By: William Bellis III, Senior Corporate Marketing Manager at Vizergy®, with contributions from Joe Hyman, President & CEO, and Paul Fraser, Director of Product Management
August 2, 2013
Part one of this series helps you get confidently set up for your 2014 digital marketing budget planning. It sheds light on key issues that you must consider. Part two will delve into hot topics (aka online channels) that you should heavily focus on, while part three will recommend dollar percentage allocations for said channels. Altogether, this series will provide your property’s team a valuable roadmap for planning an exceptional budget.
Part One - Important Considerations before You Build Your 2014 Digital Marketing Budget
It’s that dreaded time of year again for many of us - budgeting. The mere thought of it can be cringe worthy and headache inducing. But we’re here to help you avoid the headaches and confidently-maybe even happily-create a more accurate and effective 2014 digital marketing budget.
It’s time! Are you ready?
For many hotels and resorts, 2014 budgeting season starts now; for those procrastinators out there, it might be November. Whatever the case, it’s time to at least start thinking about your budget, particularly your digital marketing budget. It’s better to be ahead of the game, instead of scrambling to finalize your numbers and get approval later. And you don’t want to sacrifice daily operations and other priorities while you’re stressing over a last minute budget.
The Latest Industry Stats - Is your property matching up?
Has the travel industry fully recovered? Are travelers planning trips like they were prior to the last recession? Well, credible and recent industry data is the best way to tell. So here goes:
STR year over year (June 2012 vs. June 2013) data for U.S. hotel industry:
- Occupancy down 0.3%
- ADR up 3.3%
- RevPAR up 3.0%
PKF Hospitality Research, LLC on U.S. hotels in 2014
- RevPar will rise 7.7%
- Net operating income up 15.4%
- Operating expenses up 4.2%
eMarketer on mobile travel research and booking increases
- 40% of digital travelers will research trips on tablets and smartphones in 2013
- 39% have booked travel on tablets, 27% on smartphones
PhoCusWright on U.S. road travelers and mobile bookings
- Nearly 25% of adults took road trips and stayed at hotels in the last year
- 21% of last minute bookers used smartphones to shop, 13% used tablets
- Mobile leisure/unmanaged business travel bookings will more than triple from 2012 to 2014, reaching $25.8 billion
Briefly zeroing in on distribution channels, STR shows that travel shoppers often prefer properties’ direct websites over GDS and online travel agencies (OTAs). As far as total percentage of bookings, hotels are often split between property direct and OTAs, with independent hotels relying more on OTAs. However, PhoCusWright data has shown significantly more growth with bookings made through hotels’ direct sites (14%) vs. OTAs (5%).
The data from this graph (STR - “Channel Demand Share by Scale for US”) has held true for the last year plus, and will continue to hold true throughout 2014. Travel shoppers, especially for economy and mid to upper midscale hotels, prefer property direct.
So we essentially have a modest to impressive range of positive data (both recent historical and future trends) from four of the most respected research companies. If a fairly promising industry outlook is the consensus, then your property’s outlook and future performance should match or exceed it. In other words, when you benchmark your own data against the industry and against the competition, you should stack up favorably. And of course that requires a fair share of online marketing spend.
General Rules of Thumb
There are a few “old school” strategies that are still frequently practiced today. These aren’t mandatory, but can be an excellent starting point for most properties:
1. Independent Properties: Total marketing budget is typically 10-12% of total annual revenue. So $20,000,000 of revenue calls for a $2,000,000 marketing budget (including labor).
2. Branded Properties: Total marketing budget, aside from your corporate marketing support and spend, is often 2-3% of total annual revenue. This way, you’re supplementing corporate efforts with your own localized efforts, in order to outperform your comp set.
3. Both Property Types: The percentage of total marketing budget devoted to digital channels should trend toward the percentage of total annual revenue earned from digital channels. To capture more than you fair share of revenue, spend a bit more!
4. Both Property Types: Group business is undoubtedly an important part of your revenue mix and should be considered when developing your digital marketing budget. It is difficult to recommend a percentage or spend, as properties’ revenue mixes vary greatly. But consider groups as some of your most sophisticated digital buyers.
Your own data is key.
Does your staff use an analytics program? Do you store and track website performance and marketing attribution metrics both on a macro and micro level? From overall ROI to ROAS on a specific Google paid search campaign? Or what about total website conversions to click path performance? Basing future marketing initiatives on your own data-historical performance and consumer behavior within channels-is a must. So basing your future budgets on those same data derived initiatives is logical. Your team, both on property and vendor level, should regularly analyze your performance and determine where your guests come from and where they don’t come from. Segment your guests by intent/behavior, distribution channel and marketing channel. You should also study your STAR Reports regularly and diligently. Something so simple can pay big dividends when determining where to allocate money.
Now what? Well, you obviously want to spend money where you are getting the best returns. Vizergy’s digital marketing platform aggregates website performance and marketing attribution data from thousands of independent websites and suggests the best returns in the following channels:
1. Natural Search (SEO)
2. Paid search (PPC)
3. Referrer (traffic from links on other sites)
4. Direct (direct traffic to website, mobile site and tablet site)
5. Ad Campaign (email marketing, meta search, display remarketing, paid links, etc.)
6. Social (Facebook, Twitter, Instagram, Pinterest, Google+, etc.)
Does your property’s data show high returns from said channels? Have you allocated marketing funds for campaigns on emerging channels like meta search and display remarketing? When was the last time you updated your website? Is it mobile and tablet friendly? Are you outranking your comp set in natural search? More on these channels and questions in part two.
Think Local.
Even though the domestic outlook (and global outlook in most cases) is on the upswing, your local market undoubtedly plays a role in your property’s performance, as recently emphasized by Robert Mandelbaum, Director of Research Information Services for PKF. So do homework on your local area, whether it’s a major city with countless demand generators, or a picturesque destination with heavy leisure travel. Is tourism up or down? Are large local businesses investing in infrastructure? Will businesses, families and other local groups be more inclined to use the restaurants, spas and meeting space at your hotel? Is supply exceeding demand, and vice versa? All factors to consider when determining where to allocate dollars.
ADR and other key recovery related stats vary widely from area to area. Take notice of where your geographic locale stands to know how much you can rely on your local demand generators.
Outsource or In-house?
This is a constant debate for most companies in most industries. And the hospitality industry is no different. Online marketing is complex, and seems to evolve at the speed of light, from online media buying strategies, to search engine optimization (SEO) changes, to building websites for new screens. That alone makes a strong case for outsourcing to experts. Throw in the fact that you can often outsource for the same or less than it would cost you to hire and train an in-house team (do the math if you haven’t already), and it makes even more sense.
However, there are some items, especially tactical in nature, which should be handled at the property level. For instance, social media postings and review responses become more accurate and genuine when handled by staff. Remember, “Reputation management is revenue management!” And some large, global hotel companies have the manpower and resources to perform more of their marketing for corporate and franchise properties in-house.
All in all though, outsourcing is historically the popular choice for strategic hotel Internet marketing for some branded properties and most independent properties and hotel management companies. And there’s a plethora of talented hotel Internet marketing companies that produce high ROI (ROI can be tricky, but 10:1 or higher overall should be expected) and deliver the revenue you need, but do your homework… not all are created equal!
Part One Wrap/Part Two Preview
You have plenty to think about and consider before you start formulating your budget… even quite a bit outside of this article. But hopefully each of the aforementioned items put your mind at ease in a way. If you thoroughly think about each and relate them to your property’s specifics, you have a solid platform to build upon.
Look for part two in a couple of weeks in the same place you found part one. And if all else fails, visit the Vizergy blog, as it will be posted there when it’s hot off the press. You don’t want to miss it, as we’ll get more detailed, and discuss hot topics (in other words, digital channels where travelers want to find your property in 2014). After part two, you’ll not only have a starting place, but you’ll also know more than enough to be dangerous… if you don’t already.