging in most hotel organizations; the pandemic accelerated this.

Dr. Kelly McGuire, managing principal at ZS, stated in her presentation at HSMAI ROC Americas 2021 that the ability of these teams to achieve maximum market potential would necessitate key changes.

First, it is essential to delegate, automate, reduce, and eliminate the non-essential work that these key players have been performing. Second, the teams need to be reconstituted to ensure there is a mix of strategic thinkers, relationship builders, communicators, and business experts. More critical thinking and less data cleaning and report writing are needed if commercial teams are to be agile in delivering on KPIs.

A recent article by Drs. Peter Ricci and Anil Bilgihan in Hotel Business Review reported on insights from 14 revenue managers. They summarized the challenges this way: “The majority of revenue management models are based largely on historical data; however, incorporating big data such as the political environment, weather, flights, holidays, events, social reputation, and online prices/inventory, vaccination rates, number of daily COVID-19 cases [and] security of a destination into the algorithms, may help revenue managers to improve the accuracy of their forecasting. Through the effective use of big data in real-time, room rates or packages can be tailored to each guest which, in return, will maximize revenue and improve guest satisfaction.”

Challenges from technology, remote work, and smaller teams tackling the commercial activity together have also made it unclear what the goalposts are. KPIs and appropriate measures of success are changing rapidly, challenging managers to find new ways to monitor and upskill their teams.

Bonnie Buckhiester, president of Buckhiester Management, has authored several articles on the leadership roles that revenue managers, working with their marketing and sales counterparts, had to learn to play, beginning with, “Fish only where the fish are.” As the pandemic took hold, the convergence of revenue strategy and digital marketing rapidly progressed. Website data from marketing informed pricing decisions as booking windows shortened. Sophisticated business intelligence tools had to be acquired and learned if these teams were going to access real-time data about feeder markets, travel patterns, traveler sentiment and other nontraditional sources of data. Buckhiester contends that the pandemic has accelerated the shift to “fourth-generation revenue strategy directors” who, along with their numbers and analysis, are looking for clues to understand and better characterize demand. These are leaders who have acquired new skills that allow them to challenge tradition and discover new insights to finding demand.

Strategic thinking is more essential than ever in the commercial areas. People must follow trends and markets more closely and with new insight. Technology and year-over-year comparisons no longer substitute for a lack of planning and the need for comprehension of new dynamics and market forces.

In addition, organizational structures are changing so that the hotel’s revenue generation team is one unit charged with revenue and commercial analysis, sales deployment, digital marketing spend, and technology deployment. Budgets and performance measurements must change as these structures and duties evolve. Determining proper incentives and measures was a huge topic for sales, especially as the pandemic saw more than two years of hard-won sales fall off the books. Responsibility and accountability for action and execution are essential determinants of success for these new teams.

This is an excerpt from the HSMAI Foundation’s State of Hotel Sales, Marketing, and Revenue Optimization Talent: 2020-2021 special report. To learn more about the HSMAI Foundation and its mission, visit the Foundation website.