Your commercial strategy as an evolution and not a revolution
In this episode of the Hotel Moment podcast, Karen Stephens, Revinate CMO, and Jennifer Hill, VP of Commercial Strategy at Kalibri Labs, make a case for why the hospitality industry needs to treat commercial strategy as an ongoing pursuit, rather than a giant numbers game with a rush to generate revenue. Hill offers a fresh perspective for hoteliers on how to rally each of their departments to drive revenue and satisfy stakeholders, while using commercial opportunities to give back to the local community and exemplify what hospitality is all about.
Listen in for inspiration on how you can approach your commercial strategy with intention, increasing the value of your assets, projects, and campaigns that ultimately serve your guests and everyone else involved.
Meet your host
As Chief Marketing Officer at Revinate, Karen Stephens is focused on driving long-term growth by building Revinate’s brand equity, product marketing, and customer acquisition strategies. Her deep connections with hospitality industry leaders play a key role in crafting strategic partnerships. Karen is also the host of The Hotel Moment Podcast, where she interviews top players in the hospitality industry. Karen has been with Revinate for over 11 years, leading Revinate’s global GTM teams. Her most recent transition was from Chief Revenue Officer, where she led the team in their highest booking quarter to date in Q4 2023. Karen has more than 25 years of expertise in global hospitality technology and online distribution — including managing global accounts in travel and hospitality organizations such as Travelocity and lastminute.com
Transcript
Intro/Outro – 00:00:02: Welcome to The Hotel Moment podcast, presented by Revinate, the podcast where we talk to leaders in the hospitality industry. If you’re looking for trends, perspectives, and stories from leaders in travel and hospitality, you’re in the right place.
Karen – 00:00:21: Hello, and welcome to The Hotel Moment podcast. I am your host, Karen Stephens, the Chief Marketing Officer Revinate. And today, I’m very excited to be joined by Jennifer Hill, the Vice President of Commercial Strategy at Kalibri Labs, a company known for its groundbreaking data analytics solution tailored for the hospitality sector. At Kalibri Labs, Jennifer leads with a visionary approach, harnessing the power of data analytics to redefine revenue optimization strategies for the market today. Jennifer’s contributions have been recognized on numerous occasions, earning her titles such as the Top 25 Extraordinary Minds in Sales, Marketing, and Revenue Optimization by HSMAI and the Revenue Management Professional of the Year Award in 2014. Welcome, Jennifer.
Jennifer – 00:01:05: Thank you so much.
Karen – 00:01:06: This is a special podcast because we’re actually sitting at the NAVIGATE conference in Miami, so we are live, face-to-face.
Jennifer – 00:01:12: Live.
Karen – 00:01:13: It is amazing we even have this.
Jennifer – 00:01:14: It’s my first time.
Karen – 00:01:15: The first time at NAVIGATE?
Jennifer – 00:01:16: Yeah.
Karen – 00:01:17: Oh, well, we love that. And that’s kind of amazing because you’ve been in the industry for a while.
Jennifer – 00:01:21: A long time.
Karen – 00:01:21: A long time. All right, so let’s get going on that. So can you give us a little peek into your journey in hospitality and what sparked your interest in being in this industry?
Jennifer – 00:01:30: Happy to share my story. It actually is a long one. It spans my entire lifetime.
Karen – 00:01:35: Your entire lifetime.
Jennifer – 00:01:36: So I was born into the business, so to speak, but into a family that worked in hotels, who didn’t own hotels. My mom actually was pregnant with me when she was a banquet waitress. And when I was a senior in high school, she was the assistant general manager in charge of sales, which was a hell of a title even then. But yeah, she was the Director of Sales for a long time. And I learned how to type on a Holodex admin screen.
Karen – 00:02:00: No way.
Jennifer – 00:02:00: Yeah. I learned how to file. Lots of funny stories about faxes coming back with things when she was doing catering orders for what was like green beans, almondine, or something. It was like green beans, almonds and beans —someone wrote back in the order for a wedding. So I started working for her because I was doing it for free. And I thought it was time for me to get paid.
Karen – 00:02:21: All right. I love it.
Jennifer – 00:02:23: Yeah. So that’s how I got into it. I thought I wanted to teach English and I went away to school and got my first job working part-time night audit. And now I’m here 23 years later.
Karen – 00:02:33: Wow. So you’ve worked at various hotel companies and organizations over the years. So did you start on property and move up? Or how did that go?
Jennifer – 00:02:40: Yeah, I started on property. I started with a company called Lodgian. It was based in Atlanta for a long time. Fortunate enough that I worked for that company for seven years and had a lot of growth opportunities. So I did start out as a part-time night auditor Friday and Saturday night. Really wild, crazy college years because that’s how I spent my time. Eventually moved just to regular standard front desk hours there. Was promoted into a sales coordinator role. And then I moved and transferred to another property out of state where I went back to the front desk for a little while back to sales coordinator. And it was really just when revenue management was starting to take its hold. And people really were getting to the point of understanding that it wasn’t just, a glorified reservations manager, glorified front desk manager or supervisor. And there was a revenue manager on property who went on vacation and just needed somebody to help push the buttons for a week – showed me how to do that. And then a few months later, he decided to move on, take another position and recommended me for the revenue management position. I was still a senior in college. I was working around my class schedule and had a really great opportunity to become a revenue manager a couple of months before I graduated college. And I would go in six o’clock in the morning and leave around nine for classes three days a week and come back. And I’m really fortunate they gave me the opportunity to have a flexible schedule to do that and that they were willing to work around that and take a chance on me. And that was sort of a blessing for the start of my career. I moved on to other companies that included Interstate and Highgate. And I’m now in my seventh year at Kalibri Labs. So…
Karen – 00:04:15: Right. So let’s talk about that a little bit. Kalibri Labs. And I really love your title. So I mentioned again, we’re at NAVIGATE here, which is our customer conference in Miami. And we’re actually doing a panel this afternoon all about commercial strategy. So what I think is really cool is this is something that’s just really come up. Can you talk a little bit about, A, what is commercial strategy? And B, how is it different from what we’ve thought about in the past when you talk about RevPAR? Can you talk about how we think about profitability at a hotel and how commercial strategy plays into that?
Jennifer – 00:04:46: Sure. I probably will start with the latter part of that question. Part of my professional bio says I’ve been practicing commercial strategy since before it had that name. And I think that’s an important note is that it’s really an evolution.
Karen – 00:04:57: Yeah.
Jennifer – 00:04:58: It’s not a revolution. We’re not blowing things up. We’re not starting from scratch here. You know, we’re bringing different talking points and conversations around what we have done in the past to generate revenue and to ensure that profitability. So at Kalibri Labs, we are focused on profitability. We always have been that’s sort of the start that we got in the industry and how our products grew up, and have been purpose built for what today we call commercial strategy. So we think of commercial strategy as the confluence of revenue, sales, marketing, e-commerce, digital, everything sort of under that big marketing umbrella, distribution, ops, finance, everyone, right? It’s included in this conversation where we’re looking to help hotels generate the most profitable revenue so we can drive as much of that to the bottom line as possible to improve profitability to overall improve net operating income or NOI. And that then helps our hotel owners increase asset value, which is ultimately their goal and what we’re doing in generating profit and revenue. And so RevPar is a part of the story, but not the whole story. And we really just want to empower people with data. It’s a really data-driven approach, commercial strategy. We define it loosely as an operating framework, you know, designed to help hotels improve profitability and enhance asset value.
Karen – 00:06:19: Great. So I think you mentioned all of those different organizations that play into commercial strategy. And I think for me, what’s interesting is that I’ve also been in the industry for quite a while. A long time. Anyway, but you used to think of those as being kind of isolated, you know? Revenue management is doing their thing. Sales is doing another thing. Marketing is doing another thing. And I think you kind of alluded to it there that commercial strategy is about all of those groups coming together and really talking about what is the best piece of business that we can bring into this hotel. So can you talk a little bit about how you put that framework on and how that conversation should start on a property?
Jennifer – 00:06:53: Sure. Yeah, I think the first thing is understanding what demand is out there. And that’s why when we talk about RevPAR, and we say RevPAR only tells part of the story, especially RevPAR Index. It’s giving us just one slim view of the market. This is how we’re performing on average to this group of self-selected competitors. So the most important thing around commercial strategy and working together in that teams — revenue, sales, marketing — just to keep it simple, is to really understand the full picture of market demand and the dynamic so you can understand what is out there before you decide what to go and get. Where you allocate resources, whether that’s time or talent or your actual marketing spend to those opportunities. And that starts with a very proactive, strategic conversation with those key disciplines and commercial areas. So no one is being consolidated in terms of role or responsibility. There should still be equal voices. And those people will still practice and execute in their areas of expertise and experience, but we’re going to make those decisions together. And we’re going to decide how we’re going to deploy our budget, how we’re going to deploy our time. And then the people who are the experts in those areas go off and do their thing. And the biggest challenge is getting everybody on board for understanding what metrics are going to be used to measure that success, because I think we’ve had that tension in those silos with revenue, sales, marketing in the past because we have different goals. We’re incentivized differently. And so incentivizing ourselves, understanding the “What’s in it for me?”, for your teammates, is really important.
Karen – 00:08:29: Okay. Yeah. And I think one of the KPIs or one thing I’d love to talk about more is net operating income, right? So I think we have things like average daily rate, which is a metric. That’s great. But if you’re paying a lot of money for that piece of business, that’s going to impact your net operating income. So can you just define for that? What is net operating income and how does that impact asset value?
Jennifer – 00:08:50: Sure. So net operating income is going to be near the bottom of your P&L statement, usually in that front page. I can’t remember specifically if it’s above or below EBITDA, but I’m sure you’ve heard those terms. And if you look at your P&L, it’ll be there. So that’s net operating income. It’s what we have left. It’s our profit after all of our expenses, whether they’re variable or fixed. And that impacts asset value because that’s how asset value is calculated. So, sort of a really basic standard calculation in the real estate world is asset value or net present asset value. And that’s related to your NOI or net operating income. And you can calculate that by using a capitalization rate. We often at Kalibri Labs just use an example of 8 or 8%. And so you divide your net operating income by that current capitalization rate. So we use an example, a lot of a $750,000 NOI. You take that, multiply it by 8%. You get an asset value of, I think it’s $9.375 million, something like that, right? So that’s how we look at that and just encourage you to be thinking, “This isn’t just a top-line business. It’s a bottom-line business.” This is a really unique industry where we are operating – often a franchise or an independent business, inside a real estate venture. And we have lost sight of that.
Karen – 00:10:10: Yes.
Jennifer – 00:10:11: And with the growth of institutional owners and larger family offices, and REITs, it’s necessary to understand the goals of the owner.
Karen – 00:10:19: Absolutely. And I think what’s also compelling or what really turned on a light bulb for me, $750,000, you’re like, “Wow, okay, that’s our net operating income. Fantastic”. But when you put the multiple on it, that becomes nine point whatever. We don’t have a calculator in front of us, but we know we’re in the nine million range. But if that number goes up, let’s say that now it’s $900,000. When I go to do that math again, that’s multiple millions, more.
Jennifer – 00:10:46: It definitely is exponential.
Karen – 00:10:49: Exponentially more. So this is really important. If you’re a marketer or you’re in sales or in revenue, and you start to think about the context of the asset value, so this is where commercial strategy really gets in there, then you can go to ownership and go, “Well, the reason that we need to do this particular campaign that’s going to cost us X amount of money is that we can drive this much revenue. This is the cost that this is our net operating income when we come back. And that’s going to give us a multiple.” And then the lights go on, right? Instead of the owner going, “Oh, that’s going to be 50 grand.” If 50 grand is going to yield enough to drive the asset value. Is that a good way to think about it?
Jennifer – 00:11:21: It’s a really good way to think about it. So we often use just basic calculations when we’re not working with specific hotels to illustrate that. And there’s an example where if you are keeping 83% of your revenue and you go down to 81%, that’s negatively impactful. It’s a million, over a million dollars in asset value. The net impact is 100,000, but the asset value declines by a million and a quarter.
Karen – 00:11:47: Okay.
Jennifer – 00:11:47: Just by 2%.
Karen – 00:11:48: 2%. Small.
Jennifer – 00:11:50: Right. So you go up by 3%, you make one different decision, and you go from 83%, keeping 83% of your revenue to 84% of your revenue. And that’s going to have an impact. It is really, I don’t want to say it’s nominal because I feel like that diminishes it, but small impacts make big differences when we’re thinking about those decisions and the return on that particular activity and understanding that, and why an owner may say no and understanding the information that you can bring to the conversation to make a difference.
Karen – 00:12:21: Make it informed.
Jennifer – 00:12:22: To change their mind and also let them know that you understand why they’re doing what they’re doing.
Karen – 00:12:27: That’s a big thing, right?
Jennifer – 00:12:29: Yeah.
Karen – 00:12:29: I think that’s really important, especially people who are just starting out in their careers. Like if you’re starting out in a hotel and you really love hospitality and you really like the industry, we were just talking about that. We’re here with all hoteliers. It’s so fun.
Jennifer – 00:12:42: It’s great.
Karen – 00:12:42: It’s so fun. But there are organizations out there that can help educate you. Because once you start to use this language, you start talking about net operating income, you start talking about asset valuation, then you’ve kind of grown your own value, your own brand, if you understand how to have that conversation.
Jennifer – 00:12:58: Absolutely. The development of that muscle, so to speak, is really important. And I am a hotelier at heart. And sometimes I think about what I’ve done in the past in revenue management is making more money for people who have money. Like I will be honest, but I also fully believe in hospitality as an art. And the part of it that keeps it going and makes us good community partners, and neighbors, and keeping jobs open, and providing tax dollars to our cities and our counties where we are. All of those things are so critical. And that’s what I remind myself of, too. This is a human-to-human business.
Karen – 00:13:34: Yes.
Jennifer – 00:13:34: Right? But we still have to speak the language of owners. And we talk a lot about that in training. So in order for them to continue making that investment in a hotel operation, we have to give them a reason to want to do it.
Karen – 00:13:47: Absolutely.
Jennifer – 00:13:47: It’s a for-profit business at the end of the day, but we still are providing a service. If you have a heart for hospitality, you don’t have to be like, “Oh, no, late stage capitalism.” Like, we can do it all.
Karen – 00:13:59: You can do both.
Jennifer – 00:14:00: We can help provide opportunities for work and for growth. And that professional change in myself was big, like, as I’ve kind of come up through the industry and realized there’s more at play here than just giving somebody a great experience.
Karen – 00:14:15: Oh, yeah, that’s great. That’s wonderful. It’s the art and science.
Jennifer – 00:14:17: Art and science.
Karen – 00:14:18: Absolutely. So if somebody wants to learn more about Kalibri Labs, and I know you just had a beautiful piece of a report that came out. So can you tell everybody what that is?
Jennifer – 00:14:26: Sure.
Karen – 00:14:26: And they can find it.
Jennifer – 00:14:27: Sure, yeah. So our CEO and co-founder, Cindy Estis Green’, is a prolific author. I had the privilege and opportunity to help co-author the latest edition of Demystifying the Digital Market and Guide to Commercial Strategy, which is its sixth edition. It’s really what launched our company. So it was really great to be able to support that. And this edition’s formal, official, full-length co-author was Dave Roberts, who is a professor at Cornell and has a lot of experience at Marriott, and is a real literal rocket scientist.
Karen – 00:15:00: Okay. That’s great.
Jennifer – 00:15:01: Yeah, so those are my fun facts. So Demystifying the Digital Market and a Guide to Commercial Strategy. You can download it at kalibrilabscertification.com. It is Kalibri. I’m sure that will be in the show notes somewhere.
Karen – 00:15:15: It’ll be in the show notes.
Jennifer – 00:15:16: The Kalibri Lab certification. And that will also keep you updated on an important part of that, which is the certification. So, we are partnering with industry associations like HSMAI, HFTP, HAMA, and AAHOA to launch the industry’s first commercial strategy certification. We have our first 42 certified AAHOA Con in April of 2024. And it will be available online by mid-year.
Karen – 00:15:44: All right.
Jennifer – 00:15:45: And so you better become a certified hospitality commercial strategist.
Karen – 00:15:49: There you go. You heard it here first.
Jennifer – 00:15:51: It’s a mouthful. But if anybody has any recommendations for shortening it, let us know.
Karen – 00:15:55: Let us know. All the marketers out there. All right. Well, thank you so much. My guest has been Jennifer Hill, the Vice President of Commercial Strategy at Kalibri Labs. Thank you so much, Jennifer.
Jennifer – 00:16:04: Thank you, Karen.
Intro/Outro – 00:16:05: Thank you for listening to The Hotel Moment Podcast. Make sure to subscribe wherever you listen to podcasts. And if you’re watching on YouTube, please like the video and subscribe for more content. For more information, head to hotelmomentpodcast.com. The Hotel Moment Podcast is presented by Revinate.
About Revinate
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