By Juli Jones, CAE, Vice President, Hospitality Sales & Marketing Association International (HSMAI)
Recently, HSMAI’s Sales Advisory Board sat down to discuss 2020 budgeting and predictions for the upcoming year. Just like members of HSMAI’s Marketing and Revenue Optimization Advisory Boards (MAB and ROAB), who discussed this topic last month, SAB members have concerns about a potential economic downturn. Here are three takeaways from our conversation:
1. Economic forecasts: Several SAB members said that they look at multiple forecasts when budgeting for the upcoming year. “I’ve always had a hard time relying on them,” one member said, “because they do change.”
Another member noted that predictions are just that: predictions. “When we present budgets to owners, the second slide in our deck shows last year’s predictions about performance, and we add the actual results to show how off [the predictions] always are,” the member said. “We use that to set the stage. Frankly, nobody really knows what is going to happen.”
But even if predictions aren’t 100-percent accurate, they still can be useful to prepare for the coming year. At least one SAB member already has their company’s strategy planned out, based on next year’s forecasts. “We’re going back to basics and really trying to group up as much as possible,” the member said. “Government in a few of our markets has been very robust, so we’re trying to figure out how to diversify when that starts shutting down in the future. We’re looking at all new sources of business to try and offset some of our softer periods.”
2. Top performers: Like our MAB and ROAB, the SAB discussed if there would be any positives to a downturn — with members noting that it has the potential to make really great salespeople stand out from the crowd. “It allows you to separate your great salespeople from your order takers,” one member said. “You can double-down on taking care, in terms of bonuses and perks, of top performers that can still produce in down markets and are good at share shifting. Those top performers, we’re going to be able to really value what they do.”
Another member said: “You’re going to find out who can prospect. I personally think that the market is going to be flat – maybe up a half percent – and that’s an aggregate for our entire portfolio. In that environment, sales becomes even more critically important, and I think it becomes our opportunity to shine.”
3. Potential problems: SAB members discussed several struggles they are facing this budgeting season and what they intend to do about them. “The pressure to automate is intense, and to move more and more online,” one member said. “There seems to be a real appetite for securing resources if it’s related to technology.” The same member encouraged other SAB members to be prepared to focus on the importance of direct sales when proposing funds that go against technology resources.
Another member said a problem with budgets is that they are not hitting flow through, because ADR isn’t rising enough to account for expenses for technology, digital marketing, labor increases, new union contracts, and rising minimum raises. Another member added that wages rising to $15 in some markets will exert puts a lot of expense pressure, which can also affect NOI targets.
One SAB member said that their company has been focusing on short-term bookings instead of long-term. “The pace was just down,” the member said. “But now we’re trapped in this short-term booking cycle and trying to get everybody to focus on building that backlog beyond the next six, nine months.”