How to Measure Sales Performance

David M. Brudney, ISHC, a nationally recognized spokesman for hotels and a veteran with four decades of experience, is the principal of David Brudney & Assoc. of Carlsbad, CA

By David M. Brudney, ISHC December, 1983

The panel discussion on marketing at the California Hotel & Motel Association’s 1983 convention focused interest on the whole subject of marketing. I’d like to continue that healthy dialogue here by presenting a series of articles dealing with marketing in the hospitality industry. This space can serve as a forum for you to voice your opinions, ideas and questions. Please, let me hear from you. Everyone will benefit from the exchange. 

Lets start with most commonly known and most easily identifiable ingredient of marketing: sales! Specifically, let’s deal with the measurement of sales. How do we, as hotel operators and owners, accurately measure our sales department’ performance and the result produced? 

Do we merely sit back, examine the occupancy, average rate and the bottom line and if the hotel has reached or surpassed the goals in each category, do we determine that sales has done its job? Have I just described you? If I have, don’t feel badly, you’ve got lots of company. 

Measuring sales performance is not a simple task. Some guidelines that help are:

• Research
• Judgments
• Establishments of goals
• Monitoring sales activities
• Measurement

Research

Make certain you have facts from which to base your decisions. First, if you can, ascertain what occupancy and average rate you would run without a sales person, department or function? Could your hotel survive on "built in" markets such as chain reservations systems, travel agencies, local attractions (drawing visitors to your area) and overflow/referrals from local and regional competitors? You need to know this information before you start a sales department or some sales support position (the manager normally assumes this position in very small properties) 

Remember that the original purpose of a hotel sales position was to augment business, not duplicate. Fundamentally, sales should concern itself with the securing of business when the property needs business the most. Sales’ next priority is to continue to develop -- and to hold onto! -- those profitable bases the property already enjoys. 

Does your property have a marketing plan? A market analysis? A competitive analysis? A product analysis? These documents are essential if you expect your sales department to perform its job satisfactorily. Don’t send your sales force out unless they have and understand this information. 

Judgments

After thoroughly studying the data collected -- the plan and the three (3) analyses -- a hard decision is necessary as to what you, the owner/operator, have a right, realistically, to expect as far as first year results. Setting unrealistic goals is one of the biggest problems in our industry. Management’s high expectation the first year normally lead to a "doomed" sales department whose efforts fall far short of management’s projections. Get your sales people involve, encourage maximum contributions and participation by all concerned, study the data together and weigh all the facts. Decide on what you really think you can do. Be conservative at first until you have been able to establish some kink of track record. 

Establishment of Goals

You’ve got to be real honest here. Markets such as "series" bookings with tour wholesalers and bus tour operators can take 18 months to two (2) years to develop successfully. Some markets, no matter how attractive they may appear, may not be right for your property. If, for instance, you have no safe area to unload bus passengers or no food and beverage outlets on property or next door, you really shouldn’t set goals/quotas for that particular market because you probably won’t realize any business at all. 

Interpretation of the "product analysis" is crucial at this point because it affords you another point of reference in determining whether or not your property is capable of handling various markets. You need to make a decision and a commitment to those markets that offer the best potential for immediate, short range and long range business. Be sure and do that before you set any goals/quota on projected room nights and before you establish how and when you’ll measure results. 

Set goals/quotas on markets that make sense for your property. A good market analysis will tell you what demand there is from each of the various markets for rooms in your town or area. Use that information to help you. And make realistic goals, especially the first year. 

Monitoring Sales Activity

This is where the marketing plan can be so helpful. It clearly identifies the markets to be developed, the tools required to do the job, name or names of staff responsible for executing each task and -- best of all -- a schedule of when these activities (e.g., sales calls, sales trips, prospect visitations, promotions, industry shows, etc.) will take place. 

Management must understand and be able to interpret the marketing plan as well or better than the sales department. Management must accept the fact that marketing is an every day activity, not an activity to be "experienced" quarterly or annually. Marketing, as the man once said, "is like shaving...you’ve got to do it every day or you’ll look like a bum!" 

A good marketing plan is like a good road map. The map not only guides you along your journey but also lets you know you’re "there" when you’re "there". Let the plan work for you and use it as a daily tool for you to monitor and measure progress, to make necessary changes, to stimulate discussion between you and sales, an to constantly challenge your sales department. 

A good plan should also include projections on the mix of business you have agreed upon and supply the framework for monthly and quarterly reviews to determine if sales is producing the right numbers. 

Measurements

Measuring the results and performance of sales must begin with a study of annual room revenue, average rate and occupancy. But that’s just the beginning. Some other key areas to examine:

• Cost of sales
• Market segmentation factor (the percentages of the "mix" of business, actual years projected, i.e., 30 percent commercial, 30 percent tours, 20 percent group, 15 percent government, 5 percent contract).
• Effectiveness in selling previously identified "depressed periods"
• Percentage of "booked" business that did not materialize (the "wash out" factor)
• Catering revenue generated by the sales department.

As you can see, a great deal of measuring (marketing) results has to do with what questions you ask. You’ll know you’re doing something right if the revenue, average rate and occupancy figures are right. But unless you dig a little deeper you won’t be able to determine the total contribution to the overall profitability of the hotel. 

Don’t fall into the trap of discounting these suggestions because your hotel is "too small" or "too unsophisticated" or that this information "doesn’t apply" to your situation. The smallest, most independent properties are the ones that need marketing expertise and support today, more than ever. 

And please, don’t pass over this article because you "wouldn’t know where to begin" or you "couldn’t afford that kind of special help." There’s lots of help out there waiting to serve you. 

Qualified hotel marketing consultants are available and most will provide affordable service to you. Hotel/motel chains and management companies offer sales and marketing guidance and support as part of their services. Major accounting firms that specialized in our industry also offer special guidance in establishing proper guidelines for management’s’ measurement of sales. 

University extension programs include outstanding sales and marketing courses in their curriculum. Be sure you check out courses available at your local or area community college. AH&MA still offers exceptional correspondence courses in marketing. And don’t overlook the educational programs available through local chapters of HSMAI (Hotel Sales & Marketing Association International). You can also pick up some excellent books such as C. DeWitt Coffman’s standard "Marketing for a Full House’(Cayuga Press, Ithaca, NY). 

Other Factors to Weigh

There’s also an effective "subjective" way of measuring sales performance. Some people -- Joe Kordsmeier, for one -- believe that figures are nothing more that that -- figures. I worked for Kordsmeier for several years when he was senior vice president of sales and marketing for Hyatt Hotels. He argued that his "three circles" criterion was more revealing to him in evaluating sales people and their production than any set of figures. He asked three sources what each though of an individual sales person’s effectiveness: 1) the customer, 2) management and 3) peers. Joe used the same technique to learn about his competitors’ sales people! 

Other criteria to consider:

• Overall efficiency of the sales department.
• New accounts developed.
• Mini-markets developed.
• Length of time required to turn a lead into a definite piece of business.
• Local industry and civic contribution.
• Ability to speak intelligently and spontaneously on where hotel’s business comes from; mix of business; mix of business at competitors; industry trends.
• Developing strong internal respect for sales and developing a sales and marketing team amongst rest of hotel staff.

There’s more to this subject. Let’s hear from you. 

About David Brudney & Associates

David M. Brudney, ISHC, is a veteran hospitality sales and marketing professional concluding his fourth decade of service to the hospitality industry. Brudney advises lodging owners, lenders, asset managers and operators on hotel sales and marketing "best practices" and conducts reviews of hospitality (as well as other industry) sales and marketing operations throughout the U.S. and overseas. The principal of David Brudney & Associates of Carlsbad, CA, a sales and marketing consulting firm specializing in the hospitality industry since 1979, Brudney is a frequent lecturer, instructor and speaker. He is a charter member of International Society of Hospitality Consultants. Previously, Brudney held hospitality sales and marketing positions with Hyatt, Westin and Marriott.

Contact:  David M. Brudney, ISHC, Principal
David Brudney & Associates
Carlsbad, CA 92009
Phone:  760-476-0830
Fax:  760-476-0860
Email David Brudney
Web Site:   www.DavidBrudney.com