Ideas That Pay

The Problem

In autumn 2004, Harrah’s Entertainment was looking forward to its $9.3 billion acquisition of Caesars Entertainment. By the middle of 2005, the merger would give Harrah’s six hotels in the crucial Las Vegas market: Caesars Palace, the original Harrah’s, plus the Paris, Rio, Flamingo, and Bally’s.

Traditional to the hotel industry, Harrah’s had sold its group business through separate sales teams for each hotel. But Tom Jenkin, president of Harrah’s Western Division, asked a crucial question. As Mike Massari, vice president of Las Vegas meeting sales and operations, remembers it, “If you had six brand-new hotels within two miles of each other, and did not have to worry about any day-to-day obstacles, how would you organize to grow the business?”

Finding The Solution

The answer: Harrah’s formed a unified sales team that would seek to maximize meetings revenue for all six hotels. The reps would be divided only according to the three geographical markets they sold to, East, Midwest, and West, but not according to what they sold – meetings at all six hotels.

“During the six months before the merger, everyone was nervous, and nervous people do not sell well,” Massari says. So Massari and Harrah’s worked out the whole plan while waiting for the opportunity to implement it. When the merger was finalized in June 2005, Harrah’s spent only three weeks validating the preliminary reorganization plan, then rolled out the new organization in July 2005.

Centralizing sales for a multiproperty hotel business in one city has been tried before, usually without a great deal of success. “Usually, the properties operate independently and often compete against each other,” Massari explains. One reason is that top management at each hotel is often compensated on the basis of the financial performance of the individual property and thus resists the effort to maximize group revenue. So Harrah’s decided that top managers would have their compensation partly reflect performance of the merged business. Massari observes, “It was absolutely crucial to making it happen.”

Making It Work

Harrah’s kept all the meetings sales reps, but shed sales leaders, changed compensation, intensified training, and merged information systems. All of the original 45 reps stayed, but the combined team needed fewer leaders, so some left. Harrah’s has added reps since the changes were made. “This was a revenue-generating measure, not a cost-cutting one,” Massari emphasizes. Base salaries for the reps were retained, but performance pay was altered. Fully 60 percent of this pay is now based on achieving system-wide booking goals for all six hotels, while the remaining 40 percent depends on selling business for individual properties.
Harrah’s put all reps through an initial training session with Achieve International right after the merger and now does two or three days of training per year, concentrating on just three elements: consulting, uncovering needs, and benefit selling.

Although information on leads, prospects, and inventories for the six hotels had been in three separate locations, fortunately, all this critical data was on one platform. “That was a real stroke of luck.” Massari says. “It would have been much more difficult if there were three different platforms.”

Results

The first gain was that all Harrah’s reps were able to share much more information on prospects and customers than they had in the past. All 45 reps now sit next to each other and report to the same managers. Each can ask a customer a different set of questions, eliciting a different kind of information about that customer. In the past, these different types of information were not shared, or were shared very poorly. Now everyone is working on the same informative page when talking to each prospect.

Second, to meet a customer’s needs, each rep can now draw on the inventory, space, and services provided by any of the six hotel properties. Running out of room at one property thus does not prevent a favorable offer to a prospect. And utilization of all the hotels’ space is maximized. Further, reps can offer a much more flexible menu of services, for example, breakfast at one famous hotel, a reception at another, and meetings and conferences at still another, all under one master contract with one food-and-beverage minimum.

The bottom line, of course, is revenue, and here the results have been truly impressive. The six hotels together sold $267 million of business in 2005. Massari set a goal of $350 million in 2007. The team beat that number a year ahead of schedule, doing $387 million in 2006.
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