Especially during the economic recent downturn, an increasing number of managers are realizing that the reservations agents and front desk staff, who have often been thought of as operational employees, play a key role in sales. Many hotels have implemented transient reservations and front desk sales training along with processes for measuring transient sales effectiveness.
While these components are critical, it is also important to implement a properly structured incentive program to help further motivate the team.
The most commonly stated objection to incentives for the reservations team is that “Taking reservations is their job. Why should we have to pay them anything extra?” Conceptually, this is true. Reservations agents, or for that manner all employees, should not be given an incentive for just doing their job. However, when their actions translate directly into additional business, there is no reason not to reward them, especially when the reward itself can motivate them to raise their performance to even higher levels.
When you think about it, this same “that’s what they’re already being paid to do” argument could be made about all hotel industry salespeople. Yet the overwhelming majority of traditional salespeople are on compensation plans that include commissions and/or incentives. If the lodging industry wants its reservations agents to think like salespeople, act like salespeople, and to perform like salespeople, then we need to also compensate them as salespeople.
Depending on they type of property or call center you are operating, there are a number of key results areas that your property should be measuring anyway. Although any of these could potentially become the basis for an incentive program, it is important to tie your main incentive(s) to the indicators that have the greatest impact on profitability for your particular operation. Also, before tying any of these to incentives, make sure that you are getting reasonably accurate data.
- Total Monthly Transient Revenue Vs. Goal
- Call Conversion Ratios
- Upsells To Higher-Priced Accommodations
- Average Revenue Per Booking
- Total Revenue Sold By Agent
- Reservations Sales Mystery Shopping Scores
Regardless of what type of incentive program you implement, here’s some guidelines to make sure it is as effective as possible.
Directly Tied To Extra Revenue. Since it doesn’t make sense to reward employees for doing what they were hired to do, effective incentives reward employees for generating revenues that are above and beyond the forecasted/expected levels. Generally, executive management and ownership will support such incentives because they are only paid-out when revenues exceed the goals. Of course it is important to set goals that are challenging, yet attainable.
Many of the key revenue targets established in the budgeting process can be established as transient sales goals. For example, on-site reservations agents selling one particular hotel, the budgeted transient revenue can become the goal each month, provided that it is adjusted to accommodate any YTD trends. In other words, if the transient revenue has been regularly falling short of budget each month YTD, the transient revenue goal needs to be adjusted downward. Otherwise, with essentially no chance to achieve the incentive, the staff will quickly lose interest.
Similarly, if monthly transient revenues have been regularly exceeding budget as the year progresses, then the monthly goal needs to be adjusted upward. Otherwise, the incentive will come to be perceived to be an entitlement program and will be expected regardless of performance.
Most call centers, too, can structure incentives around metrics that reflect additional revenue for either the call center itself, if it is a for-profit operation, or for the properties being represented by the call center. For example, many third party reservations representation contracts are structured so that the fee is based on converted calls. If so, agent call conversion ratio would be an excellent basis for the incentive. (Agent call conversion is in general an excellent basis for an incentive program at call centers, since they tend to have technology-based systems for measuring it. Incentives for call conversion are generally not a good idea for individual hotels, as a very manual process is typically required for collecting the data.)
If management wants to tie an incentive into a key result area that does not directly impact profitability, such as mystery shopping scores, it should be positioned as a secondary incentive with a smaller payout, or simply presented as a contest for a fun prize. Otherwise, the organization could find itself in the unfortunate position of having to pay out an incentive when the revenues fell short of budget.
Can Reward Individual OR Team Performance. So long as they are structured correctly, incentive programs can successfully reward individual performance, team performance, or both. The main challenge with individual incentives is that if they are set-up so that employees compete with each other for the top three or so positions, over time the same employees will tend to win. While this is no doubt motivating for the superstar performers, the mid-level talent is shut out and has no reason to at least try to be the best it can be.
To work around this, just make sure that individual incentive programs are structured so that employees compete against themselves, rather than one another. So for example rather than rewarding the top three revenue producers for the month, reward every agent who improves their performance over the previous reporting period.
Generally, team incentives work better than individual incentives where:
- The reservations team is relatively small, and where agents share a significant amount of side-work that sometimes keeps them from handling general reservations sales calls.
- The technology does not provide reservations sales data by agent, such as call conversion ratios, total revenue sold, nor average revenue per booking.
- More than one call is typically required for a guest to confirm and finalize a reservation. (Typically destination resorts that sell packages including extensive recreational activities and similar options.)
Easy To Understand And Monitor. In an effort to factor in all aspects of job performance that are desirable, organizations often end up with an incentive program that is confusing even to managers and that makes it difficult for agents to determine how they are performing. Better to have several incentives running simultaneously than to try to tie them all in to one program based on a number of metrics.
Start and End On A Short Time Basis. Quarterly or annual programs don’t attract the staff’s attention until the quarter or year is about to close. By that time the outcome has already been determined and agents will consider themselves to be lucky or unlucky depending on the outcome. Although weekly or bi-weekly incentives would be preferred, monthly incentives are the most practical, especially where the staff is kept informed on a daily basis as to how they’re progressing.
Also, especially when a new incentive program is being introduced, the program should have an expiration date. Not only does this allow the management team to close any loopholes that might be allowing some unscrupulous agents to beat the system, but also reminds the agents that the incentive program is essentially a bonus and is not to be taken for granted.
Results Are Posted. Many organizations hesitate to post the results of employee incentives. The concern is usually that one employee might become envious of another’s success. While this is certainly possible, it also shows under-performers that with a little extra effort and some ingenuity, they payout can be there for anyone. Thus, the under-performing agents are encouraged to learn from and emulate the superstars.
Differentiated From Base Pay: Incentives should be paid-out on a separate check from base salary, and distributed on a day other than the regular payday. (Ideally at the monthly transient sales meeting.) This helps reinforce the idea that incentives are a reward for producing results and are not part of normal compensation. Employees can walk away with a sense of accomplishment knowing that their efforts lead to some additional cash that can be used for something besides their regular monthly bills.
Paid-Out Exactly At The Listed Amount. While many incentive programs are paid-out at an amount that varies according to revenues, others are paid out at pre-determined amounts. In this case it is important to ensure that employees actually receive the dollar amount that they were expecting. There is nothing more disheartening for a reservations salesperson than to achieve a $100 incentive and get a check for $76.50. Management has two choices. One option is to simply call the incentive a “$76 incentive.” A second option is to “gross-up,” which is to add the employee’s portion of the taxes into the program costs. With this option the $100 incentive might actually cost the organization $130, but agents will feel much more positive about their rewards.
When structured correctly, and when tied to additional revenue, a reservation sales incentive can be the final tool your organization needs to convince your agents to take a sales approach in convincing “inquiry only” callers to book a reservation during their initial call. If the program complies with the guidelines here, the management team will be very enthusiastic about paying out the monthly incentive, regardless of how much is being paid out to the agents.