When It's Smart to Turn Away Business

Abstract

Most directors of marketing intuitively know that accepting some business has an opportunity cost of not being able to accept potentially more lucrative business. The decision becomes particularly critical when the prospective contract is for a large event, such as a conference. Some hotels address this matter by, for instance, requiring executive committee approval for all large contracts or all business that involves function space. The decision can be made much earlier and more simply by individual sales representatives or sales managers, however, if they analyze the tradeoffs of any potential contract. An analytical approach can be built into a spreadsheet calculation that takes into account such variables as special room rates, potential banquet revenues and costs, and revenues and costs of other services (e.g., audio-visual support). The decision is more than quantitative, however, and must take into account such factors as the effect on other guests' perceptions of the hotel if, say, facilities are jammed by conventioneers. Those effects cannot be modeled on a spreadsheet and are subject to the marketing director's judgment.