In January, I had the opportunity to moderate the panel “Driving Excellence:
Building a Unified Commercial Strategy” at the Hospitality Sales and Marketing Association International (HSMAI) Europe’s Commercial Strategy conference. Joining me were Gianni de Fede, global senior vice president, commercial, Radisson Hotel Group; Beata Cieplik, director, commercial performance, UK & Ireland, IHG Hotels & Resorts; Riccardo Cala, director of marketing, Penta Hotels; Shumi Khan, global senior vice president, business performance and revenue management, Accor Hotels; and Jostein Brustad, vice president, sales, Thon Hotels.
We identified five myths about commercial strategy and discussed how these commonly held beliefs are holding back progress toward achieving an effective,
unified commercial strategy:
- Revenue managers are the natural choice for commercial strategy team leadership.
- You can’t get started with commercial strategy until you’ve determined the organizational structure and incentive plans.
- AI is coming for commercial jobs.
- OTAs are the least profitable distribution channel.
- Salespeople don’t sell anymore.
As our discussion unfolded, the topics naturally dovetailed, highlighting the importance of aligning people, process, technology, and strategy toward a common goal of driving profitable revenue.
Leadership Requirements
For so many years, revenue management has held the responsibility of understanding demand patterns to maximize revenue through price. One could logically assume that this role becomes the natural coordinator of commercial activity, and therefore the leader of commercial strategy. Our panel agreed, however, that commercial strategy leadership goes beyond who holds the data. This team must understand which levers can be pulled at any given time to drive the desired outcome and be able to execute together. It requires both a deep expertise in a domain, and a shared understanding of how all levers operate. Coordinating this activity is not a demand generation or demand management skill — it’s a leadership skill. The best leader for the commercial strategy team is the best leader. It’s someone who can ensure that all voices are heard, build a cohesive strategy, and hold teams accountable for following through.
Organizational Structure and Incentives
Talking about commercial strategy leadership naturally led to a discussion of commercial strategy organizational structure. Many believe that unless they define the organizational structure and incentive plans for a new commercial strategy team, the group won’t be motivated to work together. In fact some think it might undermine the very strategies necessary to driving revenue. However, this can take a long time, especially given that it’s a completely new process for most organizations.
Panel members advocated for getting started somewhere over waiting for the perfect moment. Bring a team or task force together and charge them with testing a more holistic operating model. Start with people that have the right mindset — regardless of their current organizational role — and experiment with ways of working. A team that’s willing to be creative, agile, flexible, and collaborative can find what works best for your organization.
Keep your HR partner involved, so they can be working toward the ultimate goal of officially realigning the organizational structure. Of course, others on the panel recognized that this it is not so easily accomplished, particularly in larger organizations burdened with sizable teams and an entrenched legacy structure. They’ll need to do more work to understand effective reporting structures and holistic incentives. That said, we ended with the broad advice of “just talk to each other.” An important
first step in this journey is for the siloed disciplines to learn more about one another. Worst case, you meet a new work friend. Best case, you find a win-win opportunity to improve performance!
Technology Enablers
Of course, all this concern about organizational structures and incentive plans could be moot, once artificial intelligence (AI) comes for all the commercial jobs. Or at least that was the myth that the panel dispelled.
In fact, the panel viewed recent advances in AI not as a replacement for humans, but as a key driver of commercial success. AI-enabled productivity tools will give commercial teams time back for collaboration and strategic thinking. Automating the routine, manual processes that bog teams down will ensure that scarce human resources can be redeployed to things that humans do best. Advanced algorithms can quickly surface insights from the volumes of complex, multidisciplinary data, facilitating strategic decision making.
The biggest barrier to fully realizing this opportunity is humans’ tendency not to trust the output of an algorithm, relying instead on their own gut instinct. We see this behavior across the commercial function with revenue managers reanalyzing system recommendations, marketers second guessing next best actions, and sales leaders reluctant to give up their in-person relationships to digital interactions. Change is hard, but it’s up to commercial leaders to encourage their teams to embrace the opportunity, by embracing it themselves!
Identifying the Right Business Mix
The panel also challenged myths about the commercial strategy itself, the most common being that online travel agencies (OTAs) are the least profitable channel. Important conversations have taken place over the last decade about the true cost of acquisition. Unfortunately, an unintended consequence has been a black and white belief that anything but direct business is bad. The right commercial strategy seeks to optimize business mix at any given time, based on what’s a) available in the market and b) best for the hotel.
It isn’t as simple as saying that OTAs are too expensive. Rather, you need to understand the potential of every channel along with the cost. Every channel partner you work with should be bringing you demand that you can’t reach on your own without significantly more investment. That’s what makes their commission worthwhile. This is more nuanced and harder to achieve. It involves more data, more analysis and more coordinated decision making. You arrive at the most profitable commercial strategy by looking at this problem from many angles, fully understanding the pros and cons of every demand source, not by a broad strokes rule of thumb.
Having the technology platforms to analyze the data and fostering strong collaboration among experts in distribution, sales, marketing, and revenue management is critically important to achieving this.
The Team’s Evolving Role
Our final myth, “salespeople don’t sell anymore,” was another challenge to our traditional ways of working. Our discussion centered around the ideal role of a salesperson as trusted advisor, not order taker. Sales leaders should take a strategic approach to client relationships, ensuring that they’re partnering to meet needs and solve problems. While this type of engagement with key clients is more time consuming than a transactional relationship, it will drive a lot more value for the hotel.
To free salespeople to cultivate these relationships, they’ll need to serve fewer clients and have more client facing time, which means embracing technology enablers. Sales teams must rely on technology to take care of routine, manual activities, like identifying and nurturing leads or responding to RFPs. This will be a mindset shift, and require investment, but it’s also a perfect example of a human/AI partnership, where technology supports the human doing what humans do best.
The Path Forward
Executing commercial strategy successfully will be harder than operating in our traditional siloes, requiring more analysis, deeper strategic thinking, and new approaches to revenue generation. That’s the challenge.
The good news is that you’ll have help along the way. You’ll have colleagues from other disciplines who will bring their expertise and be there to bounce ideas and test strategies. You’ll have advanced technology that can take away manual, repetitive work and provide insights to help you drive the business forward. Importantly, you’ll have the opportunity to learn new skills and new disciplines that will ultimately advance your career while also advancing our industry. I would like to thank the panel again for a robust, candid and interesting conversation!
