Market Analysis and Sales Office Audit - Look Beyond the Obvious in Turnaround Situations - By Carol Verret

Reporting mechanisms always carry with them implicit assumptions about the data to measure. Audits usually follow a specific check list and the verification of the items on the check lists may not tell the entire story about how the property is being marketed and its position in the comp set.

For example, I was sent into a market to analyze and make recommendations on acquiring a distressed property for a franchise conversion and the potential for a turnaround. As I was combing through the report and data furnished by one of the large accounting firms, it was indicating that this was a distressed market – overbuilt with primarily economy product that produced declining ADRs and deteriorating demand. The first impression from the data was not good.




On the journey from the airport to the property, the drive around of the immediate area did nothing to allay my impressions that this was a distressed market with few demand generators. T he client was looking to renovate and convert the franchise to a mid market, high visibility franchise.

In the sales files the major demand generator contacts were found as well as those obtained through Economic Development and Chamber of Commerce lists. Both of these organizations take ‘positive pills’ in addition to their daily vitamins and while we love them for that, their optimism has to be verified by data.

The lists were used for focus calls to the key contacts at these demand generators. The focus calls revealed that they were will to pay much more for a mid market property and that the demand within these demand generators for mid market properties was sufficient to make that an interesting proposition. They were now booking those mid market travelers at properties in the next city as there were few if any options in the immediate area.

To verify this, I commissioned a STR report that was limited to mid market properties in an expanded market area and discovered only two -- both of which showed increasing demand and ADRs over the past five years. From this data, we were able to conduct an impact analysis and projections of demand for a new upgraded franchise in this location.

In terms of sales audits, we went into a property that predictably during the recession was underperforming. They had made a decision to keep their rates at a higher level than the comp set in most market segments. An analysis of sales department activity showed high levels of activity but the results were disappointing leading to discouragement and low morale among the sales team.

Upon further digging, it turned out that the sales department was required to make cold calls, an average of fifty a week, from a variety of lists. As long as they made the number of calls required they were rewarded for their efforts. The issue was that they were being evaluated on process not productivity. There was no evaluation on contact to closing ratios, prospecting efforts that might have yielded higher quality calls and revenue generation. The assumption on the part of the General Manager and the DOSM was that quantity of calls not quality was the key to generating increased demand. There were other issues, but this one was key.

Look beyond the obvious:

• STR Reports: Is the comp set based on an accurate product/published rate category or is there another comp set based on the ADR? Cornell published a study that during the recession that many properties’ ADR positioned them into a lower product/rate comp set based on their ADRs. ( Cornell University, 2009) Is there more than one comp set that the property should be evaluating based on specific market segments and/or ADR?


• Actual versus Potential. We have all read the disclaimer in investment prospectuses ‘past performance is not a guarantee of future results.’ This can slice both ways in evaluating a hotel. Are there going to be upgrades or future investment in the property? Does management or ownership have on ‘rose colored glasses’ in relation to the true condition of the property and the rates and demand it can drive?


• Impact Analyses. Is there new product coming into the market and how will it dilute demand? Even if it is considered be lower on the franchise food chain will it impact one market segment for all properties in the market? For example, a mid level select serve product with good visibility and high demand in the leisure drive market may impact all mid market full serve hotels in that segment.


• Sales Department Audit. Don’t just look at the numbers – look at the assumptions behind the numbers.
  
  
  
  
  
  
  • It’s not the quantity it’s the quality of calls – Who’s being called on and how are they being approached?
  
  
  • Surf the database – How many have traces? How many are just re-traced over and over?
  
  
  • Lead sources – Where did a lead come from – was it an inquiry or a lead actively developed by the sales person?
  
  
  • Sales skill set assessment – Listen to phone calls, go on appointments and evaluate the sales skills of the sales person.
  
  
  • Social media and email marketing – How well do the sales people use social media for qualifying and lead generation? Do they send out mini eblasts to select groups of customers with an offer or new information?