How To Use Data To Make Better Group Revenue Choices Resulting in Optimized Profits
By Kristi White VP, Product Management, Knowland | March 08, 2020
The father of modern quality management, W. Edwards Deming's quote ' In God we trust, all others must bring data" rings even more true in the age of Big Data. This observation does not mean data replaces experience but rather it informs the best choices among competing options.
In the hospitality industry, hotels allocate guest room inventory across multiple channels to optimize guest room revenue. As an industry, we typically do this very well for transient business. However, when it comes to group revenue the discipline is not always the same. Too often hotels get lost in chasing the bird in the hand (inbound, third-party leads) they forget about the birds in the bush.
Third-party leads seem easy. It's available revenue but it doesn't always mean it should be preferred revenue. The close rate on third-party leads is vastly lower than directly sourced business and these repeat unreliably. Additionally, there are often hidden costs in acquiring the business which is rarely taken into account. Directly sourced business typically comes with fewer hidden costs and a strong sales team can turn it into sustainable business across the long haul making it preferential for building a base of business.
Just to level set, not all revenue is equally profitable. There is a cost to acquire the revenue, which will vary from group to group. Typically, we think of costs in terms of what it takes to service the business (cleaning rooms, staffing, etc.). In the past five years, there has been a focus on the acquisition cost (GDS fees, travel agent commissions, etc.). However, with groups we need to account for all of these costs plus additional third-party costs that come from the planner.
The goal is not to seek and grow revenue at the expense of profit. However, too often our internal goals do not set us up to achieve this. Today where hotel sales teams have goals related to how quickly they respond to third party leads, we reduce our sales process to price vs. value.
This ultimately leads to a leap before you look mentality which means, sometimes, we accept business via a third-party lead that wasn't the most profitable for our hotel. But, hey, we closed the business so that's good, right?