The Smart Hotelier's Guide to 2014 Digital Marketing Budget Planning
August 14, 2013 5:50pm
By Max Starkov & Mariana Mechoso Safer
Hoteliers, we have just passed the mid-year mark and it's time to plan your digital marketing budgets for next year. Budgeting season is the ideal time to assess your business objectives, as well as audit the performance of the initiatives you invested in this year.
2014 is expected to be another great year in hospitality. To start with the good news, travel demand is projected to be up by 3.3 percent while supply will be up only one percent (PKF). All three key performance metrics are expected to experience positive growth over the already robust growth in 2013. The U.S. hotel industry's occupancy rate is estimated to grow by 2.2 percent, the average daily rate (ADR) by 5.4 percent, and revenue per available room (RevPAR) by 7.7 percent over 2013.
What does this mean for hoteliers? No more excuses! It's time to find room in the budget for all of those digital technology and marketing initiatives that have been put on the back burner in previous years.
This article provides guidance on how to structure your budget in 2014. Next year's digital marketing budget should focus on driving direct online bookings and achieving serious ROIs by structuring initiatives into three main categories: digital assets optimization, consulting, and operations; "core" digital marketing initiatives; and "business-need" multi-channel digital marketing initiatives.
Before we dive into a concrete action plan for 2014, we would like to discuss two lingering concerns and two game-changing digital marketing trends that will shape how we do marketing in hospitality in 2014 and beyond.
Hoteliers notoriously under-spend on digital marketing initiatives and they continue to rely on tired and obsolete advertising formats, especially print media.
In 2013, hotels and resorts in the U.S. were projected to spend only 28 percent of their marketing dollars on digital advertising. Inertia from the past and a lack of understanding that travel consumers have migrated to the online, social and mobile channels are the main reasons some hoteliers continue to rely on offline advertising formats.
How much should hoteliers spend on digital marketing?
STR Analytics recently evaluated a large sample of data from its HOST Almanac report regarding U.S. hotels (about 180,000 rooms) in the upper-upscale segment and was able to compare certain metrics for branded and independent properties. Independent hotels on average spent 7.1 percent of their operating expense budget on marketing fees and were able to avoid franchisee fees ($100.4 million out of $1.4 billion in total room revenue for this segment). The chain-affiliated hotels reported spending 7.8 percent of their operating expense budget on marketing and an additional 3.4 percent on franchise fees.
Independents are spending 7.1 percent of total room revenue on marketing. Why are they under-spending on digital marketing? Why does only 28 percent of advertising spend go to digital marketing while over 42 percent of roomnights booked come from the Internet (STR), and the vast majority of roomnights booked via other channels are directly influenced by the digital marketing presence of the hotel?
At a time when online travel demand is growing, hoteliers should be capable of extracting a much higher percentage of direct online revenues from local, state and regional opportunities. Instead, we are seeing the opposite.
Independent hotels are overly OTA-dependent.
Independent hotels have been easy prey for the OTAs due to a lack of understanding of the cost- effectiveness of the direct online channel, ignorance of basic online distribution rules such as rate parity, and weak negotiating power with the OTAs. More than 76 percent of online bookings for non-branded hotels came from the OTAs and just 24 percent came from the hotels' own websites (STR, HSMAI Foundation).
Independent hoteliers must budget for a major expansion in their direct online channel efforts in 2014 if they want to decrease their over-dependence on the OTAs and last-minute discounters such as HotelTonight.com.
Branded hotels are overly brand-dependent.
Major hotel brands are doing a good job of brand building and online marketing at global and national levels, but simply do not have the bandwidth to cover regional, state and local markets. Branded and franchised hotels that are over-reliant on their brands' online marketing efforts are missing out on serious incremental online revenues from local, state and regional initiatives. For example, HeBS Digital has a number of very proactive franchised hotel clients which consistently enjoy higher revenues from their vanity websites than from Brand.com.
Hoteliers - branded or independent - must focus on the direct online channel. This means employing best practices in the online distribution channel and increasing direct online revenues via hotel website re-designs and enhancements; allocating funds to SEO, SEM, re-targeting, mobile marketing, etc.; and utilizing the OTAs only as part of a balanced distribution strategy.
The unchecked growth of the mobile channel and the emergence of the tablet channel have resulted in new user behavior and new information needs in each device category, requiring hoteliers to create and manage digital content across three distinct distribution and marketing channels (desktop, mobile, tablet).
The adoption rate of smartphone and tablet devices is skyrocketing, and hotel queries from tablets were projected to increase this year by more than 180 percent, by 68 percent from mobile devices and desktop searches to decline for the first time by four percent (Google).
The results from the first half of 2013 are in, and they show a seismic shift from desktop to mobile and tablet devices. Across HeBS Digital's hotel client portfolio, consisting of thousands of hotel properties, we saw a major shift from desktop to tablet and mobile in every data category.
Of significant importance is the fact that over 31 percent of web visitors (17 percent in first half of 2012), 38 percent of page views (14 percent in 2012) and 12 percent of bookings (six percent in 2012) were generated from non-desktop devices (mobile and tablet). Tablets generated 360 percent more room nights and 670 percent more revenue than the "pure" mobile devices.
What does this mean for hoteliers?
Internet users exhibit different behavioral patterns when using the desktop, mobile and tablet devices; each device category address different needs at different times of the day and week.
The immediate implications are that hoteliers must boost their online presence for all three screens. In addition, year-over-year web analytics no longer paint the full picture, and must be reviewed in conjunction with other data sources. For example: nearly 18 percent of web visitors now come via the mobile channel. However, the majority of mobile bookings are happening via the voice channel (7 out of 10) which would not be recorded through traditional web analytics.
Meta search marketing in hospitality requires real-time room availability and pricing feed. This new hybrid digital marketing format, the result of the convergence of hotel online distribution and online advertising, requires real-time hotel inventory & pricing as well as marketing technology to manage campaigns, property budget and bids on a daily basis and by property.
Today we are witnessing an explosion of meta search travel sites and features, facilitated by advancements in digital technology and advertisers' perceptions of these sites as unbiased online media players compared to the OTAs. By adding real-time availability and pricing and enabling rate shopping, travel planners are now provided with everything they need to research and book their hotel stay.
The most popular meta search sites and features in the hospitality and travel space include:
Why is meta search marketing a must-have for hoteliers?
Meta search is not a distribution channel, nor is it a "set and forget" initiative. Meta search marketing is an advertising model that utilizes the cost-per-click (CPC) advertising format, where the advertiser pays when someone clicks on their listing and is taken deep into their booking engine. This requires daily spend and bid management, daily reaction to what other advertisers are doing, monitoring of budget spend on a daily basis, and monitoring of rate parity (often abused by the OTAs).
When adding each line item to the digital marketing budget, it's important to take a holistic approach. What is your overarching strategy, what technology do you need to invest in to support your digital marketing efforts, and what digital marketing campaigns will result in the highest ROIs and the most direct bookings? If you want to start the year off in tip-top shape, you need to commit to your 2014 budget now.
Your 2014 budget should be broken down into the following three components:
1. Digital Assets Optimization, Strategy & Operations: These line items include keeping your digital marketing assets such as your website up to date with the latest technology, boosting your three screen presence (desktop, mobile, tablet), content management system (CMS) technology upgrades, conversion boosting applications, consulting, analytics and hosting.
2. The Core Digital Marketing Campaigns: These budget line items consistently drive high ROIs for all types of hotel companies. This includes SEO initiatives, SEM campaigns, meta search marketing, and good "old fashioned" email marketing.
3. Business-Need Driven Multichannel Marketing: Based on concrete business needs and not advertising driven, these campaigns take into account factors such as seasonality, area events, or customer segment need areas (such as meeting or group planning). Multichannel marketing campaigns can then be planned to achieve set revenue or lead (for meetings and events) goals.
This section of the budget is the foundation of your digital marketing strategy. Without it, you won't have the technology to enable you to drive bookings on your website, nor will your revenue goals be achieved throughout the year. This portion of the budget should include the following initiatives:
1.) Improving your Presence on the Three Screens
In this multi-device world we live in, hoteliers must meet the needs of their guests on each device. This means investing in technology that allows for the best user experience on the three screens: desktop, mobile and tablet.
The difference between an ordinary hotel website and a great website could be measured in hundreds of thousands of dollars of missed revenue a year. Going cheap when re-designing the property website will severely damage the hotel's bottom line. If your website is over 18 months old, there is a good chance it's not utilizing the latest trends in artistry, functionality or technology. Your website needs to find the right balance of excellent design, state-of-the-art digital technology, and engaging textual and visual content (rich media and video), improving the user experience from top to bottom.
Desktop users require as much information as possible and place high value on visual galleries. Mobile users need slimmed-down content with an emphasis on maps and directions, easy to use mobile booking engine and click to call property reservation number. Tablet users require a visually enhanced experience as well as a website that is built to accommodate the touch screen and swiping capabilities the tablet offers. Read more about how to accommodate behavior on the three screens here.
Technology available today allows for a hotel to manage all content in one place, yet still provide a customized user experience for each device. This technology, Responsive Design on Server Side (RESS), does the work for the hotelier, meaning they don't have to manage three different websites. HeBS Digital's CMS Premium is an RESS-enabled content management system.
You must also have access to a CMS that functions as the nucleus of your digital marketing, where every website update, social media post and image can be published with the click of a button. The CMS should not only allow you to create and manage content through the three distribution channels, it should also offer:
Recommended share of the budget: 15-25%
2.) Account Management, Strategy & Consulting
Every hotelier needs a partner in their digital marketing efforts, a partner who has a wealth of hospitality experience, offers quick response time, and is fully transparent. This partner should educate them on how to include direct online channel bookings by being strategic and tactical.
It is important that the account manager understands the hotel's business and customer segment needs, and how to use digital marketing tools to execute and produce results.
This partner should be able to:
Recommended share of the budget: 9-11%
3.) Reservation Conversion Boosting Applications
HeBS Digital research shows that on average 1 out of every 3 website visitors initiate a booking on the hotel website, but less than five percent of visitors who initiate a reservation actually complete the reservation. Through the use of technology, hoteliers can now reach out to those abandoned bookers and get another bite of the apple.
Conversion boosting applications available today include:
Through the use of HeBS Digital's suite of reservation recovery products, a luxury hotel brand was able to recover 1175 bookings translating to $1,009,563 in revenue in just four months.
Recommended share of the budget: 5-7%
4.) Cloud Hosting and Content Distribution Network
Investing in cloud hosting and a CDN (content delivery network) platform will inevitably boost site conversions and improve search engine rankings that are increasingly dependent on fast download speeds.
A few other benefits of investing in this type of hosting platform:
Recommended share of the budget: 2-3%
5.) Analytics & Campaign Tracking
Tracking every dollar spent, as well as visitor behavior on your website, will allow you to make quick tweaks to your online presence that result in higher revenues and a better user experience. This data could also help you justify the investment in technology needed (are you seeing low bookings from mobile or tablet users and need to invest in RESS?). In addition, with over 15 percent of website visitors utilizing the mobile channel, call analytics is a must for any hotelier. Analyzing your call analytics will ensure you aren't underestimating the performance of your online campaigns and cancelling or lowering the budget on initiatives that are driving revenues via your voice channel.
Beware of free tools that own your data, have no customer support and do not provide you with the big picture.
Every hotel digital marketing budget must make room for those initiatives that are proven to drive high ROIs. Not investing in these initiatives will damage the hotel's bottom line, and with these affordable options there is no excuse.
1.) Search Engine Optimization (SEO)
The difference between appearing on the first and second page can add up to thousands of dollars of bookings and RFP submissions, as we mentioned in our article, "The Undying Importance of SEO: How to Actively Manage Your Search Engine Presence."
There is a direct correlation between the quality of the website SEO and the results from your paid search (SEM) campaigns. The better the SEO on the site, the better the Quality Index assigned to your paid search campaigns by Google, which means higher ad position, better conversion rates, higher ROIs, and lower cost per click. A robust content strategy, supported by adequate technology and marketing funds, can make all the difference and allow the hotel to maximize revenues from the search engines.
We've had many clients come to us thinking they could ignore implementing an SEO strategy only to have them realize their revenues from organic searches have plummeted and website revenues overall have suffered.
Make sure to budget for these SEO strategies in 2014:
Recommended share of the budget: 8-10%
2.) Search Engine Marketing (SEM)
There's a reason we always recommend a significant portion of the budget go to paid search marketing, and that's because when done right these campaigns drive high revenues and leads. As long as you are analyzing performance, optimizing your campaigns consistently, and keeping up with the latest advances in search, then this part of your budget will result in immediate bookings at a good ROAS.
By continuously optimizing performance, expanding efforts with the Google Display Network, and utilizing the most advanced SEM campaign management technology in the marketplace today, HeBS Digital was able to generate some serious ROIs for an independent, luxury hotel in New York City.
Recommended share of the budget: 24-30%
3.) Meta Search Marketing
Meta search marketing is the new revenue frontier in hospitality and a great way to shift share from the OTAs. It does, however, require real-time hotel inventory availability and pricing as well as marketing campaigns, budgets and bid management by property.
How much should hoteliers budget for meta search marketing? It's much more affordable then you'd think. HeBS Digital's Google Hotel Finder meta search package starts at $300/month and a TripAdvisor meta search package starts at $500/month. These cost-effective meta search marketing packages include the advertising spend, property CRS connectivity to the MetaSearch Gateway, campaign management, daily bid and ad spend management, conversion tracking, and reporting.
Meta search marketing must be part of hoteliers' concerted efforts to shift share from the OTAs to the direct online channel.
HeBS Digital clients enjoy healthy ROIs from their meta search marketing campaigns, ranging anywhere from 800-2,500%.
Recommended share of the budget: 5-10%
4.) Email Marketing
While email marketing has been around for years, it continues to evolve as technology advances and user behavior changes.
As we are living in a multi-device world, email campaigns now need to be designed to accommodate users on the three screens. According to eMarketer, 55.2 percent of emails are opened on the desktop, 25 percent on smartphones and 7.3 percent on tablets. There are also consumers that open the same email on multiple devices. That means you must design email campaigns to render properly on the desktop, mobile, and tablet and keeping the message short and engaging to hold the user's attention.
In 2014, design your email marketing campaigns for the three screens, aim for slimmed-down content rather than longer emailers, and take advantage of the latest technology available to increase ROI. For example, you can feature real-time rates and availability in your emailers, and depending on the date/time the user opens the email they will see the latest rates.
One HeBS Digital client launched an email promotion highlighting its newly restyled accommodations and soon-to-launch dining concept, which resulted in 358 bookings and an ROI of 112,159 percent! Click here to read the full case study.
Recommended share of the budget: 2-4%
5.) Online Media & Retargeting
An online media plan that includes initiatives reaching your key customer segments, aided by technology that helps you reach qualified users at the right time and with the right message, will help drive direct online channel bookings and shift share from the OTAs.
Using the latest targeting capabilities, including retargeting, will move users through the conversion funnel. Did you know that you can serve a banner to someone who has just booked a flight to the city your hotel is located in? Or that you can reach people that have visited your website in their Facebook Newsfeed? The focused retargeting opportunities available mean that you can drive a significant amount of bookings through smart online media planning and campaign management.
Click here to read how HeBS Digital was able to generate 1,787 percent ROAS using a combination of display advertising and retargeting for an independent hotel property.
Recommended share of the budget: 6-8%
6.) Social Media & Reputation Management
We've said it before and it's still the case today: social media is not a distribution channel. It is however, an engagement channel, and a way to de-commoditize your hotel product. Therefore, the management of social media channels - whether this means a social media coordinator on property and/or assistance from an outside digital marketing agency - needs to be part of the budget.
Protecting your reputation on social media channels and customer review sites must also be built into the budget. The investment needed is minimal yet the payoff is great. We highly recommend reputation-monitoring tools like Revinate and ReviewPro for the efficiencies they offer and monitoring the competitive set.
A portion of your digital marketing budget should be allocated for campaigns that serve defined goals. For instance, do you need to drive more weekend bookings? Is winter typically a time where your property experiences a large drop in occupancy? Are you renovating and want to promote a grand re-opening? Once your goals are defined, a marketing campaign can be created and launched to help reach these goals. Not all goals can be defined before the start of the year, which means you'll need to leave some flexibility in this part of the budget to allocate funds as needed.
These business-need campaigns are considered multichannel campaigns. Multichannel marketing campaigns are the most effective way to address concrete business needs, increase reach, and boost bookings and revenue for a need period.
Planned properly, multichannel campaigns utilize the right combination of online channels effectively and, most importantly, promote one cohesive campaign message across these channels. When strategizing a business-need campaign, we take into consideration how the fundamentals can play a role in achieving success. For instance, should we launch an SEM campaign to promote this initiative? Would adding a section to the website build awareness and increase the SEO visibility of this campaign?
Once we've determined the fundamentals, we can begin exploring what media channels are right for achieving these goals and begin building the marketing plan.
Here is an example of what this campaign might look like, for a property that is trying to increase bookings during their shoulder season with a seven-day sale:
Click here to read how HeBS Digital was able to achieve 3,341% ROAS for a luxury brand for their Cyber Monday multichannel marketing campaign.
In summary, here is a quick snapshot of how you should allocate your 2014 digital marketing budget:
2014 is expected to a great year for the hospitality industry. Travel demand is projected to be up by 3.3 percent and all three key performance metrics are expected to experience positive growth. No excuses - it's time to find room in the budget for all of those digital technology and marketing initiatives you have been putting off investing in. These investments, properly planned and managed, will pay off tenfold.
HeBS Digital recommends dividing the digital marketing budget into three components: digital assets optimization, consulting, and operations, core digital marketing campaigns, and business-need driven multichannel marketing. This holistic approach covers all of your technology and strategy planning needs, the fundamentals that will continuously drive direct online channel revenues with high ROIs, and fulfils the concrete business goals you need to achieve throughout the year.
Budget planning and campaign management can be overwhelming. Partner with a hotel digital marketing firm that can provide the technology needed to support your digital marketing efforts, will recommend initiatives proven to maximize ROIs, and understands how to combine your business and customer segment needs with the digital marketing tools needed to execute and produce results.
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HeBS Digital has pioneered many of the best practices in hospitality digital technology and marketing, and direct online channel best practices and strategies. The firm has won over 250 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, and others.
A diverse client portfolio of hospitality clients: from restaurants to major hotel brands, luxury and boutique hotel chains, resorts and casinos, hotel management companies, franchisees and independents, and CVBs are benefiting from HeBS Digital's direct online channel strategy and digital marketing expertise. Contact HeBS Digital's consultants at (212) 752-8186 or firstname.lastname@example.org.
Contact: Mariana Mechoso Safer
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