REPORT FROM THE U.S.—Calculating the true cost of employee turnover can be difficult in the best of circumstances. Making the same determination for revenue managers, a specialized position drawn from a rather shallow talent pool, can be downright impossible, experts said during a webinar Tuesday.
That’s why hotel managers and directors of revenue management must take proactive measures to ensure they have in place succession planning and a strong revenue culture, according to panelists Tuesday during a webinar titled “Help! The cost of turnover in revenue management is killing my business,” hosted by HSMAI University, Hotel News Now and its parent company STR.
Nicole Young, corporate director of revenue management and sales for sbe Entertainment Group, talked to a number of GMs, hiring managers and other hotel executives prior to the webinar about turnover in the revenue management position, and she said a common theme quickly emerged.
“Turnover costs are really sneaky, good help is hard to find, and it seemed that nobody was particularly excited when being faced with having to source and recruit new revenue management talent,” she said.
Across all U.S. industries, the average cost of replacing any position can be as much as 150% of that position’s salary when all is said and done, Young said. That includes exit costs such as severance, outplacement and legal fees, as well as replacement costs such as sourcing, recruitment, screening, relocation and signing incentives.
For the hotel industry, average replacement costs are closer to 30%, she said, citing a study from the Cornell University School of Hotel Administration.
Hotel managers must consider other hidden costs as well, such as the toll turnover takes on a hotel’s staff, strategy and future, said Jenny Moore, corporate director of revenue management for Commune Hotels & Resorts.
When a revenue manager leaves, that means others within the organization are called upon to fill the void. They often must self-train for the task, diverting their energy and focus from their normal duties to serve as a stopgap measure in a highly specialized discipline. And often these fill-ins make mistakes that cost the hotel lost revenue, Moore said.
There’s also a loss of productivity from managers who must now focus on hiring for the new position, she said. The overall result on the company can be a drain on morale.
Losing a revenue manager also impacts the hotel’s strategy, Moore continued. Gone is the surgical examination of business mix and group demand; business is instead booked on gut feeling.
The loss of a revenue manager can also mean the loss of a long-term outlook, as other staff members scramble to fill the next few days or weeks as opposed to the next few months and years that will serve as the foundation of future success, she said.
“It becomes a very narrowed-down look at revenue management, where the property is simply trying to maintain inventory controls,” Moore said.
“There’s the loss of organizational system knowledge. A lot of times your (director of revenue management) is your system expert … and there’s just knowledge that they’re going to walk out the door with,” she added.
Filling the void
Allowing for a seamless transition from one revenue manager to the next requires careful planning well before an employee gives his two weeks’ notice, panelists said.
“Start strengthening the bench now,” Moore said.
Succession planning is key for every position within an organization, let alone the revenue manager. It can be raised during the formal review process, Moore said. She suggested making it one of the revenue manager’s goals.
It can be presented as, “Who’s covering when you’re going on vacation?” Moore said.
She also advocated making a revenue-management playbook.
“This could be creating a document with contacts, logins, who’s who to contact in certain situations. … I personally like to create instructions tabs with any reports I have to do in an Excel format. If I have to manually do a report, I’ll do a step-by-step instruction sheet,” she said.
Young stressed the importance of maintaining an active local network of potential replacements.
“Keep your options open. Are we waiting to maintain or make new relationships with local revenue management until we have an opening, or are we fostering a good, friendly culture where we know the people who are in our neighborhood and we can reach out to them when we have a position open?” she said.
Perhaps the most important preventative measure, however, is maintaining a strong revenue culture, said Ted Rusch, director of revenue for Yotel.
“At the end of the day, turnover is change, so we have to manage change. I want to lead from the front and manage change,” he said. “The ideal culture will propel the organization forward, devoid of senior leadership, regardless of personnel.”
Revenue management should not be executed in a silo, he said. All hotel stakeholders, from GMs to sales directors to front desk associates, should be aware of how day-to-day decision making impacts total revenue on property. The revenue manager in this case must be a leader who can effectively communicate that impact and align behavior around common goals.
Once that buy-in and level of awareness is achieved, it’s much easier to address the revenue management void during the interim, Rusch said.
“Culture is one of the most important strategic things that you can do for your property in both maintaining a revenue manager, lowering turnover and mitigating cost if turnover should occur,” Moore said.