During the recent HSMAI Commercial Strategy Week, I participated in a breakout titled “Is RevPAR enough? Considerations for a Profitability-Focused Commercial Strategy”. We were divided into tables during this breakout to discuss the questions prepared in advance. As we started going through the questions, I thought it fair to ask, “How many of you are currently involved in the P&L (profit and loss) Review Meeting?” What was not expected and seemingly unfair to our industry was that of the eight revenue professionals sitting around me, only one raised their hand. I sat there absolutely stunned, wondering how we can ever get to an agreed KPI (key performance indicator) of profitability as an industry if we are not allowing everyone that can affect it a seat at that table. It was yet one more clue: while we were all at a Commercial Strategy conference, very few were part of a commercial strategy team in their current roles, whether at the corporate or hotel level.
As we define the KPIs across the hospitality industry, the ones that point to profitability continue to rise to the top as primary targets across all disciplines. It is fair then to assume that to succeed in that shared KPI; there must be shared accountability for all parties to be involved in the strategy and review of the results. So now I pose the question from the table to the industry, “Why aren’t your Commercial Strategy Teams at the P&L Review Meeting?”
The P&L Review Meeting is where it all comes together. The group attending this meeting reviews revenues versus expenses to explain the result, profit. Based solely on that understanding, it seems evident that there should be a representative from each area of the P&L report to present their results. Until now, it is traditional to have Ops Team members meet with the Director of Finance to develop the Executive Summary. While this has been “enough” to explain what happened, it has never been enough to positively elicit a change to affect the next period’s result. Unless the team that can change the strategy is present, the result will continue to be misaligned.
You can’t save your way to profit.
If you want a more effective change than cutting staff and spending, invite the Commercial Strategy team that drives the top line to the table. Empower them by showing them the costs of doing business, both above-the-line and below-the-line. Hold them accountable for more than bringing revenue in; hold them accountable for the cost of that revenue. Challenge them to change the distribution strategy to be more profitable based on the desired profitability result.
- Ask the Director of Sales, “Is there a strategy behind what type of group business we take; 3rd party intermediary versus direct?” “Do we try to sell all groups in-house during the same day similar menus to reduce food cost and labor expense?” “How do we determine what tradeshows we will attend? Have we been before, and what did we gain as a result?”
- Ask the Director of Revenue, “Is there a strategy behind how much of each transient segment we take between qualified, non-qualified, business transient, and packages beyond what the “system” deems?” “When using more aggressive distribution channels for need dates, do we fully understand the cost of that business beyond the channel cost? How does this business affect operations from housekeeping labor and incremental revenues to our reputation scores?”
- Ask the Director of Marketing, “Is there a strategy behind when we turn the faucets that fill the funnel of awareness, consideration, and conversion on and off based on demand and mix of business?” “Who determines the property level’s marketing needs, and is that person aligned with the entire strategy?” “How are you reporting return on ad spend (ROAS) for each marketing tactic and top-line initiative?”
- Ask all three of them collectively how they are working together to create one aligned strategy that drives profit to the bottom line. When all three are in alignment, it costs less and yields more.
More questions will arise from the results requiring explanation. Turn your P&L Review Meeting into a P&L Strategy Meeting by having the entire team responsible in the room, at the table, asking and answering questions that drive the following result while explaining the current result.
Knowledge is power
Having your Commercial Strategy Team at that table will prove fruitful in the immediate and long-term. Allowing this team to understand the cost of the business they bring in is undeniable to the profit strategy. While Commercial Strategy cannot solve wholly on its own, ensuring that this team is a part of these conversations can dramatically change the results. So I ask again, “ How many of you attend the P&L Review Meeting?” we will win when we get a show of hands that includes Commercial Strategy.
Next destination, Marketing Attribution. All aboard!
Originally published at https://www.linkedin.com.