The difference between sales bonus plans that benefit the salespeople and those that benefit ownership can be dramatic. Shockingly, many hotels have plans that pay significant dollars to salespeople while the hotel may be missing its budget by millions of dollars. While it is essentially a given that salespeople in our industry need to be incented in order to stimulate productivity, it is less commonplace that incentive plans ultimately benefit both salesperson and owner. The challenge, and the opportunity, is to come up with a plan that sufficiently motivates salespeople to achieve maximum productivity, while absolutely connecting them to the overall financial performance of the asset. Sound complicated? It is, which is why it is crucial that we examine this in further detail.
The primary reasons sales incentive plans exist are two-fold:
1. Astute owners and managers recognize the fact that true salespeople are always motivated by the opportunity to earn more, and incentive plans can provide a reward mechanism for such salespeople to earn more as they produce more
2. Traditional owners and managers recognize the fact that throughout the marketplace salespeople receive bonuses, so in order to remain competitive and attract/retain top talent they are required to provide a mechanism to earn more.
Sales incentive plans are replete with nuances which offer both opportunities and challenges to owners/managers and salespeople alike, so it is crucial that ownership/management create the plan that best suits their properties and their long-term goals. Some important, and very basic, considerations are:
1. Each salesperson must have individual revenue goals to achieve
2. Management must have a reliable tool in place to measure the salespeople’s performance against their goals
3. Each salesperson must have defined accounts, markets, and/or segments to be responsible for, so that booking activity can be properly credited to the proper salesperson
Incentive plans that only use these basic criteria and don’t go further to address the needs of the salespeople and the hotels can cause that hotel to operate at a competitive disadvantage in its marketplace.
Let’s consider a bonus plan that goes significantly further in its makeup. For example:
a. Reward “new” business (first time in your hotel) at a potentially higher rate than “return” business (existing clients who come back for additional programs)
b. Link the salesperson’s bonus opportunity to other revenue sources beyond their traditional performance in rooms revenue.
i. Impose Catering/Banquet goals in additional to Rooms revenue goals on all applicable salespeople, to encourage the salespeople to think in terms of “total revenue,” rather than simply Rooms revenue
ii. Tie individual salespeople’s bonus opportunity to market share performance. For instance; pay the salesperson a bonus when they achieve or exceed their individual revenue goal, but apply another milestone-based bonus when the hotel gains market share during that same period of performance measurement.
iii. Attach quarterly bonus opportunities that vary from quarter to quarter, market to market. In other words, challenge your team to supplement historically “low business” periods and smooth out seasonal/event driven drops in revenue.
1. Example: northeast urban markets may apply a “total revenue achievement” component during the first quarter when weather limits their ability to push pure average rate.
2. Example: urban hotels may apply a “weekend Group revenue achievement” component during those times of year when securing weekend Group business is particularly difficult to accomplish
The list of possible “enhancements” to traditional sales bonus plans is lengthy. It is imperative that ownership/management think creatively and dynamically in order to offer a plan that truly motivates its salespeople to perform above and beyond the standard (ie. annual budget or operating plan).
Truly aggressive and productive salespeople want recognition for their efforts; a pat on the back and a token annual increase are a bare minimum, and certainly not satisfactory by themselves. Owners & Managers need to invest the time, effort, and financial resources to create a culture of “paying for performance” within their Sales organizations in order to encourage performance to previously uncharted levels.
If you’d like talk more about creating a robust sales incentive plan, or you’d like to know more about how to purchase our Sales Incentive Plan Toolkit, email me directly by clicking here.