New Incentive Plan Research Yields Varying Results

By LaDonna Gerhart, Executive Vice President of Sales and Marketing, Remington Hotels, and Allison Handy, Senior Vice President of Marketing, Prism Hotels & Resorts — both members of HSMAI’s Sales Advisory Board

New research from HSMAI and ZS Associates presented at HSMAI’s Hotel Management Company (HMC) Sales & Marketing Executive Roundtable in May studies the sales incentive plans for 39 different HMCs. HSMAI’s Sales Advisory Board (SAB) discussed the key findings on a recent call, including:

  • The primary metric for incentive compensation varies by position. While 81 percent of the payout for sales managers is related to their individual contribution, only 23 percent of the payout for directors of sales is related to their individual contribution, with two-thirds based on total hotel contributions.
  • The majority of incentive plans are capped. The maximum payout for directors of sales is 30 percent, a reduction of 5 percent from a previous study conducted four years ago. Sales managers’ maximum payout is also 30 percent — but this represents an increase of 2 percent from the previous study.

Quarterly vs. yearly: The SAB discussed potential implications for bonuses if there is an economic downturn, including how compensation programs may change. Members agreed that, with changing goals and market conditions, it’s important to have quarterly incentives instead of yearly. Out of the surveyed plans, 80 percent were quarterly, and 21 percent were both quarterly and annual.

Brands and vendors: Another member added that they would like to see how HMC incentive plans compare to plans from other companies, such as brands and vendors. “I think that’s really important to do as well, because we’re competing against those companies to retain our salespeople,” the member said. This was especially important because the study revealed that “one of the biggest dissatisfiers from salespeople is their confidence in the goal- and quota-setting process.”

Beyond base salary: An SAB member remarked that other industries do a better job of attracting salespeople by focusing on top-line and potential salary as opposed to current practices in the hotel industry. “The one piece of this that I think has to change is that we sell our position based on base salary,” the member said. “We hire people and say, ‘I’m going to pay you $50,000 as a salesperson and you have the potential to earn another 50 percent on top of it.’ Selling the total compensation package is what every other industry does. But in our world, we say we’re going to hire you at $50,000 base and in small print somewhere, we say you’re going to earn this much incentive.”

There is also a difference between how tech salespeople get paid and how hospitality salespeople get paid. Tech salespeople don’t get paid until the business is completed, but in hotel sales, blocks often are booked multiple years out, an SAB member noted, so forcing a salesperson to wait that long “simply wouldn’t work.”

Upcoming study: SAB members spoke an upcoming HSMAI study that focuses on management company processes for goal and quota setting which is scheduled to be presented at the fall management company round table. “We’re excited to see what that will uncover,” one member said. “I think we’re going to add another big piece of information to the toolbox.”

HSMAI shortly will be releasing its research on HMC incentive plans as a special report. Check for details.

Categories: Sales, Sales Measurement
Insight Type: Articles