Find the right hotel key performance indicators for hotel sales
All hotels need performance indicators to better understand how things are working to take corrective actions, validate results, improve accountability, and calculate bonuses for their salespeople. A Sales Key Performance Indicator (KPI) is a performance measurement 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 of renewing contracts for another term. The reactive sale is an incoming inquiry as an RFP or reservation inquiry. The hotel needs to respond (react) with an offering should they want to win the business.
Leading and lagging indicators
Another concept for hotel key performance indicators is to look at leading and lagging 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 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
- The 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.
- The number of inquiries - it is reasonable to believe that many would increase the chances of winning more business.
If the number of contracts, activities, and inquiries is 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 measure the production and performance that has already occurred and compare the outcome to the goal. The main reason is to gain insights and adjust decisions to get back on track toward 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 the number of activities per generated revenue
If the production from contracts, number of won inquiries, and 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.
Leading indicators are the early warning system and must be followed every week. Lagging indicators focus on insights and learnings and therefore need more data to show the correct trends. To analyze trends, room revenue and room nights need to be analyzed for full weeks rather than months.
Most 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.
Each hotel has to set its 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, tracking the indicators against the target is easy.
Tracking leading and lagging indicators against targets will drive sales in hotels and reassure top management that sales is an essential 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.
All leading and lagging indicators are updated and displayed on the sales dashboard to keep the salespersons on the right track toward the goals.