IN THIS HOSPITALITY CASE STUDY, LEADERSHIP AT THE HAMILTON HOTEL COMES TO AN IMPASSE WHEN THE GENERAL MANAGER AND DIRECTOR OF SALES DISAGREE OVER STRATEGIES.
A LESSON IN TWO WHO WOULD BE RIGHT: This story appears in the book published by the Educational Institute of AH&MA, Case Studies in Hospitality Management. These cases were developed with industry experts in housekeeping, human resources, club management, and marketing who work with EI’s writers to create realistic hospitality scenarios and provide discussion points that address the fundamental issues of each cse. These cases also appear in four of EI’s textbooks: Managing Housekeeping Operations, Managing Hospitality Human Resources, Contemporary Club Management, and Contemporary Hospitality Marketing.
It was hard for Susan Fontenot to keep her mind on her driving as she made her way through the city’s early morning rush-hour traffic. She was on her way to a potentially difficult meeting with Thad Johnson, the director of sales for The Hamilton, a 500-room first-class hotel in the heart of downtown. Susan was a marketing consultant the general manager of the Hamilton, Rick Martin, had called last week, all in a dither.
“I can’t believe it,” Rick had said. “I just got this month’s profit and loss statement, and occupancy year-to-date is down 4 percent, while marketing expenses are over budget by $55,000. How can that happen? Months ago, I raised the sales-call quota for our salespeople, started sending them to every trade show in sight, and re-did all our collateral materials so they are really first class. And still, we get these numbers! I don’t know what else to do to help Thad – my background is in F&B, not sales. Will you come in and help us come up with a plan to turn things around?”
Susan knew from experience that there were two sides to every sales-are-down story, and this was no exception. When she arrived in Thad’s office and sat down across the desk from him, it didn’t take him long to get to the point. “Rick doesn’t know what he’s doing,” he said bluntly. “Three months ago, when the occupancy numbers first began to go down, he started bugging me about sales calls. I told him to be patient, things would turn around. But they didn’t turn around fast enough for him, and a month ago he raised our sales-call quotas. The only thing raising our call quotas did was raise everybody’s stress levels in the department.
“Yes, Rick mentioned raising the quotas,” Susan said, taking a yellow pad and pen from her briefcase. “Just how high did he raise them?”
“He wanted each of us to make 50 in-person client calls a week!” Two breakfast site inspections, and four other on-site visits in-between, every day. He just pulled those numbers out of the air. It’s ridiculous.”
“How many calls were your salespeople supposed to make before?”
Thad frowned. “I don’t believe in quotas,” he said. “I came up through the ranks, and I know how much I resented the director of sales I used to work for. She insisted on a certain number of calls every week, with all sorts of end-of-the-week and end-of-the-month sales call reports to fill out, and I told myself I wasn’t going to operate that way. I trust my people and I don’t look over their shoulders all the time. Besides, they’re always busy. Because we’re a first-class hotel, I emphasize personal service. I make sure the salespeople babysit their groups when they’re in the hotel. ‘Make sure the client sees you all the time and knows your care’ – that’s my motto. If a client has a problem, the salesperson is right there to take care of it personally.”
Susan smiled. “It must make it hard for your salespeople to find time to make outside calls.”
“Well as a matter of fact, it was pretty rare for us to make an outside call before Rich handed down his quotas,” Thad replied. “I never had quotas before; our hotel sells itself. Everybody knows what we stand for and what we offer. If someone wants to go first-class in this city, this the place to stay.”
“How close are your salespeople coming to actually making 50 calls a week?”
“To Be honest, I don’t know,” Thad said. “I just told them to do the best they could. Like I said, I don’t believe in quotas and paperwork and I’m hoping Rick won’t push it.”
Susan made some notes on her yellow pad.
“Besides,” Thad went on, “we’re too busy going to trade shows! That’s another thing Rick insisted on. Just between you and me, I think it’s because he enjoyed going to the National Restaurant Association show in Chicago every year back when he was an F&B director. Now we’re constantly packing and unpacking out trade-show booth and making travel arrangements to travel hither and yon. Most of the time these trade shows don’t generate any business. People jut pick our booth clean of brochures – and that’s another thing!” Thad grabbed a brochure sitting on his desk. “Look at this thing! Ten pages, full color! Back at the beginning of the year Rick insisted that all our collateral materials be in color, so he scrapped everything except for this brochure and a 30-page banquet menu collateral piece we send out to prospective banquet clients. That used to be a two-color piece, but it’s full-color too. He said a first-class hotel should have first-class collateral. That sounds nice, but I don’t have to tell you how expensive full-color stuff is.”
“Full-color costs money, no question about it,” Susan agreed.
“And while we’re on the subject of expenses, how fair is it that every manager in the hotel signs for meals and drinks and it gets charged to my department as ‘advertising and promotion?’ If they are legitimately with a client, that’s one thing. But they eat at the hotel because they don’t want to eat in the employee break room, or it’s raining outside, or they are short on cash this month – they even treat their spouses to dinner, and they sing the bills like it’s a management perk or something. And it gets charged to marketing. If Rick is so concerned about marketing expenses, why doesn’t he do something about that? I’ve complained and complained about it.”
“I’ve seen that privilege get abused at other hotels, too.” Susan nodded. “How do you keep track of the other department expenses, like office supplies, sales trip expenses, and so on?”
“Oh, I just wait for the profit and loss statement to come out at the end of the month and see where we are. If we’re over one month, I try to cut back the next.”
Susan made a note, then tapped her pen on her chin. “Let’s backtrack for a moment. I’d like to know more about your staff – Rick didn’t go into details with me. How many people do you have and what’s their experience level?”
“I’m lucky – when I came on board two years ago, I inherited a staff of four veteran salespeople. Two had been with the hotel for five years, the other two had just come on board but had worked for other hotels for a number of years.” Thad smiled. “I didn’t have to do any training or coaching. I was able to just do my job and let them do theirs.”
“Susan smiled. Sounds like you’re pretty confident in their abilities. Have you ever gone out on a call with them?”
“No, why should I?”
“Well, because you’re so confident in them, I was wondering if you had actually seen them in action, selling to a client.”
“No. Up until this year, we’ve always made our numbers, and, like I said earlier, we didn’t make many outside sales calls anyway. People know our hotel’s reputation. Most of our clients call us.”
“So, you don’t provide your salespeople with sales targets to meet or action plans to follow?”
“Not really. Like I said, they’re busy fielding all the incoming calls and taking care of clients. They’re good people and they know what they’re doing.”
“I see.”
Susan made some more notes on her pad. “Well, as you know, Rich has asked me to make some recommendations to help the hotel raise its occupancy numbers. Four percent doesn’t sound like much, but I’m sure you are as aware as anyone that, with your hotel’s average daily rate and budgeted occupancy levels, a 4 percent shortfall comes out to about $700,000 below budget for the year. I have some preliminary notions what might be helpful, but do you have any ideas for turning things around?”
Thad leaned back in his chair and thought for a moment. “To tell you the truth, I think Rick overreacted to the situation,” he said. “Of course, I’m willing to take a look at any ideas you come up with, but I think the numbers would eventually have come up on their own if we had just stayed our course. To my mind, personal service is the key to this market. A continued emphasis on really serving our clients once they get to the property will keep them coming back, and work-of-mouth from happy clients will keep our phone ringing.” Thad paused. “I think Rick’s directives are doing more harm then good, so my suggestions would be to call off the trade shows.”
Susan nodded and returned her pad and pen to her briefcase. “You have a point about the trade shows,” she said “Rick wants to bring marketing costs down and increase occupancy. From my discussions with you and Rick, I think I’m going to concentrate on three marketing expense areas: the trade show issue, the hotel’s collateral materials, and the advertising and promotion expense account. On the occupancy side, I’m going to look at ways to help you determine whether your salespeople have the sales skills they need to meet the booking objectives, and I’m probably going to recommend, that you give your salespeople more direction as to where you want them to focus their efforts.”
Susan rose and shook hands with Thad. “I know it can be difficult to have an outsider come in to look at what you’re doing, but my job really is to just try to be helpful and look for ways to make sales targets easier to make. I’m going to schedule a meeting with both you and Rick sometime next week, and I hope you’ll be happy with the recommendations I come up with for you.”
El Suggests…
The case was developed in cooperation with Lisa Richards of Hospitality Softnet, Inc., a marketing resources and support company in Boston.
Discussion points from The Hamilton Hotel center around three areas:
- What are some recommendations Susan Fontenot can make for decreasing the hotel’s marketing expenses?
- What are some recommendations that Susan can make to Thad Johnson to help him evaluate his staff’s sales skills?
- What are some recommendations Susan can make to Thad to help him give his staff more direction to ensure their efforts are focused and targeted.
To correct escalating marketing expenses, Susan should encourage Thad to keep better track of his department’s expenses by using a purchase order system. Susan can make recommendations concerning trade shows, collateral materials, and advertising and promotion expense account abuses.
To help Thad better evaluate his staff’s sales skills, Susan can recommend that he have someone “Shop” his salespeople. Or he could pose as a client and ask the salesperson to sell him. Lastly, he could go on sales calls with them.
Susan needs to find a happy medium between Rick’s unreasonable 50 personal sales calls a week and Thad’s no-quota system.