Industry Update
Opinion Article 2 January 2021

Deceptive Digital Marketing Practices Hotels Should Watch Out For

By Nate Lane, Senior Director Business Development, Pegasus

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Not every company out there has your best interests at heart, but it isn't always easy to tell if - or when - you've been deceived. Without asking the right questions, hoteliers could be misled into comparing apples to oranges when requesting results from technology partners, leading them to make rash decisions based on inaccurate information. No one wants to fall for misleading messages, so here are three of the most common ways hotels can be duped by dishonest collaborators.

1. Misleading Attribution Windows
Hotels thrive on direct bookings, and anything that can drive consumers to their website is beneficial to their business. This is why hoteliers strike up partnerships with other companies to promote their properties, paying a commission to these partners for any bookings they drive to the hotel's site. These companies lay claim to a period of time between when a consumer is directed to the hotel's site and when they make a booking, called an attribution window.

If a purchase is made within that time the partner earns a commission on the booking. But what if a company is caught manipulating their conversion rates in order to score bigger commissions, without actually benefiting the hotel?

This situation is far from uncommon, but one instance in particular stands out. A hotel in Pennsylvania expressed concern that a regional publisher promoting destinations in the Poconos was falsifying its numbers in order to inflate its commission earnings. This hotel estimated it was paying $75,000 each year to the publisher for its referral commissions, but the property's leadership wasn't sure if this publisher was actually responsible for driving significant enough conversions to justify such an expense.

The first issue this property faced was that the operators in charge did not understand attribution windows and how they impacted the commissions they were paying. In normal circumstances, an attribution window of roughly 30 days would be an acceptable time frame to prove the publisher influenced a guest's booking decision.

However, it quickly came to light that the company in question inflated its attribution window to 83 days, meaning the hotel was paying commissions to the publisher on bookings it had not made and were booked nearly three months after guests visited the website from completely different channels.

Marketing your hotel is expensive, considering hoteliers are expected to pay for their website, search engine optimization tools, Google ads, content writers, digital strategists, and more. Because costs add up it is important for hoteliers to understand which channels are the most efficient at attracting guests and trim the fat where necessary. The guest booking journey is long, with consumers often visiting between 10 and 15 websites before making a hotel booking. This property was paying commissions to a website their guests visited up to 83 days before buying a room, meaning there was scant data to prove the publisher was influencing bookings simply based on guest visits.

Any hoteliers who question the worth of their digital partners should research their attribution windows and obtain any figures from these partners in writing. The attribution window in this example was egregious, and after renegotiating their program the hotel eventually severed ties with the organization after seeing the true value of their relationship.

2. Hidden Media Markups
Digital marketing can be a treacherous arena for business to invest in because it is so easy to conceal unscrupulous behavior behind claims of privileged information and operators' lack of knowledge. In some cases, this allows digital marketers to funnel a portion of a hotel's marketing budget directly into their pockets using hidden markup tactics, costing hoteliers more over time while less and less of their money actually goes toward marketing.

Here is how it works: A hotel approaches a digital marketing agency with a budget to be put toward paid media each month. Then, the agency marks up the media behind the scenes, taking a portion of these funds for themselves before activating the remaining available budget for advertising. This leaves only a portion of the hotel's investment for actual media coverage while the digital marketing partner earns an abnormally high margin off of your marketing investment.

Even large hotel companies can fall prey to hidden media markup costs as they get lost in the shuffle while advertising their properties online. One such organization was stuck investing tens of thousands of dollars into digital media, only to find their digital partner was collecting a 15 percent media markup on top of a 10 percent management fee, costing them significantly more money than what they agreed on.

After switching to an organization with a larger upfront management fee with no media markup, this company was able to save a considerable amount of money while ensuring their investment was used for its intended purpose.

This issue stems almost entirely from a lack of transparency with digital marketing partners. Hoteliers should request direct access to their advertising and analytics accounts and a definitive breakdown of where their funds are being allocated if they want to ensure their investment is used as intended. In extreme circumstances it may be necessary to obtain an itemized list of digital marketing expenses.

Hoteliers should also be wary of digital marketing companies with oddly low upfront fees, as these companies could be fishing for rash hotel partners with the goal of recouping their full expenses through hidden markups. The best way for hoteliers to avoid being taken advantage of is to frequently ask questions about where their media spend is going and how effective it has been. If your hotel is investing heavily in media and seeing less than expected return, it's possible your partner could be skimming some of your contributions from behind your back.

Hoteliers should clearly articulate what they expect from their digital partners at the outset of their relationship. Then, they have to watch their books closely for any misconduct.

3. The Website Lemon
Your website is usually what introduces travelers and prospective guests to your hotel. This makes your site a valuable piece of online real estate, and it is not advisable to build one at a bargain. Still, there are many vendors out there who are willing to build a website for your business at a reduced rate - only to crush you later beneath nickel-and-dime charges after the site is already in operation. Schemes like this can trap hotels into paying higher costs over time that quickly spiral out of control, or may even force some operators to settle on a poor online presence in order to avoid feeding the beast.

These website scams target hoteliers who are fixated on driving all of their costs to the bottom. Underhanded vendors will work with these operators for a modest fee, building a rigid site that works in the short term. Then, when the hotel's owner or operators ask for any modifications to the site they are swarmed with multiple charges, often for each individual change. Some vendors will even charge business owners extra to provide the ability to manage their own content on the website they own and paid for.

One hotel in particular finished building a new website for $4,000, and management knew straight away that it needed ongoing maintenance before it would reach their desired specifications. After working with the property to assemble a list of foundational, necessary changes and forwarding it to the website partner, the property received an invoice for $7,300 before the partner would even consider making any improvements.

This is a classic bait-and-switch, but the key difference is that these seemingly low-cost agency partners have altered their goal to control your online identity while earning money off of your hopes for improvement. They know that a hotel's website is the key to capturing direct bookings and remaining competitive, regardless of the market, and that operators are desperate to remain relevant. Once you have reached this point there is no going forward. Your only option is to choose a new partner and start over, or risk showing your willingness to submit to ongoing, needless expenses.

The most dangerous aspect of this scam is that it impacts all chain scales. Even large brands are at risk because it is impossible for large organizations such as these to police every one of their property's websites. In addition, hoteliers with branded relationships often still work with independent and boutique hotels, who face the most risk of falling prey to buying the equivalent of a lemon website that never quite works right, no matter how much money you throw at it.

The old adage still rings true: If it looks too good to be true, it probably is. Websites remain a substantial investment for any business, and cutting corners when developing online real estate is just as risky as it is in reality. Hoteliers are used to looking at their finances on a month-to-month basis, and they should continue to do so in order to hold their digital partners accountable for their actions. If any of these partnerships show signs of dishonest or unreliable behavior it is always less costly to cut ties early that it is to conduct business as usual in the hopes that one day the situation will improve.

Reprinted from the Hotel Business Review with permission from www.HotelExecutive.com

Nate Lane

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    About Pegasus

    Pegasus combines high-tech innovation with high-touch service to give hoteliers more control over their revenue and distribution strategy than ever before. Following their merger with Travel Tripper, Pegasus enables hoteliers to better connect with their guests through an innovative and flexible platform of Reservations, E-commerce, Global Sales, and Business Intelligence solutions that help hotels drive demand and increase revenue and profitability, including the Pegasus CRS, named Best CRS 2021 by Hotel Tech Report. With more than 30 years of experience in global distribution, Pegasus serves hotels across 120 countries from eight offices worldwide in New York, Scottsdale, Las Vegas, London, Paris, Frankfurt, Tokyo, and Hyderabad. For more information, visit www.pegs.com.

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