All the performance indicators to measure hotel sales performance

31 March 2022
The demand for MICE and groups has started to recover. Customers are again shopping for the best offers, so hotels receive more inquiries now than before. More shopping means that hotel sales teams must send more proposals and compete with more other hotels to win the business.
If the competition gets tougher, hotels need to become much better to drive their salesforce to ensure high productivity. The goal is to win more business with less effort in less time. Therefore, sales processes must be well-designed, easy to follow, and produce the desired results. There are a few key performance indicators to watch to maximize outcomes. First, let's look at a business and meetings hotel.

Different customer types

There are many different types of customers in hotels. One is promising to buy future room nights at an agreed rate and other terms. Another is an ad-hoc MICE deal. The main difference between the two customer types is that contracted customers do not know which days they will buy the room nights, while the MICE deals are date specific.
 
The sales process to win business from these two customer types is very different, so to track the performance, a hotel needs two sets of key performance indicators. There are only two ways to increase revenue: Increase the number of customers and sell more to existing customers. A great sales team hunts for new customers and farms current customers.

Customers with contracted room nights

The number of customers

The first task is to build a solid customer base, so the number of customers is a good indicator på how good the sales team is at hunting for new customers. Many hotels already have a base, so hunting for new customers gets more complicated because, in most destinations, the number of customers (corporate, leisure) is limited due to the size and attractiveness of the destination.

The average revenue per customer

The second step is to sell more to each customer. A reasonable KPI measures how the average revenue per customer develops over time.

Realization rate

Customers often promise more rooms nights than they will book to get a lower rate and better terms. Therefore, the hotel needs to monitor the produced room nights compared to promised ones closely. The hotel sales team needs to farm the customer to maximize the room nights. The KPI is the realization rate (actual room nights/promised room nights).

Market penetration 

Another KPI to track is market penetration (actual room nights/destination room nights), which measures the hotel's share of the total room nights in the destination from a specific customer. This KPI will show if there is a potential to increase the revenue from each customer.

 Account penetration

Suppose the contracted customers buy other products and services than just rooms. Then, the hotel can measure the "Account penetration" (additional revenue/room revenue) and track the KPI over time to understand how well the sales team attracts revenue from each customer.

Sales engagement 

A final KPI to drive sales is "Sales engagement," which is the percentage of contacted customers for a period. The idea is that the hotel reaches all customers regularly to maximize revenue from each customer.

MICE customers

MICE customers can be once-in-a-lifetime customers or frequently returning customers. Hotels tend to send proposals on a case-by-case basis because availability, rates, and terms vary depending on the season and the day of the week. Therefore, the potential to grow revenue is to increase the number of customers and the average revenue per customer.

The number of customers 

The number of customers is as crucial within this type as the contracted customers. First, build a solid base of MICE customers by hunting for more customers. Then, track the change in the number of customers.

The average revenue per customer 

Again track the average revenue per customer and even the average revenue per reservation. The potential is to increase the revenue per reservation to grow revenue. In addition, the sales team can attract customers to return for other MICE reservations and sell more products and services to improve the order value for each MICE event.

The number of inquiries

If the hotel is top of mind, the hotel will automatically receive inquiries for MICE. The number of requests indicates the popularity of the hotel and how well the sales team hunts for new customers. Therefore, it is vital to register and track all requests, even when the hotel cannot accommodate them. Furthermore, the hotel wants to follow the demand for MICE to select the most profitable customers in the future since demand patterns tend to repeat themselves.

Win rate

Many inquiries are excellent, but how many of them the sales team wins is a more interesting KPI. Track the win rate for the number of inquiries and the value.

Response speed

Another vital KPI is how quickly the hotel responds. Measure the average time from when the inhouse sales entered the request into the hotel PMS to when the sales team sent the proposal. Hotels can also measure the time from inquiry to won/lost.

Upsell

It is all about maximizing the deal value. Measure the value at three stages: The booked value, the proposal value, and the invoiced value. The difference between the invoiced value and the proposal value will show how much more the customer bought on-site during the event. The difference between the booked and the proposal value indicates how much more the salesperson sold to the customer.

Outbound sales coverage

A final KPI to drive MICE sales is "Outbound sales coverage." For example, suppose a hotel has 200 ideal potential customers with three decision-makers for each prospect. That is 600 contacts. The sales team reached out to 300 contacts in the last period, so the coverage is 50 %. This KPI ensures that the sales team has a high activity level and thinks about future business.

Final thoughts

The sales team is the driver of revenue in hotels. Sales create the flow of income, while revenue management manages the flow to optimize the profits. The revenue stream will not be as strong without sales, which makes revenue management more challenging. Hotels that want to become successful need to apply most of the KPIs discussed above to drive the sales team to produce extraordinary results.