Survey Finds Hotel Executives Dissatisfied With Sales and Revenue Management Incentive Compensation Plans
Hotel sales and revenue management teams are accountable for delivering profitable business to their properties. Incentive compensation is an important motivational tool for these roles, but a new study uncovers significant employee dissatisfaction with the current state of incentive compensation plans in the hotel industry. This, in turn, poses important risks for a hotel’s sales and revenue management talent retention, motivation and overall employee engagement.
That’s the conclusion of the Hotel Sales Incentive Practices Research Study by global sales and marketing consultancy ZS and the Hospitality Sales and Marketing Association International (HSMAI) Foundation. In this study of incentive compensation design – the first of its kind for the hotel industry – ZS surveyed 522 HSMAI members in sales and revenue management within the U.S. andCanada. The goal was to better understand the structure of incentive plans today and highlight opportunities for improvement.
In ZS’s analysis of a wide range of hotels, from boutiques to international luxury resorts, only 20 percent of sales executives and 18 percent of revenue managers reported being likely to recommend their incentive compensation plans to other colleagues or peers. The majority of participants, however, were unlikely to do so for several reasons – particularly overall pay levels, low payout upside, limited performance reporting and poor plan administration.
“The magnitude of dissatisfaction across these roles may have significant consequences for the industry,” said ZS Principal Tony Yeung. “Low incentive plan satisfaction among revenue management and sales teams can translate into lower motivation and a loss of talent over time.”
“Turnover in hotel ownership and difficulties in articulating a return on investment of sales, marketing and revenue management initiatives challenge an impactful incentive plan,” said Robert A. Gilbert, president and CEO of HSMAI. “Attribution of hotel revenue performance is becoming more complex today, which contributes to the wide variety of plans that exist in our industry. With that, many need to be updated.”
Industry-wide Practices Reduce Employee Motivation
In their study, ZS and the HSMAI Foundation identified the most common plan structures, metrics and plan management approaches. They isolated common areas that impact incentive compensation plan satisfaction: overall compensation levels, differential pay for low and high performers and performance reporting topped the list as the biggest drivers.
“Survey participants who are likely to recommend their incentive plan to others tend to work at hotels that offer higher total compensation,” says Yeung. “This emphasizes the need to benchmark and ensure pay levels are competitive within both the hotel industry and broader sales function.”
“Simplicity and good communication are common denominators for success and, thankfully, there are many other non-monetary drivers of satisfaction,” added Gilbert.
About 50 percent of sales and revenue management participants also cited relatively low differentiation between top and average performers in their compensation plans – an issue that is particularly acute for the hotel industry.
“In many other industries, such as high-tech, industrial products and health care, we see a much higher proportion of incentive budget allocated to top salespeople, which often translates to a two to three times payout difference between high and average performers,” said Yeung. “For many hotel brands and individual properties, relatively low pay differentiation is limiting the impact of their incentive plans.”
Finally, ZS discovered that performance reporting also impacts plan satisfaction.
“Timely and accurate performance reporting and monitoring reinforces the value of an incentive plan, but many hotels lack strong tools to do so,” said Yeung. “Addressing this can improve plan satisfaction at relatively low cost.”
Opportunities for Improvement (Hint: It’s Not Always About Money)
ZS and the HSMAI Foundation uncovered several opportunities to drive higher plan satisfaction and performance within sales and revenue management. Higher total pay levels are one opportunity, but others exist that require less, if any, incremental investment. Additional opportunities include:
- A stronger focus on pay-for-performance to better reward, motivate and drive performance of top employees;
- Establish accurate, realistic and achievable goals that better reflect performance expectations;
- Adopt recognition programs to acknowledge the strongest contributors; and
- Develop robust tools for sales and revenue management performance reporting to enable teams to always know where they stand towards their goals and payouts.
“We think opening a candid dialogue about this dissatisfaction rate can only serve to improve satisfaction and results for hotel management and ownership,” said Fran Brasseux, executive director of the HSMAI Foundation. “Sales, marketing and revenue management teams all need to be on the same page with the same target for hotels to achieve optimal top and bottom line performance.”