Creating a sales incentive program

Sales department is known as a revenue generated department, not only in the hotel industry but I would say in other industries too. 

Because of its function, sales department becomes a significantly important division to support the overall company performance.

Revenue generation can be defined as an activity in which a hotel will create a thorough plan on how to analyze the market situation, capture the targeted market, promote and sell its products and services to earn income.

Sales department in a hotel will usually focus on generating revenues from room accommodation, meeting and event. 

Revenues from event will be derived from both personal event such as, weddings, anniversary, engagement, birthday as well as corporate event such as, awarding night, dinner gathering, sales achievement event, etc.

Revenue target will be created for hotel sales team to be achieved which can be based on budget figures, forecast figures or stretch budget figures. The approved final figures to use as target must be realistic and achievable according to the business situation.  Another factor related to revenue will be RGI (Revenue Generation Index) positioning which can also become another target for sales team.

How about establishing a sales incentive program? The purpose of creating a sales incentive program is to stimulus and challenge sales team to achieve not only the targeted revenue and RGI positioning but also to generate more revenue above target as well as to achieve the expected level of RGI positioning.

In this writing, I want to talk about some criteria to consider when developing a sales incentive program for sales team in a hotel industry.

1. Set the target

Here, I will focus on revenue figures as the target to set.  First, decide and agree on which yearly revenue figures to use as target.  The figures can be based on budget, forecast or stretch budget as long as they are reasonable and achievable according to the market situation.

Additionally, you can also include RGI positioning as another target, for example, if your hotel RGI is currently positioned on number 3 amongst competitors, then, does the target is to achieve the number 2 position or push harder to the number 1 position by end of year.

2. Hotel target, team target, and individual target

I would presume that if you already have yearly revenue figures mean you also have a month by month breakdown of revenue in order for sales team to understand what figures to achieve on monthly basis.

Hotel target is an overall revenue target as per budget. Team target is the revenue target created for the team, for example, if hotel sales team is divided by transient sales team, group sales team, wedding sales team, etc., then team target can be determined by transient team target, group team target, wedding team target, etc.  Create revenue target for the team based on monthly, quarterly and yearly basis.

Afterwards, you can then breakdown the revenue team target into an individual target.  There are several ways on how to create an individual revenue target, for example, is an individual revenue target calculated and divided by market segment, dedicated accounts or geographical areas or other measurements.  So, each sales person will have a clear indication on his or her quota numbers to achieve.

Whatever method you plan to use, do ensure that the revenue target is divided fairly amongst each individual so everyone can remain motivated.

3. Measure the portion of each target

Decide on the weight of hotel target, team target and individual target.  This does not mean that one target is less important than another, but rather to help the sales team to focus more on which most priority and important.

4. How the sales incentive is calculated

Do consider the following factors,

• Are you going to implement monthly target and monthly incentive payout?
• Are you going to implement monthly target and quarterly incentive payout? This will allow sales person to catch up and work harder in the following month if his or her achievement on the previous month is resulted into a shortfall versus target
• What are the maximum incentive earnings, for example, a maximum of one-month salary or two months salary in a year?
• How does the incentive be paid out?
  • Is it when the hotel target reaches 100% target or above?
  • Is it when the team target reaches 100% target or above?
  • Is it when the individual target reaches 100% or above?
  • What happen if the hotel and team target have been achieved but not the individual target?
  • What happen if the individual target has been achieved but not the hotel and team target?

5. Create pay scales

Determine clear pay scales for easy calculation on pay out periods.  For example, if sales team achieve hotel target, then what is the percentage pay out of an individual sales person base salary. The same method applies to calculate the pay scale for team target and individual team target.

Lastly, don’t forget to create a P&P (Policy and Procedure) of this sales incentive program to explain the detail process as well as Do’s and Don’ts to become the guidance which will be applicable not only for sales department but also for another department concerned.

Have a productive week.