How to break the 'Silo Mentality' at your hotel with a successful commercial strategy
Periods of disruption often create the ideal setting for invention. With the pandemic obstructing the hotel industry’s vision for the future, that time appears to have arrived.
Most hotels cannot operate in business as usual fashion pre-COVID world. Ways of working that used to deliver success may no longer prove fruitful. Consumer behavior has changed, the competition has altered, and conventional forecasting methods based on historical analysis have been rendered relatively obsolete. The foundations which once supported year after year of stable growth have been shaken.
But with every crisis comes opportunity. To seize these new opportunities now and when a full recovery has been realized you first need to be able to spot them.
As you continue to work through the crisis and target more short-term issues, innovation across the business will likely have taken a back seat. You may be restricted by resource, budget or expertise, but being overly conservative in approach could be short-sighted – now is the moment to prioritize innovation in order to fulfill your potential for growth this year.
In order to successfully pursue new growth opportunities, you need to adopt technology solutions that differentiate you from your competitors by delivering actionable commercial insights. This will enable you to shape a unified commercial strategy and bring together what were previously disjointed teams.
The hotel industry and the 'Silo Mentality'
Traditionally, hotel commercial teams have demonstrated a ‘Silo Mentality’– a mindset in which they feel as though they belong to a specific group in their workplace rather than a collective. As a result, information, resources, metrics and strategies aren’t shared as readily (or even withheld).
This gives rise to departments that work in isolation, shun collaboration and operate on the boundary of overall business strategy, jeopardizing wider organizational goals. Not only that, but when this disconnect envelops a business, efficiency suffers. Companies and teams are unable to pivot quickly as a unit, losing out on opportunities as they present themselves.
Such a divide among commercial teams can be due to a general business sense that “this is the way it’s always been, so why change?” or more down to interdepartmental competition and disparate objectives. A prime example: sales wanting to hit occupancy targets regardless of price and revenue managers trying to maximize revenue per available room (RevPar).
To overcome satellite teams becoming further siloed at your hotel, leaders need to give their departments a unified vision, which uniformly incentivises teams in pursuit of the same desired outcome, profitability. This begins by implementing a holistic commercial strategy that integrates each team.
What is a commercial strategy in the context of the hotel industry?
A commercial strategy unites the entirety of a hotel's revenue generating teams: sales, marketing, revenue management and distribution - within one goal structure and usually under single leadership, headed by a Chief Commercial Officer or Director.
While the definition is simple, it requires a high level of executive buy-in to put into practice. There needs to be support in challenging the status-quo and contesting deep-rooted, yet outdated principles in the industry. Crucially, there should be an understanding of the value of a change in organizational structure and a strategy underpinned by data.
Your strategy needs to match current circumstances and if it is not evolving to a rapidly shifting market, you will get left behind.
Why now move to a holistic commercial strategy?
With nearly two years of COVID-19 now behind us, it has become clear that revenue management, marketing, sales and distribution teams can no longer work independently. The pandemic has piled pressure on hoteliers, with staff having to do more with less and thus the need for improved efficiency has been put under the microscope.
With little corporate or MICE travel, hotel demand has shifted mostly to leisure. Hoteliers are solely focused on what was previously (for the most part) only a small segment of their business. With less demand and supply remaining the same, competition is heightened once more. Hotels require a larger number of leisure travelers staying for increased periods of time to augment revenue.
This requires all commercial teams pulling in the same direction; such as marketing reshaping their promotions at a price point instructed by revenue management, to attract leisure travelers to your property and away from established leisure hotels.
By breaking out of the ‘Silo Mentality’ with a commercial strategy you will foster a business culture of transparency, communication, collaboration and most importantly, improved efficiency.
Improving operational efficiency and combining the unique strengths of each commercial team will put you in an optimal position to realize your property’s potential for profit.
Adopting technology solutions that consider the complete commercial cycle is a straightforward and effective approach to apply a unified commercial strategy. By supplying teams with actionable insights, based on real-time data, common strategies and goals come into view. You can then easily track progress and replicate these tactics for future success.
An evolving business model
The drive toward greater operational efficiency in the hotel industry with a highly integrated, data-first strategy shouldn’t be viewed as a seismic transformation. Instead, it should be seen as a change that was already underway among market leaders and early adopters, and has simply accelerated with the impact of COVID-19.
Since the inception of revenue management, there has been a rapid expansion in revenue generating online outlets, primarily online travel agencies (OTA) and metasearch sites. Guests are more tech-savvy and booking online is now second nature, which has led to hotels placing greater emphasis on their online presence.
Some revenue management and distribution teams have begun to work much closer with ecommerce and digital marketing, to deliver the best possible guest experience, in an effort to become more profitable.
Many global groups and chains have started the process of commercial restructuring backed by tech adoption. Smaller operators can be more predisposed to lag behind these changes due to unique challenges regarding sunk costs, resistance to change and the resource and time taken to adopt new technology.
This shouldn’t deter independent hoteliers from pursuing such a strategy. Smaller hoteliers are naturally agile and can pivot quickly with relative freedom. They aren’t bound by red tape or legacy technology, and are also equipped with the entrepreneurial skill set to take advantage of this transition. If you act now.
The future of the travel and hospitality sector is still somewhat clouded and the next 12-24 months will continue to test hoteliers. Those who are fastest to adapt will find themselves as front-runners.
Now is the time to develop a holistic commercial mindset and strategy, driven by real-time historical, current and future-looking data, which bridges the gaps between your departmental silos. By realigning your commercial ‘North Star’ you can effectively pivot to a more efficient way of working and get the best out of your teams - emerging from the crisis as a leader, and performing above the market in 2022.
But what’s the easiest way to make this a reality? The answer: the four guiding pillars of a successful commercial strategy: predict, price, distribute and analyze.