The magical request for proposal is the miraculous request that drops into an inbox and generates business for your hotel. Your sales team completes the form, delivers it into the ether, and like manna from heaven revenue rains into your coffers driving your hotel’s profitability. That’s how it happens, right?
It must be a reality because, as an industry, we have created metrics on how quickly teams must respond to each RFP. The sales staff is incented on it, measured against it, and penalized for falling short of those metrics. But what is the reality of those RFPs? Who is tracking the level of success beyond the speed to return them?
How We Got Here
To better understand them, let’s take a step back and see how we got here. In the 10 years preceding the pandemic, RFP volumes increased significantly. Additionally, more pressure was brought to bear on the need for quickness to respond. As an industry, we believed one of the first three to respond wins the business 80 percent of the time.
This is when incentives for speed started to be included in sales metrics. Combine that with an increase in the volume of RFPs and sales teams began to depend on that influx to build their pipeline. This often came at the expense of hunting for their own business. Our teams were busy—but how productive were they?
When talking with hotels, the average close rates for RFPs were between 5 to 7 percent. And here is where the fallacy of RFPs comes into play: If we believe that the first three hotels to respond win the business 80 percent of the time, then teams should be doing better at closing business.
With teams incented to respond to RFPs faster and faster (within 2-4 hours), it stands to reason your hotels are often one of the first three responders. This means in those instances where your hotel is one of the first three, your chances of closing the RFP should jump to 33.3 percent because now you are only competing against the other first responders.
Let’s examine the numbers and exactly what they should like. If your hotel receives 100 leads and 75 percent of the time it is in the top three, your hotel should be closing 25 of those leads. If you were to analyze your hotels, does your close rate look like this?
|Number of leads received||Percentage of time you make the top three||How many you should close|
Or does your hotel close rate look more like the following? The team responds to all 100 leads, and they close 5 to 7 percent of them despite where they land in response order.
|Number of leads received||Close percentage for "average" hotels||Actual closed RFPs|
|100||5 to 7 percent||5 to 7|
Most hotels likely fall into this latter chart. On a good week or month, they close 5 to 7 percent of RFPs even when they are one of the first responders. This likely means there is not much truth to the 80 percent close rate. This begs the question—is speed really the best way to respond to RFPs? Or is it finally time to push back on the process and create a better mousetrap?
In today’s resource-strapped environment, this question becomes even more important. Teams that used to have 10 people now have two and with RFPs returning, they are likely overwhelmed with meeting the speed metric. This means those RFPs are likely only getting a perfunctory response: dates, rates, and space—and this is most assuredly not putting your best foot forward.
How Do We Solve the Problem?
The first step is acknowledging we have a problem and, more importantly, that we created it ourselves. Next? It’s time to reimagine not only the RFP process but the actual sales process. If we are honest, this problem existed before the pandemic. It existed before but the volume of business was high enough to hide the cracks.
But now, the volume of business isn’t high enough. Pre-pandemic, most sales teams weren’t terribly proactive in how they acquired business. They lived on closing 5 to 7 percent of their RFPs and what walked in the door. But there wasn’t (for most hotels) a significant amount of proactive effort to attract new business.
First Things First
As an industry, we must reevaluate how RFPs are managed. Speed can’t be the greatest factor. It’s time to build processes around RFPs that reflect a deeper understanding of the account and your hotel’s ability to close the business. For example, company XYZ sends an RFP for 40 rooms, for three nights, needing 1,000 square feet of meeting space on a Monday to Thursday pattern in June.
Currently, a salesperson, assigned to the account or the segment, checks availability (maybe a few sets), runs a rate past the revenue manager, and responds to the RFP. All within the space of two to four hours. Then, they wait.
If they are lucky, they hear back from the meeting planner and learn they didn’t get the piece of business. If they are exceptionally lucky, they win the business. Most likely, they just screamed into the void and never hear anything back.
But what if the example above only ever booked luxury hotels in the past and your hotel is an upper-midscale hotel? Did you just waste precious time responding to an RFP your hotel has no likelihood of capturing? Could that time have been better used doing something proactive?
What should change? The entire process. RFPs should be handled by a single person (thus freeing up hunters to hunt). This can be a great entry-level position for the sales team.
So, what is the new process? It’s not difficult, and only requires a modicum of effort.
- Identify a single point of entry for RFPs.
- Evaluate each RFP to prioritize those with the greatest likelihood of booking your hotel. To do this, you will need a tool to help you understand the buy behavior of accounts. It’s important to know if they only use luxury hotels and you are an upscale hotel, this is not where your team needs to spend a lot of time.
- Assign a priority level. For those where your likelihood to book is low, a perfunctory rates, dates, and space response is probably appropriate. However, if this is an RFP in your wheelhouse, taking extra time to pull together a more robust offer that showcases your value relative to others, places you in a stronger position.
- Once the RFPs have been sent, assign follow-up to the appropriate salesperson. Those with the highest possibility go to a hunter, and those with a lower probability might stay with the RFP person to help them establish their own pipeline.
From this point, the follow-up belongs to the newly assigned person with the responsibility to chase that in their space.
Additionally, there are three important steps to follow after the RFPs are delivered to the ether:
- Add all RFPs to your sales and catering system (not just the ones you think you can win). This will help you better understand the volumes and accurate close rates.
- Track the probability to book in your sales and catering system. This might need to be added as a custom field but it’s worth it. When you start going through old leads as a source of business, you don’t want teams chasing lower probability opportunities. Identifying this at the point of entry will make it easier in the future.
- Track the Lost Business Reason in your sales and catering system. This needs to be specific to RFPs. Great examples of this include “chose another venue,” “no response,” etc. Understanding the underlying cause of Lost Business status will help prioritize how your teams follow up on leads as possible future opportunities.
- Implement a cadence on all Closed/Won business to go beyond the singular win to capture more wallet share (where applicable) from the account.
What To Do Next
After you have your RFP process redefined and are using fewer resources it’s time to reallocate your remaining resources to focus on hunting for business. This process will probably take a bit longer. However, as before, you will need to make sure you have a few things in place to ensure success.
- Execute the proper sales tools. Investing in the right software tools is crucial to ensure your salespeople know who is booking, and where.
- Understand your market. What is booking in your market. The best accounts you had before COVID might not be the best opportunities now. Insight into what is booking beyond your comp set is key to understanding the next item.
- Deployment based on strengths. Having a single segment or extremely narrow deployment concentrations will not be effective. This is a time for strong utility players who can do it all. Creating broader categories to cover the segments with the most opportunity is critical.
- Develop a proactive sales plan. Identify the top opportunity accounts in your market and develop a strategy to target them. Each account should have detailed action steps based on wallet share currently and how you can increase it.
- Training. Formalize training processes for how to sell, how to use the tools available to your team, and how to pivot at every stage of recovery. Leverage relationships with your vendors to facilitate training and analyze product usage to make sure you are getting the full value of your toolset.
RFPs aren’t going anywhere. Our industry must get better at how we respond to them, how we follow up on them, and how we grow wallet share afterward. By changing the RFP approach, hotels will free up important manpower to invest in the proactive selling process. Combine a winning RFP strategy with a strong selling process and your hotel will always lead the pack.
Kristi White is chief product officer at Knowland.