Recovery calls for online action plans
The U.S hotel industry is projected to end 2010 with important increases in two of the three key performance measurements, according to the latest forecast of Smith Travel Research (STR). Occupancy is expected to increase by 3.6% and RevPAR by 3.0%, while ADR is expected to end the year flat. In addition, demand is projected to grow by 5.7%, while supply is expected to increase by only a modest 2.0%.
This is excellent news for the industry as a whole and hoteliers are justifiably enthusiastic after enduring the long and brutal recession.
What does all of the good news mean to hoteliers?
First of all, hoteliers must realize that increased demand does not automatically translate into higher occupancy. Hoteliers must be more proactive and creative than the competition to get a “bigger piece of the pie,” i.e. increase market share and benefit more from the growing demand.
Secondly, over the duration of the recession, a number of very important developments occurred that profoundly changed inventory distribution and marketing in hospitality:
- Social Media: engaging your customers via social marketing has become not only the norm, but is expected by past, current and future hotel guests.
- Mobile Web: the mobile channel has already become an important travel planning and transaction channel in the U.S. and worldwide. Hotel guests and travel consumers in general are already mobile-ready, and hoteliers and travel suppliers have to respond adequately to this growing demand for mobile travel services.
- The emergence of the Hyper-Interactive Travel Consumer who is tweeting, texting, emailing, communicating with friends via Facebook, and commenting, often in real-time, on restaurants and hotels via review sites like Yelp and TripAdvisor. Most hotel websites are not equipped to handle the hyper-interactive consumer and read like a static online brochure.
- The Online Travel Agencies (OTAs) gained market and channel share during the recession. Example: in 2009 the OTA share of the CRS bookings for the top 30 hotel brands was 29.1% vs. 24.8% in 2008. Direct online channel helps higher ADRs and RevPARs as opposed to OTAs, which drag ADRs down.
What action steps should hoteliers implement to take full advantage of the growing travel demand? Over the next several weeks, we’ll discuss eight action steps that will help hoteliers rethink their online marketing strategies, outsmart the competition and increase online market share and bookings. Below are the first two.
Action Plan: Time to un-shrink the hotel marketing budget!
Hotel marketing budgets have shrunk considerably over the past 18 months. As shown by HeBS’ 2010 Benchmark Survey on Hotel Internet Marketing Budget Planning and Best Practices, the economic environment prevailed as a crucial factor when planning this year’s hotel budget. Even so, in 2010 hoteliers continued to shift budgets from offline to online marketing formats. In this year’s survey, 51.1% of respondents said they were shifting a portion of their budgets to online because they believe Internet marketing produces the best results (55% vs. 10% that think traditional marketing is more effective). This is a smart move considering the online channel is still the only growth channel in hospitality and the most measureable marketing channel.
In this economy, which Internet marketing formats do hoteliers believe generate the highest ROIs for their hotel?
In the past few years, website design, website optimization, and search engine optimization were the initiatives that hoteliers said brought the best returns. This year, we see that even though social media and mobile marketing only recently made their way into the hotel budget, hoteliers are expecting good results from these new marketing channels:
What Internet marketing formats do you believe produce the best results and the highest returns on investment (ROI)?
Search optimization ? Organic search
Strategic links to property website from online directories, portals
Web 2.0/Social Media formats (e.g. TripAdvisor, Facebook, Twitter, blogs, etc)
Paid Search Engine Marketing: Pay-per-click (PPC)
Display advertising (banners)
Now is the time to perform a mid-year review of the hotel Internet marketing budget:
- Review and update budget to meet growing travel demand and increase market share.
- Hold off on advertising where you cannot measure results (e.g. print) and ROAS (Return on ad spend) or those that have not resulted in good ROIs in the past.
- Shift funds to advertising formats with proven, direct, serious ROIs, e.g. SEO, SEM, email marketing, and initiatives that help the hotel engage customers and produce great indirect ROI, such as social and mobile marketing initiatives, etc.
- Re-evaluate the importance of each key customer segment and feeder market in the marketing mix. For example, if fly-in guests’ share has decreased due to airline capacity cuts and declines in corporate travel, focus on drive-in feeder markets.
Action Plan: Focus on the Direct Online Channel
The Direct Online Channel must always be at the centerpiece of any hotelier’s Internet marketing and distribution strategy. Travel consumers booking via the hotel website, i.e. direct customers, are more loyal, bring in more revenue and tend to travel more often. Across the industry, in 2010, Direct Online Channel sales will exceed 62% of total online hotel bookings. In Q1 2010, 71.7% of online bookings for the top 30 hotel brands were direct via the brand websites, while 28.3 % were via the indirect online channel, e.g., the Online Travel Agencies (OTAs).
The Direct Online Channel provides hoteliers with immediate results in the current economic environment as well as long-term competitive advantages. What should hoteliers do to improve their direct vs. indirect online channel ratio?
- Maintain strict rate parity across all marketing channels and maintain a best rate guarantee.
- Create unique product offerings and provide unique value proposition via the hotel website.
- Engage your customers directly via social media and mobile initiatives, and Web 2.0 features and functionality on the hotel website.
- Focus on marketing initiatives with proven ROI to increase market share and generate incremental revenue via the hotel website:
- Search Engine Marketing (SEM)
- Search Engine Optimization (SEO)
- Email marketing to the hotel opt-in list
- Multi-channel marketing initiatives, promotions and contests
- Social Marketing: hotel fan page and profile on Facebook, Twitter, Flickr, YouTube
- Mobile Marketing via mobile website, mobile SEO and mobile search marketing
- Strategic linking and online sponsorships.
- Launch online marketing initiatives, addressing your top business segments and feeder markets
Consider this case study scenario comparing cost per booking in the Direct vs. Indirect Online Channels:
- Direct Online Channel (Hotel Website): $12.92 per booking
(Cost per booking via the hotel’s own website, including website hosting and maintenance fees, marketing spend, campaign management fees, and Omniture analytics. Based on 530,000+ bookings in 2009 via hotel websites from HeBS’ hotel client portfolio)
- Indirect Online Channel (Online Travel Agency-OTA): $107.57 per booking (Based on average 2009 ADR in NYC = $215.14 and 2 night LOS = $430.28 x 25% OTA commission)
The difference between the cost of a Direct Online Channel and Indirect Online Channel booking is 8.3 times!
How are you rethinking your marketing strategy to capitalize on the recovery? I look forward to your comments and discussion below. In my next blog entry, I will focus on the power of multichannel marketing and the critical need to reevaluate the effectiveness of your brand’s website.