Faced with the prospect of a long, brutal winter up north, the Monarch Butterfly migrates south each year in pursuit of a more habitable climate. This process is imperative to the survival of the species. Those left behind will quickly perish after several frosts.
Long before beginning this journey, the butterfly undergoes a series of radical transformations- a process called metamorphosis. It transitions from egg to caterpillar to chrysalis to butterfly, each stage requiring it to cast off its former self in preparation for the road ahead.
As we look back on HSMAI’s Commercial Strategy Week in Dallas, it’s clear that the hospitality industry is facing a crisis of identity that is no less critical to the success of our species. As hoteliers, we must undertake a transformation of similar magnitude.
Commercial Strategy Week was comprised of two separate conferences featuring a single resonant message– now is the time for hoteliers to transition towards an integrated commercial strategy model.
Although the irony of holding separate revenue/sales and marketing conferences to discuss breaking down our siloed approach is clear, some compelling themes emerged throughout the week.
1. A few bold leaders have determined that it’s time to take a “big step forward” rather than waiting for better times to resume.
2. While everyone’s aligned that an integrated Commercial Strategy Model makes sense, the term lacks clear definition.
3. Much as the butterfly bears little resemblance to the caterpillar, we must leave our old operating model behind if we want to take flight.
Let’s explore these concepts further.
A Big Step Forward
Lori Kiel, Chief Revenue & Marketing Officer for Kessler Collection, set the tone for the conference by emphatically stating that it’s time to stop simply leaning into a difficult environment. Rather, we should seize the opportunity to “take a giant step forward.”
During the downturn, a clear divide has emerged between those companies building towards the future and those waiting for their markets to return to normal.
“Normal” does not exist, and likely never has. The pandemic has done us a favor by highlighting this, and we have a once-in-a-generation opportunity to build towards the future.
This is the year we begin building a true connection between our hotels and our customers rather than buying our way into “direct” business via metasearch.
It’s the year we enable our teams through a shared data model instead of fighting to preserve and expand our fiefdoms.
It’s the year we come back from the brink of techno-obsolesence.
Defining Commercial Strategy
Commercial Strategy. It sounds smart, sexy, and intuitive.
The problem? One in three readily admit they have no clue what it is, and the remainder think it can be solved by the “KPI to rule them all.”
In defining Commercial Strategy, it may be helpful to explore the work of the incomparable Jim Collins. He’s inspired countless industry disruptors with his theory that the most successful companies structure their operations to ensure that action in one area leads to momentum in the next.
Amazon, Intel, and Airbnb (sorry hoteliers) have all used his model to achieve preeminence in their respective fields.
As a result of this approach:
Amazon’s market cap has surpassed the GDP of most first world countries;
Intel turned every $5,000 invested in 1975 into over $9M today;
Airbnb now accounts for $1 of every $5 spent on lodging in the US, which has come primarily at the expense of hotels. (haters can email me here)
What do these companies have in common? Their operating models look nothing like ours.
It would be unfair to say that our legacy model has served us poorly. Hotels have achieved remarkable success on the back of hard work and incremental improvement compounded over millennia.
Yet our world has changed drastically, forever, as a result of the pandemic.
To avoid being left behind as winter nears, we need to change our operating model quickly.
Doing so requires that we leave our caterpillar (sales/marketing/revenue) form behind, clearing the way for a hospitality flywheel to emerge.
Under this new model, we might talk less about the simple alignment of sales, marketing, and revenue management. Instead, we might begin using different terms entirely and shift our emphasis to creating awareness, optimizing conversion, delivering value, and allocating capital.
At first glance, it can be challenging to untether these terms from our current operating model.
Creating awareness must be a marketing function, and optimizing conversion is clearly the job of the revenue manager…right?
Dig a little deeper and you’ll find otherwise.
– Marketing matches the hotel’s unique value proposition with consumers that care.
– Sales hunts for new business by hitting the phones, knocking on doors, and establishing partnerships.
– Revenue management improves positioning on third party channels.
– Operations ensures a quality of experience that will generate positive word-of-mouth.
– Marketing focuses on attracting customers likely to convert at the right price, rather than attracting the most customers.
– Sales focuses on the right groups rather than responding to lead spam.
– Revenue management prices the hotel to capture the right demand.
– Operations captures walk-ins and telephone reservations without sacrificing the guest experience.
Delivering More Value
– Marketing ensures pre-stay communication builds a relationship with the guest rather than continuing to reach into their wallet.
– Sales builds equitable relationships with quality customers.
– Revenue management ensures the hotel is priced appropriately for the value provided.
– Operations ensures all customers walk away with the feeling that every dollar spent was more than worth it.
Allocating Capital Effectively
– Marketing turns advertising on/off according to the hotel’s upcoming needs.
– Sales ensures that every concession plays a role in converting the group at the right rate rather than closing the sale at the hotel’s expense.
– Revenue management invests in third party channel relationships to complement, not replace, their direct efforts.
– Operations maintains asset quality at a reasonable cost.
While this list is far from comprehensive, you can easily see how collective action outweighs individual effort.
As you begin to tether your flywheel approach to functional objectives rather than distinct operating disciplines, you’ll witness a dramatic transformation at all levels of your organization.
Priorities will align, and your team will focus on working together instead of competing for resources and recognition.
Customer satisfaction will increase, employee retention will improve, and profitability will reach all-time highs.
And with that, my friend, your hospitality butterfly will begin to take flight.
Disclaimer: A lesser-known fact about Monarch Butterflies is that only 1 in 4 generations will survive through the winter. Likewise, it’s entirely possible that this model will need to be refined over time or customized to support your organization’s unique positioning. If you have any feedback regarding potential improvements, please email me here.
About the Author
Mike is the President and Co-Founder of Focal Revenue Solutions, which provides hospitality business intelligence systems and strategy for hotels, resorts and hospitality management organizations. Prior to founding Focal, Mike served as Director of Revenue Systems Architecture for Two Roads Hospitality.