Allocating revenue to the right hotel departments is one of the main challenges when creating packages.
Hotel directors and commercial teams are often at opposite ends when it comes to commercial initiatives.
One side worries that the other’s ideas could get out of hand; the other wants to sell and hopes the director will find a way to make everything work. The truth is that commercial initiatives can sometimes become a headache for both.
A common example is when the commercial team tries to boost sales by offering the spa or drinks with meals for free. A week into the promotion, the hotel director rightly complains that spa or food and beverage revenue has fallen, while accommodation revenue has benefited.
Introduction: it usually starts the same way
The commercial team notices a deviation in its forecast and needs to stimulate sales. The ideas start flowing, and it decides to include drinks with the buffet or free access to the spa.
Conflict: things start to go wrong
After the first stays under the promotion, the alarm bells ring. The director is furious, and the commercial director, tired of hearing complaints, abruptly ends a promotion that was beginning to work.
This is a typical result of unhealthy competition between a hotel’s operational and commercial teams. What are we here for? To sell. Competition is useful when it helps drive sales, but if it works against better results and becomes a contest without a shared objective, it makes no sense.
“Competition between hotel operations and the commercial team is unhealthy.”
One possible solution is to agree on how the promotion’s revenue will be allocated:
- Agree with the director on the cost of each service included in the promotion.
- Create a spa or extra drinks allocation to add to every booking using the promotion, so the amount is assigned to the right department.
Resolution: if the promotion sells and works, find a solution
We should not let a technical problem or poor organisation derail a successful commercial initiative; otherwise we pave the way for apathy.
To make the allocation work:
- Agree with the director on the cost of each service included in the promotion.
- Create a spa or extra drinks allocation to add to each booking using the promotion.
- Tell the reservations team, or automate the allocation through the PMS.
“Setting up allocations in the PMS can save your promotion.” #RevenueManagement
If you are not familiar with the term, an allocation is a service attached to a reservation with a set value. It lets the PMS assign part of the total room price, including all services, to specific accounts. Depending on the PMS, it may be called a package, allocation or extra. It can usually be configured to either split out or add an amount to the total reservation price.
For example:
Room + spa promotion = €150
Room = €126
“Spa allocation” = €12 per person assigned to the wellness or spa department.
The promotion can keep selling successfully, and the director can see spa revenue coming in through allocations linked to room bookings.