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Is 'Commercial' too difficult for hotel owners and general managers?

17 June 2021
Decisions based on experience and gut feeling do not work anymore. The consumer has changed, so the past knowledge of how to attract and capture guests is outdated. Changing consumer behavior is a hurdle for hotel owners. It might be challenging and take time to learn new skills and technology. A better way is to trust and listen to your young team members and ask for their guidance.

Owners of independent hotel groups tend to have a long and solid experience in creating attractive hotel concepts and operating hotels. Long experience also means that they have worked in the industry for many years, and it is not unusual that owners are in their prime age of 50 years old or above. Every day is a busy day in a hotel, and management works long hours to make sure guests get lovely experiences and spreading the word to others. Therefore, it is hard to keep up with all the changes going on outside the hotel.

Two areas in need of investment

Many of the current trends accelerated during the pandemic, so the challenges are now more significant than ever. Even if all functions in hotels develop fast, some of them advance at a higher speed. Two areas are critically important when the guests start coming back. The first one is touchless guest technology, and the other is the digitalization of the commercial work in hotels. Hotel owners need to update their knowledge in these two areas to make necessary investments to attract guests. Lack of investments in guest technology and the digitalization of commercial work increase the risk of losing revenue and extending the recovery period.

Digital marketing accelerated

Before the pandemic, having worked in the hotel business during stable demand made it easy to make decisions based on experience and gut feeling. Consumer behavior has changed dramatically during the pandemic, so the game of attracting guests is now very different. The restrictions during the pandemic forced all potential guests in all age groups to become digital. The only way to reach potential guests now is through digital channels. They might still call the hotel to make a reservation, but the initial search is digital. Marketing always needs to be inventive in creating content but must now also learn to monitor guest response using data analytics. The correct analysis will capture the business. Today it is vitally important to track campaign pick-up and quickly learn to adjust offerings and rates. This fast-paced process is not even possible without high-quality data, system support, and analytical skills. Hotel owners need to invest in technology, train their employees, hire freelancers and consultants or outsource.

Personal relationships take another form

Personal relationships are the foundation of hospitality, and this has not changed during the pandemic. What has changed is how the relationship is established and maintained. A younger generation is much more conscious about time and scared about spending time on the wrong things, such as travel time, commuting, manual processes, and other time-wasters. Therefore digital meetings to establish and maintain relationships are a proper alternative to physical meetings. Hotel owners need to understand that virtual meetings work well, make sure the hotel salespersons have the right equipment to make perfect digital sales calls and automate processes to minimize wasting time. That is how the hotel owner can maximize the return on investment on every single salesperson.

Impossible to cut invisible costs

Finally, many hotel owners have too much focus on general cost savings. By now, hotels are probably down to their bare bones in costs. The problem is that most hotel owners miss all the hidden expenses. The reason is that they never take these costs into their accounting systems or that they spread and mix expenses on different accounts. Customer Acquisition Cost (CAC) is such a cost, and the latest estimates indicate a cost of 15 % - 25 % of revenue. Since CAC is not visible on one line in the profit & loss, hotels more or less ignore a significant chunk of costs. Without tracking high-quality data, such as real commissions, transaction costs, loyalty costs, and costs for the commercial team, including all the activities, hotels will never get a firm grip on their acquisition costs. Hotel owners need to optimize marketing, sales, revenue, and distribution to get a sound CAC percentage of guest-paid revenue. The first step is to start to track CAC. The old saying, "What gets measured gets done," captures the essence of this problem.

Trust your young team members

Investing in knowledge, efficient processes, and technology to make the commercial team and activities more productive will generate a high return on investment. As a hotel owner, if you are not updated about all new requirements when life starts to go back to a new normal, you have to trust your younger team members that the hotel needs to make the necessary investments.

For more ideas, download the white paper "Create a High-Performance Commercial Team."

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