The Smart Hotelier’s Guide to 2012 Digital Marketing Budget Planning
By Max Starkov, Adjunct Professor NYU Tisch Center for Hospitality, Founder & Director at NextGuest Digital
2012 is quickly approaching and budget-planning season is upon us. Whether you are just starting to think about where you are going to allocate your dollars, or are moving towards finalizing your budget for next year, this is the perfect time to take a step back, review the state of the industry as well as your property's successes and failures in 2011, and prepare for a year of driving the most revenue ever through your most cost-efficient channel – the hotel website.
Recapping 2011 and Preparing for 2012
Despite the current rocky state of the economy, the hotel industry enjoys a relative robust travel demand. The U.S. hotel industry reported increases in all three key performance metrics for second-quarter 2011 in year-over-year measurements, according to data from Smith Travel Research (STR). The industry's occupancy increased 4.5 percent to 63.4 percent, average daily rate rose 3.5 percent, and revenue per available room was up 8.1 percent. STR projects that all three key performance measurements will realize increases for the year as a whole.
So what are the main criteria hoteliers should use when determining their 2012 digital marketing budgets?
Sources of Business:
The 2012 hotel digital marketing budget cannot be developed in isolation from the dynamics of the marketplace. It should be a direct reflection of the sources of business:
- What are your main distribution channels?
- What are your property's main feeder markets?
- What are your property's main customer segments: transient corporate or leisure, corporate group, meetings, social events, family travelers, etc.
Here are the main distribution channels in hospitality in the U.S.
- Rapidly Growing Online Channel (+25% in 4 years)
- Decreasing GDS Travel Agent Channel (-25% in 4 years)
- Decreasing/Flat Voice Channel (-11.1% in 4 years)
What do these distribution trends mean for hoteliers? The hotelier's 2012 marketing budget needs to focus on the online channel, the only growth channel in hospitality.
Not all online bookings are created equal
Online hotel bookings are on the rise, but are they coming from the property's website or from the OTAs? Since 2008, the OTAs have increased their market share by 45%, measured as contribution to CRS bookings for the top 46 hotel brands! In 2010 alone, the true cost of OTA distribution to the industry was $2.5 Billion (STR).
What do these distribution trends mean for hoteliers? The 2012 digital marketing budget needs to focus on the Direct Online Channel to allow hoteliers to "Own the customer", stay competitive and reverse the troubling trend of the OTA's growing market share.
Of all hotel digital marketing initiatives in the HeBS Digital 5th Annual Benchmark Survey on Hotel Digital Marketing Budget Planning and Best Practices survey, hoteliers believe that website optimization produces the highest ROI. Social media however, introduced as its own category this year, was not far behind at 43%. This shows a dramatic change in the perception over the past few years of how much revenue Facebook, Twitter, etc. really generate. While social media is not a distribution channel, it is increasingly becoming an important customer engagement channel. Whereas in the past hoteliers were skeptical as to whether social media should even play a role in their Internet marketing strategy, today it is one of the fundamentals.
**In 2011 Social media was separated from Interactive/Web 2.0 for the first time. All years prior these initiatives were combined in this question.
Most respondents (34.5%) expect to achieve 11-15 times ROI from their Internet marketing campaigns in 2011, as they should if they are following best practices.
The hospitality industry is facing major challenges
It has been 16 years since the advent of the Internet distribution channel, the most cost-efficient hotel distribution and marketing channel ever. While we have come a long way, the many challenges of the past three years – such as the emergence of the hyper-interactive traveler, social media, and mobile marketing - have made it difficult for many hoteliers to keep up.
What are the main challenges facing the hospitality industry over the next 24 months?
- Continued Shift from Offline to Online
- Significant Increase in OTA Market Share
- Social Media: Mainstream Customer Engagement Channel
- Mobile Web: Exploding Distribution Channel
- Meet Your New Guest: the Hyper-Interactive Consumer
- Channel Convergence and Need for Multi-Channel Marketing
Here are some of the biggest developments of 2011 that should be kept in mind when preparing the 2012 hotel digital marketing budget:
- Multi-channel marketing has become the norm and the foundation for a smart direct online channel strategy. In this environment, the hotel website, SEM campaigns, email marketing, social media presence, mobile, etc. have a symbiotic relationship. Unleashing a marketing promotional campaign simultaneously across all available marketing channels produces a compound effect and far greater returns than each individual marketing format.
- Big Changes in SEO Best Practices: Google "Panda", the next evolution in Google search algorithms, is more than ever based on relevancy and quality of web content. Hoteliers must take these updates into account and budget for in-depth website optimizations and redesigns for next year.
- Another Big Year for Mobile Marketing: The amount of users researching travel is expected to grow 51% next year, and by 2012 18% of mobile users will also book from their smart device (Google). Many hoteliers are still behind and have not invested in a mobile website or any mobile marketing efforts.
- Travel is Social: There are more Facebook profile pages than there are web pages (Facebook). As more and more hotels launch Facebook pages with custom tabs, twitter accounts, YouTube channels, etc., hoteliers need to focus more energy on differentiating themselves while also providing value to their audience. Also of note – social networks will capture 11% of online ad spending in 2011 (eMarketer), which further proves your hotel will need to be as creative as possible to cut through all the noise.
- Flash Sale & Group Buying Sites: While popular in 2010 and the early part of 2011, flash sale and group buying sites have proven to be detrimental to the hotel industry from a pricing and branding perspective. Hoteliers must preserve rate parity and their brand by utilizing the most cost-effective distribution channels, instead of using desperate measures to sell inventory.
Listening to Your Peers: How Are They Allocating their Budgets?
In the 5th Annual Benchmark Survey on Hotel Digital Marketing Budget Planning and Best Practices, hoteliers responded that their 2011 Digital Marketing Budgets were Higher than 2010. Hoteliers increased their website re-design/design (20.2%) and website optimization (13.7%) budgets this year. Even so, over 73.4% of hoteliers reported that the economic environment and overall budget constraints continue to affect Internet marketing budget planning (30.3% and 43.1% respectively). The good news is that for 74.5% of respondents, their 2011 Internet marketing budget was higher than in 2010.
Here is how hoteliers spent their hotel digital marketing budgets over the past few years, and what they project to spend in 2011:
Overall this year, hoteliers made more room in their budget for website re-designs and optimizations, SEM/paid search and SEO, mobile marketing and social media initiatives. The numbers also showed that many hoteliers are seriously budgeting for hotel website redesign/designs.
Building Your 2012 Hotel Digital Marketing Budget
While hotel distribution has changed quite dramatically over the past 16 years (since the advent of the "commercial" Internet), the fundamentals of hotel distribution have not changed. As HeBS Digital has been saying for years, hoteliers need to continue to focus on the distribution channels that are cost-effective, generate the most bookings, protect rate parity and price integrity, and reach their key customer segments.
What line items should you include in your 2012 hotel digital marketing budget in order to drive as many revenues as possible through the direct online channel?
Here is a quick snapshot of how you should allocate your 2012 budget:
Hotel Website Re-Design & Optimization
All hotel digital marketing starts and ends with the hotel website, the hub of your multichannel marketing efforts. What elements make up an effective website? Don't scrimp when it comes to the essentials – saving $5,000 upfront may lose you hundreds of thousands of dollars in revenue in the future. Poor decisions include websites with little content (15 pages or less), no RFP forms, no Best Rate Guarantee form, only half of the pages optimized for the search engines, etc.
As mentioned above, the new Google Panda update has raised the bar for hotel websites. This major update demands not only deep and relevant content on the hotel website, but unique and engaging content. Your old and tired 2-3 year old website cannot possibly meet these new requirements and most probably has "fallen off the cliff" i.e. has already experienced deteriorating search rankings.
Don't underestimate the power of a hotel website that offers interactive elements (see examples below), optimized content, updated imagery and videos, and generally is up to date with 2011 best practices. You may have a highly creative social media strategy, the most targeted SEM strategy, and an email marketing strategy that is incredibly effective in driving traffic to your site – but are your website visitors converting once they arrive? If your website is over 2 years old, it is time for a redesign. If it is newer than that, include a website optimization and enhancements to the site in your budget this year.
Recommended share of the 2012 hotel digital marketing budget: 15%-25%
While online video was an important part of the hotelier's strategy in 2011 – Google even branded the year to be "The Year of Video" – for 2012 it is even more essential that video marketing be in the hotelier's arsenal. Videos excel at selling your hotel product and engaging consumers better than any other medium. Also important in 2012: consumers will be watching video even more while on the go, on their iPhones, Android devices, tablets, etc.
Develop hotel videos presenting hotel services and amenities to your different customer segments, post them on the hotel website and YouTube, and send them out via MMS messaging. Due to the shortened attention span of today's traveler plus mobile distribution restrictions, best practices require not a single 30-minute video, but shorter 30- to 60- second videos illustrating different aspects of the hotel product: weddings, spa, entertainment, etc.
Additionally, advertise your videos on YouTube (an easy and cost-effective marketing tactic), and make sure your videos can easily be found on your hotel's website, its Facebook page and from your email newsletters.
Recommended share of the 2012 hotel digital marketing budget: 3%-7%
The hyper-interactive, hyper-connective consumer has high expectations for a hotel website. Hoteliers must align the interactivity of the hotel website with the behavior of today's travel consumer – who will give your hotel website just a few minutes to capture and keep their attention once they arrive.
Interactive initiatives such as sweepstakes generate buzz, increase traffic to the site, encourage repeat visits, increase time spent on the hotel website, and ultimately increase bookings. Considering participating in a flash-sale or group-buying site? Don't! Save thousands in lost revenues and conduct a coupon or a value-add sale on your own site or landing page, with a countdown ticker, sign up form, and forward-to-a-friend functionality. These initiatives also may serve to build your email and mobile-opt in lists for future marketing efforts.
It's important that you allow your website visitors to share the content on your website. Additional examples of interactive initiatives include a calendar of events, blog on the hotel website, customer review form functionality, live chat, surveys, and Facebook Like/Tweet/Google +1 Buttons.
Recommended share of the 2012 hotel digital marketing budget: 4-6%
Search Engine Optimization (SEO)
In 2011, many hoteliers' websites were hit hard by the Google Panda updates. This, along with ever changing algorithms by search engines to improve the user experience, has been a change in the way that websites approach their keyword targets, content appearance, and site structure.
With SEO constantly evolving, it is more important than ever to benchmark and track SEO efforts and successes. In addition to maintaining a focus on on-page optimization techniques, it is important to review and improve the quality, uniqueness, and value of a hospitality website's wealth of content. Now more than ever, hotel websites cannibalize each other's search rankings because of similar content and non-differentiated message. Useful, shareable content is increasingly becoming king. This is why once a solid SEO-focused coding foundation is applied, the content must be of a high editorial quality and totally unique from page to page, focusing more on readability and value to the consumer than pure keyword-stuffing and link sculpting.
Recommended share of the 2012 hotel digital marketing budget: 8%-10%
Search Engine Marketing (SEM)
Search Engine Marketing (SEM) has long been a staple of hotel Internet marketing budgets for one main reason: it works. Smart SEM marketers typically find that their campaigns generate significant revenues for their property and upwards of 1,500% ROI.
Recently, Google released a study that addressed the question: "What percentage of paid clicks would be acquired organically if I pause my SEM campaigns?" Results showed that 89% of paid clicks would not be recouped organically – only 11% would be covered by organic search results. A competitive market (especially in popular tourism destinations), increased focus on local search, retargeting/remarketing campaigns to target users who previously visited your site, the need to reach more travelers on the go through mobile search, and a heavy OTA presence means that hoteliers need to spend more to get their market share.
Recommended share of the 2012 hotel digital marketing budget: 25%-30%
Email marketing is still an essential component of the hotelier's direct online channel strategy, and an easy and affordable way to send messages to your key customer segments. Email marketing campaigns still generate significant ROIs for hoteliers, keeping this initiative as a crucial line item in almost every hotelier's budget.
Smarten up your email marketing strategy by performing more data-driven email marketing. Consider sending a 're-engagement' email to those that have not opened or clicked on an email campaign for 90 days, enticing them with a special offer to get them interested again. Resend your emails to all bounces after three days. Send an email offer to people that have started but then abandoned the booking process. Pay attention to how you segment your list and make sure you are sending offers out to those who specify their interest in that topic. If you have been using the same exact email template for over a year, it's time for a refresh. Lastly, with so many people viewing your email newsletters on a mobile device, make sure you are providing a mobile-optimized version of your email.
Recommended share of the 2012 hotel digital marketing budget: 4%-5%
Online Media & Re-Targeting Advertising
Once you have budgeted for the revenue generating basics such as website re-design and optimizations, SEO, SEM, social, mobile and email marketing, consider adding online advertising initiatives. Be sure to carefully analyze what websites you work with (that the site is part of your key customer segment's travel purchasing process), and take advantage of retargeting and behavioral targeting options.
According to the Interactive Advertising Bureau (IAB), 38% of every online advertising dollar in the U.S. goes to display – related advertising (commonly called banner advertising). In 2010 alone, nearly $10 billion were spent on display advertising, including all of its formats: banners, digital video ads, online sponsorships, rich media, retargeting, etc.
In 2012 consider launching a retargeting/remarketing campaign for your property. Retargeting is a form of display advertising in which you target users who have previously visited your website with banner ads or text ads on display networks. You can target users that went to a specific part of your site, or the whole site. In addition, you can customize messages based on which part of the site the user has visited. In its simplest form, retargeting gets previous visits back to your site.
Consider only high quality retargeting advertising networks, such as Google Display Network, Yahoo Network, etc. Avoid retargeting networks offered by some of the OTAs – typically these networks consist of low quality sites and affiliate sites. While the retargeting banners do link to the hotel website, these OTA-related networks manipulate the users to book via the OTA booking engine, which means merchant rates and revenue loss for the hotel.
Recommended share of the 2012 hotel digital marketing budget: 7%-10%
Mobile Websites & Marketing
By 2014, mobile Internet users will surpass the number of desktop Internet users. The most important statistic though is the number of smartphone users. Smartphones are changing how we do business in hospitality, how we market, how we service customers. There are nearly 75 million smartphone users in the U.S. alone; their number will exceed 100 million by 2014.
Did you know that 1 out of 5 hotel queries come from mobile devices (Google, May 2011)? Additionally, Google revealed that 20 percent of searches across Google are local, but that number bumps up to 40 percent for mobile searches.
The mobile channel is already a reality and has 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.
HeBS Digital's own research and other industry sources show that in 2011 between 2.5% -5.0% of visitors to hotel websites came from consumers accessing the hotel site via mobile devices. This year we saw increases of 3-5 times in mobile bookings for many of our clients.
As consumers continue to embrace their phones for all types of activities, mobile devices play an increasingly important role in the travel sector, especially in last minute bookings.
Mobile is an excellent platform to reach your key customer segments anywhere, at anytime. In 2012, independent or franchised hotels and resorts, as well as small and mid-size hotel chains and multi-property hotel companies, should focus on building and enhancing their mobile websites. The main focus should be:
- Creating mobile-friendly textual and visual content that presents the hotel product well.
- Enhancing the mobile user-experience via well-developed mobile site navigation, a mobile booking engine widget, mobile calendar of events, etc.
- Increasing website "discoverability" via mobile SEO and mobile SEM (e.g. Google mobile AdWords) and online media initiatives.
- Making the mobile website more interactive via mobile-social media initiatives, interactive sweepstakes and contests.
- Soliciting sign-ups to the mobile opt-in list via the traditional hotel website and the mobile website, via hotel email marketing campaigns and various sweepstakes and contests, such as interactive scavenger hunts, QR Code promotions, etc.
- Tracking conversions and user behavior via mobile analytics (e.g. Omniture) and special tracking phone functionality.
Recommended share of the 2012 hotel digital marketing budget: 9%-10%
Let's set the record straight: Social media is not a distribution channel in hospitality. Social media is a customer engagement channel, and an extremely important one at that.
There is no doubt that Social Media has changed how travel consumers research and plan travel, access travel information, and perceive credibility of information. There is no doubt that Internet users are increasingly influenced by social media sites and peer reviews. By utilizing a comprehensive social media strategy, hoteliers can create social media "buzz" around the hotel, target receptive audiences, and ultimately stimulate hotel website visits, interactions and conversions on the hotel website.
Social marketing should continue to be an important component of any hotel's digital marketing mix in 2012 and part of the comprehensive direct online channel strategy for any hotel company. Naturally, it is important to use the right ROI metrics to measure the success of social marketing efforts of the hotel.
As discussed above, social media and social marketing initiatives should be reviewed with "sober eyes" and within the context of the impact of the multi-channel marketing strategy of the hotel. Instead of focusing on bookings and revenue when measuring results from social media marketing, remember that currently the best uses of social media are:
- An important component of the hotel's multi-channel marketing efforts
- Interacting with and engaging customers
- Keeping up with the times, making the hotel look current, cool and up-to-date
- Driving engaged and relevant traffic to the property's own website
A strong presence on social media channels such as Facebook, Twitter, YouTube, Flickr, Foursquare, and LinkedIn must be budgeted for. Your hotel website is also a place where you can encourage social interaction – see the section above on 'interactive initiatives.' Now that hoteliers have started engaging their customers, now begin to monetize your presence. Including a Facebook custom tab that reveals an exclusive discount only to Facebook fans, promoting limited time offers via Twitter, and social media contests are great ways to turn social media into a revenue channel.
Recommended share of the 2012 hotel Internet marketing budget: 6% - 8%
Every year it becomes more important to monitor (and respond when appropriate) your customer reviews, make sure consumer-generated content about your hotel is aligned with the content on your website, make sure your profiles on sites like TripAdvisor are complete and optimized, and to monitor your competitor's reviews and response strategy. According to respondents of a recent TripAdvisor survey, 92 percent of travelers are more likely to book accommodations for a hotel that posts a detailed property description and photos.
In 2012 hoteliers should pay special attention to Google reviews, which are part of Google Places. Recently Google removed all third-party customer reviews, including TripAdvisor, from the Google Places pages, except for its own customer reviews. Enhancing the hotel content on the property's Google Place page with photos and videos, as well as steering guests to comment on Google Reviews should become a priority for any hotelier.
In many cases, investing in a tool such as Revinate is well worth it in time-savings and insight into where you rank against your competitors that could not be gained by monitoring these sites manually.
In addition to allocating budget dollars to reputation management, consider participating in TripAdvisor's Cost Per Click and Business Listing programs if your property has good reviews. These programs drive traffic directly to your website and divert bookings from the OTAs which have a heavy presence on TripAdvisor, and tend to covert well because people looking at reviews are closer to the purchase process.
Recommended share of the 2012 hotel Internet marketing budget: 3%-4%
Web Analytics & Tracking
Smart business decisions may not be made without investing in a web analytics and tracking tool. A tool like Adobe's Online Marketing Suite Powered by Omniture will provide you with the information you need to stay competitive and continue (or halt) spending your budget dollars on campaigns that perform and drive revenue through the direct online channel. Make sure that you also budget for someone to analyze the data: the best analytical tool out there will do nothing for your hotel if you have not invested in resources (either staff or a hotel digital marketing firm) to slice and dice the data.
Recommended share of the 2012 hotel digital marketing budget: 1%-2%
Website Operations & Campaign Management Fees
Website hosting and maintenance should not exceed 5%-6% of your budget. Campaign management and direct online channel consulting by an experienced digital marketing firm that will deliver a high ROI should not exceed 11%-12% of your overall Internet marketing budget.
The 2012 hotel digital marketing budget cannot be developed in isolation from the dynamics of the marketplace. It should be a direct reflection of the sources of business and the overarching focus on the direct online channel, expected ROIs from the various advertising formats, and solutions to the emerging challenges and trends that affect online revenues in the hospitality industry.
Following best practices means achieving the best ROIs. Once you have determined how you will allocate the 2012 budget, consider the know-how needed to make these campaigns perform.
The shift from the offline/traditional channel to the online channel is permanent, and the direct online channel is the only growth channel in the hospitality industry that makes economic sense and creates long-term benefits and competitive advantage. Therefore, mastering the direct online channel and all of its segments: traditional Web, SEM, SEO, email, social media, mobile Web, etc., should be a top priority for any hotelier in 2012.
In 2012 hoteliers need to employ multi-channel marketing and distribution strategies, supported by smart allocation of the 2012 digital marketing budget.
Partner with a digital marketing firm that understands the best practices in hotel digital marketing and direct online channel strategies, has proven results in multi-channel campaign management, generates above-industry ROIs and is accountable for every advertising dollar spent.
About the Authors:
Max Starkov is Chief eBusiness Strategist and Mariana Mechoso Safer is Vice President, Marketing at Hospitality eBusiness Strategies (HeBS Digital), the industry's leading full-service hotel digital marketing and direct online channel strategy firm based in New York City (www.HeBS Digital.com).
HeBS Digital has pioneered many of the "best practices" in hotel digital marketing, social and mobile marketing, and direct online channel distribution. The firm specializes in helping hoteliers build their direct Internet marketing and distribution strategy, boost the hotel's Internet marketing presence, establish interactive relationships with their customers, and significantly increase direct online bookings and ROIs.
The firm has won over 160 prestigious industry awards for its digital marketing and website design services, including numerous Adrian Awards, Davey Awards, W3 Awards, WebAwards, Magellan Awards, Summit International Awards, Interactive Media Awards, IAC Awards, etc.
A diverse client portfolio of over 500 top tier major hotel brands, luxury and boutique hotel brands, resorts and casinos, hotel management companies, franchisees and independents, and CVBs has sought and successfully taken advantage of the firm hospitality Internet marketing expertise offered at HeBS. Contact HeBS Digital consultants at (212) 752-8186 or [email protected]
The Smart Hotelier’s Guide to 2015 Digital Marketing Budget Planning | By Max Starkov and Mariana Mechoso Safer
Founder & Director at NextGuest Digital. Recognized as a thought leader in digital marketing strategies in hospitality, Max is a frequent guest speaker at industry events and conferences. His expertise is sought after by a diverse client portfolio of top tier hotel brands, luxury and boutique hotel chains, hotel management companies, resort and casino companies, franchisees and independents, as well as major Wall Street investment banks and financial institutions.More from Max Starkov
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