Home Revenue Management Back To Basics 100% Market Share Penetration is Not Good Enough

100% Market Share Penetration is Not Good Enough

Jan 14, 2002  By 

Hotels often brag that they are running 100% market share penetration.  If a property is positioned well in the market in terms of product and rate, 100% market share is what you get for opening the front door and not chasing customers out the back door with poor service.  Over and above 100% is the result of an effective sales effort.

For example, a client said to me recently that the bad news was that one of his hotels was $50,000 down for the month over the previous year but the good news was they were running 117% market share and 125% Yield index.  In markets that are declining it is still possible to run well above 100% Market Share so eliminate the excuse that declining market share is a function of a ‘bad market’.  

A simple definition of 100% Market Share is that if your hotel accounts for 20% of all available rooms in a market and you received 20% of all occupied rooms in a given time period, you achieved your fair share of the occupied rooms or 100% of your fair market share.  This appears on your Smith Travel STR reports monthly. However, you who may not have access to that report because you are in a small market that does not have enough properties reporting to Smith Travel to constitute a statistically valid competitive set or because you are not franchised or operate in a market with many independent, non-franchised hotels.  In those situations, it is still relatively easy to calculate market share if the other properties will share their occupancies or if your area has a lodging tax.

Defined this way, it should be easy to understand why I say that 100% Market Share should be relatively easy to obtain.  The other argument (excuse) that I often hear for maintaining less than 100% Market Share is that to do so would negatively impact the Yield Index or REVPAR Index.  On the contrary, the opportunity to manage the revenue in order to maximize the Yield Index occurs when a hotel is running above 100% Market Share.           

At less than 100% Market Share, it is difficult to pick and choose clients who fit your ideal client profiles (you did develop those didn’t you after reading last month’s article in this publication?).  The hotel is accepting the business that comes to it rather than developing business that will be the most profitable for the property.  

Going out and actively soliciting business is key to market share penetration.  In any given market there few, if any hotels, that have their sales people out on the street asking for the business.  The sales team will not totally know which clients fit their profiles without qualifying all of the businesses or organizations within their market.   It is just as important to understand who does not have business for the property, as it is to know who does.  A lot of time is wasted pursuing clients that have no potential for the property.  That is a result of poor qualification techniques.

Once you have identified a prospect that you think may have business for you, do your homework.  This is so much easier now with the resources available on the Internet.  Log onto what you think may be their web site address or do a search.  This will give you valuable information on the organization including the size, locations, mission statement or value proposition as well as key contacts.  In some cases, especially with associations, it will also give you information on where they held their last meeting and annual conference.  The location and the hotel that was used will tell you if they are in your ‘ball park’.

Going into an appointment prepared will impress your prospective client and give you some insight into how to approach them.  The following are some of the questions to ask during the qualifying process:

          1- Do you use hotels in the area?  I know this sounds like a no-brainer but it amazes me how many sales people go straight into their presentation only to be told that the contact doesn’t use hotels.

          2- Who in the company (organization) makes decisions about hotel selection and reservations?   How much time is spent talking to someone who has no decision-making authority?

          3- Which properties do you currently use for your transient and/or group business and how many rooms do you use over the course of a month or a year?  This will tell you a lot about their rate sensitivity, the amenities that are important to them and potential volume.

         4- Why do you use them and are you happy with the way they are serving you?  This question will give you insight into the ‘hot buttons’ or buying factors that are key to closing the account. 

        5- What rate range do you look for in selecting a hotel?  You probably have a good idea on the answer to this one from the above questions but it will tell you if they have a negotiated rate at your competitors, that is, if you know your competition’s rate structure. 

        6- Are you familiar with my hotel?  Many people in your local market may not have been to you property recently or at all.  Outside of your local market, a prospective client may have heard of your property but the information they received my not be recent.  You may have renovated or made significant improvements since they last saw your hotel.  Don’t assume that they know your product or your rate structure.

You may only have one chance to see this contact, make an impression and begin a relationship that could lead to new business for your hotel.  

The answers that you receive to the above questions will allow you tailor your property presentation to the prospects ‘hot buttons’ or the things that are important to them in making a hotel selection.  The key to a successful property presentation is to know your presentation so well that you don’t have to think about what you are going to say next and not to dwell on features that are unimportant to them.

A wise man once said that a rising tide floats all boats.  In most markets the tide is going out and not rising.  Those properties that don’t mount a skilled and effective sales effort will find themselves beached.   Attaining market share over 100% is about rising above the tide.  

About Carol Verrt

Carol Verrt

Carol Verret was the founder of Carol Verret Consulting & Training provides consulting and training services to companies and organizations in the areas of customer service and sales and marketing. 

Carol Verret passed

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