Find the right KPIs for hotel sales

11 November 2020
Hotel salespersons need to track their performance to feel good about themselves and to show top management how valuable they are for the business. The struggle is to find the right measurements, to find the data and to compile the report. Here are some ideas how to make an impact.

All hotels need performance indicators to better understand how things are working to be able to take corrective actions, to validate results, to improve accountability and to calculate bonuses to their sales people. A Sales Key Performance Indicator (KPI) is a performance measurement that is used by sales teams and top management to track the effectiveness of sales activities within a hotel. Every industry has its own top  sales KPI measurements. Sales in hotels are not the same as in many other industries so hotels need their own KPIs.

Proactive and reactive sales

One concept is to look at the two types of sales modes. Proactive sales is when the salesperson actively approaches potential customers, such as corporations, organizations, government, and travel trade, to offer a contracted rate to buy room nights and/or meetings at the hotel. Proactive sales activities also include the work to renew contracts for another term. The reactive sale is an incoming inquiry as an RFP or as a reservation inquiry. The hotel needs to respond (react) with an offering, should they want to win the business.

Leading and lagging indicators

Another concept to look at is leading and lagging indicators.

Leading indicators

Leading indicators predict future conditions. They describe what actions are necessary to “lead” the hotel to successfully reach its goals. Leading indicators measure actions done by sales that will lead to reaching the revenue goals. A good leading indicator helps to focus future actions on what matters. It serves as an early warning signal. Three important leading indicators in hotel sales are

  • Number of contracts - it is reasonable to believe that a hotel with more contracts has a better chance of getting reservations than a hotel with fewer contracts.
  • Number of activities to increase production from contracts - it is reasonable to believe that a close relationship with customers would generate more revenue.
  • Number of inquiries - it is reasonable to believe that many inquiries would increase the chances of winning more business.

 

If the number of contracts, the number of activities and the number of inquiries are falling it is an early warning signal that the revenue goal will not be reached. If the numbers are going up it is an early indication that the hotel is on the right track to reach its goals.

Lagging indicators

Lagging indicators measure the production and performance that has already occurred and compare the outcome to the goal. The main reason is to gain insights to be able to adjust decisions to get back on track towards the goal. A lagging indicator is easy to measure but hard to change. Three important lagging indicators in hotel sales are

  • Revenue and room night production from contracts
  • Number of won inquiries
  • Productivity as in number of activities per generated revenue

 

If the production from contracts, number of won inquiries and the productivity are falling the salesperson and top management need to analyze why and take action. If the numbers are going up everyone could celebrate the success, but still analyze to understand the reason for the success.

Once the hotel has set the leading and lagging indicators to monitor performance the struggle starts to compile the reports.

Delivering reports

Reporting frequency

Leading indicators are the early warning system and therefore need to be followed on a weekly basis. Lagging indicators are focusing on insights and learnings and therefore need more data to be able to show the correct trends. To be able to analyze trends, room revenue and room nights need to be analyzed for full weeks rather than for months.

Measurement procedure

Most of the data needed to report the above indicators are stored in the hotel PMS. If the data is clean and well structured it will be easy to retrieve and compile the data. If the PMS does not have the requested reports, data can be copied and pasted into Excel for reporting purposes.

Target range

Each hotel has to set its own target for each indicator. It is easy to start with historical data and based on that set a target for next year. Once the target range has been set it is easy to track the indicators against the target.

Conclusion

Tracking leading and lagging indicators against targets will drive sales in hotels and reassure top management that sales is an important function in the commercial team.

Demand Calendar benefits include

Automated data collection

Reservation data is automatically transferred from the hotel PMS to Demand Calendar. Revenue and room night production from contracts is instantly available on screen or in reports. Incoming inquiries is automatically added to the sales pipeline in Demand Calendar, so the salesperson can act immediately to increase the chances of winning the business.

Sales dashboard

All leading and lagging indicators are updated and displayed on the sales dashboard to keep the salespersons on the right track towards the goals.

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