May 28, 2013

What is a good hotel reservation call conversion ratio?


A frequently discussed topic at industry conferences these days is call conversion ratios. With the increased emphasis on reservations sales development, companies are recognizing the importance of turning “inquiry-only” calls into bookings.

By Doug Kennedy

One of the most important indicators of success in this area is the call conversion ratio, which refers to the total number of reservations inquiries received as compared with the number of reservations booked.

Conversion Ratio = Number Of Reservations Booked ÷ Total Reservations Calls Received

“What Is A Good Call Conversion Ratio?”

In keeping with philosophies and approaches of the quality enhancemen initiatives which most companies have undertaken in some form in recent years, on the surface it would seem to be a good idea to benchmark your call conversion ratio against the competition. So the next logical question is “What is the average call conversion ratio?”

Certainly, it is entirely possible to determine a mean, or average, call conversion ratio for like-companies serving a similar market segment. It would be a simple mathematical formula. Just survey competitive companies, add-up all reported conversion ratios, and divide by the number of participating organizations. However, for reasons explored here, benchmarking against this number may be of little or no value in evaluating your company’s call conversion ratio.

Limitations in Benchmarking Your Call Conversion Ratio

Your Customer Base Impacts Conversion Ratios

Your reservations agents’ success at capturing calls is affected by your customer base. Here are some examples:

- Percentage Of First-Time Callers. Larger advertising budgets tend to generate more first-time callers who may have less commitment to booking. While the end result of well-placed advertisements is undoubtedly more overall bookings, a necessary by-product is an increase in callers who do not fit the profile of your targeted customer base. So companies with larger advertising budgets will tend to have lower conversion ratios overall.

- Percentage Of Repeat Business. The repeat customer, who utilizes the same property on a regular basis, is less likely to shop the competition and is more committed to booking on the initial inquiry call. So those companies that have a loyal customer base, and who as a consequence are likely to do less advertising, will tend to have higher conversion ratios overall.

- Business Versus Leisure Market. Leisure guests, who are spending their own money, and who tend to expect more from their travel experiences, are likely to call more companies prior to booking than their corporate counterparts. Business travelers may have more of a commitment to staying at a particular property. Perhaps their company has a special negotiated rate. Or maybe they are attending a meeting or conference which is being held on-site. Therefore, companies serving the leisure and meetings market tend to have lower conversion ratios than those serving the corporate market.

Systems For Measuring Conversion Ratios Can Bias Results

While most reservations call centers use automated systems for measuring call conversions, the majority of reservations offices are restricted to using manual systems due to limitations in technology. Regardless of how you are measuring conversions, it is important to understand that there are a number of built-in bias’ that significantly “skew” the results.

- Manual Systems. Manual systems have one advantage; they allow for conversion ratios to be calculated according to the number of “qualified” calls, as opposed to “total calls received.” “Unqualified” calls, such as those for dates that are sold-out, or calls to service an existing reservation, can be essentially thrown-out. Conversion ratios measured manually will therefore tend to track higher. However, a disadvantage with manual systems is that tracking errors can impact results.

- Automated Systems. Nearly all call centers, and a small but increasing number of hotels, can use technology to measure conversion ratios. An ACD (Automatic Call Distribution) system, or any of the long distance based call tracking systems, will indicate the total number calls received. The reservations system will track the number of reservations confirmed, allowing calculation of conversion. While automated systems eliminate human errors in tracking, they too generate biased data. For example, companies receiving a significant number of single calls that generate multiple bookings will experience higher conversions than those that rarely receive multiple bookings from one call. Also, automated systems do not allow for a differentiation between qualified and unqualified calls. Finally, in periods of peak demand, when a significant number of dates are sold-out or not available due to minimum stay restrictions, conversion ratios will appear to decrease as calls continue to flow in but the agents have no inventory to sell. This is especially significant in recent years as the lodging industry reports record levels of occupancy and employs sophisticated revenue management systems that restrict availability.

How To Measure Conversion Ratios And Benchmark Progress

Even though results are inevitability biased, it is still critical that call conversion ratios are measured. As the now-famous Hawthorne Studies showed many years ago, productivity improves when people know productivity is being measured. Here are some considerations.

- Benchmark Against Your Own Results. The best method for benchmarking your call conversion ratios is to compare results with your own internally collected data. After creating a system, and using it consistently over a period of time, your hotel or company will begin to establish a baseline and will be able to determine how your current production levels compare with “benchmarks.”

- Use Automated Systems If Possible. Because automated systems eliminate human tracking errors and extra paperwork, they represent the best means of measuring call conversions. If you are using automated systems, find a way to differentiate reservations that originate from sources other than incoming calls. (Examples include group rooming lists, contract rooms, and wholesale bookings.) Depending on your level of automation, one option might be to utilize the “source code” feature of your reservations system. Another option might be to have reservations sales agents use a separate log-in code when entering reservations that result from sources other than incoming calls. When analyzing data collected via automated systems it is also important to take into account factors that bias results as explored here.

- Use Manual Systems If Necessary. If a manual system is the only option, it still critical that call conversions are measured. To help ensure accuracy in data collection, it is essential to provide a simplified form that will be easy for transient sales associates to complete. It is also important to explain why conversions are being measured, so sales associates do not feel threatened and commit to capturing the data as accurately as possible.

- Post the results. Regardless of whether manual or automated systems are being utilized to measure call conversion ratios, it is important to post the results in the reservations sales office. This will provide recognition for superstar performances, help identify those who need additional coaching and counseling, and challenge the competitive spirit of everyone.

In summary, the reservations office or call center is not a laboratory; it is difficult to measure call conversion ratios in absolute terms. It is important to keep in mind that the primary mission of the reservations office is to sell rooms, not to record marketing data. Measuring call conversion ratios is just one tool, albeit an important one, for benchmarking the progress of your reservations sales training and development efforts.

Doug Kennedy, president of the Kennedy Training Network, has been a fixture on the hospitality and tourism industry conference circuit since 1989, having presented over 1,000 conference keynote sessions, educational seminars, and on-premise training workshops for diverse audiences representing every segment of the lodging industry.