A Best Practices Guide to Aid in Developing
the 2007 Hotel Online Marketing Budget
|By Max Starkov and Jason Price, September 2006
As many hotels enter the 2007 budget planning season, this article aims to help hoteliers construct a competitive Internet marketing budget. The hotel’s overall competitiveness today is determined to a great extent by how well it manages its Internet marketing and distribution efforts. It is not a question of how big the budget should be, but rather what to include and how much to allocate in the Internet marketing budget for a meaningful ROI and online revenue growth. This article takes a closer look at some important aspects of Internet marketing in hospitality and what marketing activities and line items comprise the 2007 online marketing budget.
2006 may have been a banner year in hospitality, but how has this success translated into the planning of next year’s marketing budget - especially as it relates to the online channel? While the hotel may have an internal formula for ROI, many hoteliers are confused as to what, where, and how much of the marketing budget should be devoted to the online channel.
The dynamic nature of the Internet further complicates the budget planning process. In an environment that consistently brings new fads, new online media formats and business models, new competitors, and new tools and methods to market a hotel via the web, how does a hotel marketer accurately and sanely plan next year’s Internet marketing budget?
Direct Online Distribution
This year 29%-30% of all revenues in hospitality in the U.S. will be generated from the Internet and another quarter will be directly influenced by online research, but booked offline. By 2010 the Internet will contribute over 45% of all travel-related bookings in North America.
Three very distinct trends have emerged over the past several years which have to be taken into consideration when planning your 2007 Internet marketing budget:
The potential to shift even more revenue through your own direct channel
has never been greater. Hopefully the following guidelines will help you
define your online marketing budget in the years to come.
Framework of the Online Marketing Budget
The shift from more expensive to less expensive distribution channels has become the norm in hospitality. Therefore lessening your dependence on higher cost channels and driving more revenues through your own website should become the main objective of your 2007 marketing budget. Here are the top items to include as you devise the Internet marketing budget for next year. Concluding case studies further illustrate the impact of your online marketing budget.
Internet Marketing Budget Considerations:
Re-designing of the property stand-alone website and overhauling its content, imagery and functionality may be due. Typically, a hotel website has to be re-designed every 2-3 years, with ongoing content, rich media and functionality enhancements and updates in between re-designs.
Is the hotel website up to par with 2007 online user expectations? Does it adhere to best practices in hospitality websites? Is the website user-friendly, search engine-friendly and booker-friendly? Is it visually attractive and does it convey the richness of the hotel product and the destination? Does the website build brand equity or does it tarnish the brand image of the hotel? Does the site serve as a platform to establish interactive relationships with your customers? Is the site generating incremental revenues and ROIs at and above industry averages?
Answers to these questions can help hoteliers decide when and if the property website is due for a re-design. Partner with outside Internet marketing and distribution experts to audit your existing site and provide unbiased advice on whether you need a new website or if just a website optimization and copy enhancement would be sufficient for the time being.
If a website re-design is due in 2007, you have to budget for the actual
look-and-feel re-design, new imagery throughout the site, customer segmentation
and copy overhaul, optimization of the keyword density, page titles,
description and meta tags.
Direct Online Marketing and Distribution starts and ends with the hotel website, so the goal is clear: create a fully optimized website and drastically improve website user-friendliness, search engine-friendliness and travel booker-friendliness. This is achieved through a website optimization strategy which, if executed well, will inevitably enhance the website usability and performance, improve visibility on the Internet, increase conversion rates and ROIs, and boost Internet-related direct-to-consumer bookings.
A website optimization strategy is an ongoing process that involves turning the hotel website into a 24/7 sales force. It incorporates customer behavior and website usability studies to reflect best practices in 2007 online searching and purchasing habits. It continuously enhances and optimizes the contents and key features of the website, and addresses important issues such as keyword density and tags, customer segmentation, conversion ratios, eCRM issues, trust building and consumer confidence issues, etc.
There are a number of ongoing programs and activities the hotel has to budget for that will help further convert lookers to bookers and grow online revenues. At a minimum, in your 2007 budget you have to provision for the optimization of the keyword density, page titles, description and meta tags.
This new dramatic shift from offline to online distribution in hospitality has turned the hotel website and its related online marketing initiatives into the most important and potent e-CRM tool. The hotel website has become the “first point of contact” with an overwhelming majority of hotel customers.
An eCRM Strategy allows hoteliers to engage customers in personalized and mutually beneficial interactive relationships, and to increase conversions while selling more efficiently. Hoteliers should make it their mission in 2007 to build interactive relationships with customers in order to increase repeat business, boost revenues, and retain loyalty.
In the upcoming year you have to budget for the overhaul of the customer support features on the website, enhancing the FAQ and customer feedback features, establishing monthly frequency of your email newsletters to your opt-in list, as well as enhance the confirmation, pre-arrival and post-stay email communications with your customers.
Search engines are an essential component of the hotel direct online
Paid Search Marketing has become the most popular online advertising format and over 40% of all online advertising dollars will be spent on this format. Search marketing includes organic search, keyword buys (PPC or Pay-per-Click), local search, paid inclusion search, and meta search marketing. All of these are applicable to any hotel Internet marketing strategy and should be reflected in the 2007 budget.
For 2007 you have to plan a monthly budget for keyword buys (PPC) campaigns on Google, Yahoo and MSN, local search, as well as annual search engine registration fees and ongoing content enhancements and optimizations of the keyword density, page titles, description and meta tags.
Strategic Linking and Link Popularity
Strategic Linking is the business strategy to establish links from highly relevant and authoritative websites to your website, i.e. to build the “Link Popularity” of your hotel website. Strategic Linking in hospitality and its important by-product, Link Popularity, are part of a hotelier’s toolkit for building a robust Web presence and taking advantage of the Direct Online Channel. Strategic Linking achieves two important goals: a) exposes your website to incremental traffic and highly qualified potential bookers, and b) builds your website’s Link Popularity, a crucial criteria used by the search engines to determine how to rank the website in the search engine results.
Strategic linking is an ongoing process that has to be budgeted for in 2007. It helps position the hotel website at all direct "points of contact" with potential Internet travel bookers, and boosts the organic rankings on the search engines.
Your Internet marketing budget for 2007 must include a monthly allowance for building strategic linking to your website from “affinity” sites that are relevant to your key market segments and feeder markets.
Email Marketing Strategy
Email marketing is a crucial component of the hotel’s overall Internet marketing and online distribution strategy. Email marketing can be used successfully as a direct response vehicle (short-term, results-oriented) or as a branding tool (long-term and strategic goals). On the other hand email marketing to your own email list is one of the least expensive online marketing formats. Therefore creating a robust email marketing strategy and provisioning for it in the 2007 online marketing budget could have a long-term positive impact. The email strategy should include at a minimum: customer email capture initiatives (online and offline), email marketing to the hotel’s own opt-in list, email sponsorships and marketing to key market segments and in key feeder markets.
This coming year you have to budget for online and offline customer email capture initiatives, incentives and sweepstakes, monthly email newsletters and promotions, and seasonal emails sponsorships.
Destination Web Strategy
Online travel planning is destination-sensitive. Your property does not exist in isolation of its location and has a much better chance on the Web if presented as an integral part of its destination. Leverage the popularity of the destination for your property’s benefit.
You must position your hotel as the “hero of its destination” and exploit all the area opportunities and local attributes to your advantage. This will help further index the site on the search engines and help discriminating customers choose your site over an intermediary or competitor.
Your 2007 budget has to include the creation of new destination content, area travel guides, attractions and things to do, enhancing the mapping and direction features on the website, updates to the area calendar of events, etc.
Online Display Advertising
Display advertising (banners) continues to be the second most-popular online advertising format. This year over 31% of all advertising dollars in the U.S. will be display ads (banners) related. HeBS’ experience with banner ad campaigns over the past 10 years has proved very successful and has generated consistent ROIs in excess of 2600%-3000%. This online advertising format has proven to be far superior to any past offline or GDS marketing initiative.
Online display advertising could be rather inexpensive if planned and executed well and hoteliers should not consider it as a format reserved only for the big industry players. For 2007 hoteliers should consider banner ads on local destination portals, CVB sites, key market segment sites, and other sites synergistic to your business.
Also in 2007 you may want to include a line item to cover seasonal display ads on local portals, CVB and other relevant websites, or “affinity” sites that are important to your key market segments.
Consumer Generated Media (CGM)
Consumer-Generated Media (CGM) is online content created by anyone other than professional writers, publishers or journalists. It is a forum made available to Internet users via interactive technology applications. Blogs (corporate and social blogs), message boards, online forums, word-of-mouth/viral marketing on the Web, social networks, customer reviews and testimonials, trip planners, and experience sharing initiatives are the most common examples.
Is CGM a threat or an opportunity? Hotel marketers can benefit from CGM by “listening” to what customers have to say, and also promote their services on the newly emerging CGM sites and formats.
In next year’s budget you may want to consider provisioning an allowance for partnering with outside Internet marketing and distribution experts to analyze your current product offering and key customer segments, the sources of unique expert knowledge at the property, and devise an action plan on how to take advantage of the CGM phenomenon.
Website Maintenance and Hosting
The hotel site requires ongoing maintenance as you will want to enhance content, imagery and functionality to the site. Hopefully your site traffic will grow which means more bandwidth consumption and perhaps higher hosting fees. Many hotels outsource these functions as website hosting and maintenance has become a commodity. Look for a professional website hosting and maintenance company. Require a hosting environment with a 99.9% network uptime guarantee. Require full transparency of hosting and website update costs and services.
In your 2007 budget you must include website hosting, provision for extra bandwidth, and monthly fees for website maintenance and updates.
eBusiness Professional Development
In this extremely dynamic online marketing environment, it is crucial to budget for eBusiness professional development services that could help you better understand Internet marketing and distribution, direct vs. indirect online channel strategy, how to gain competitive advantage and benefit from “best practices” and latest online industry trends, how to build your own robust Internet strategy, and take your direct-to-consumer online distribution and eMarketing efforts to the next level.
Direct online marketing and distribution is too important to ignore. Partner with outside Internet marketing experts who will teach you the best practices in direct online marketing and distribution. Educate yourself and your staff and develop new in-house core competences.
Ongoing eBusiness professional development consultations, on-site Internet marketing workshops for management and sales, attendance of online marketing and hospitality forums, seminars and conferences are some of the line items you have to plan for in your 2007 budget.
A Word about Choosing Your Internet Marketing Partner
Select a firm that is fully transparent on how they spend your marketing dollars. Be sure they will teach you the best practices in direct online marketing and distribution. You will need this information to plan for future years. You will also need to understand how much of the budget is being devoted to “pure” marketing vs. campaign management fees.
Do not outsource this vital core competence to an outside Internet marketing vendor that “keeps you in the dark.”
Become a stakeholder. Ask yourself if you are more knowledgeable today in the art and science of Internet marketing verse a year ago. Do you speak the language of an eMarketing Manager and do you feel confident to teach others if you had to? Did your outside Internet marketing vendor teach you best practices and contribute to you and your staff’s professional development and online marketing skills? What did your current Internet marketing budget miss and why? What marketing services were not performed this year and why? For 2007, insist on understanding from your outside marketing vendor what marketing services are being planned and why. How much will be spent on each of these services? What portion of the budget will be spent on “pure” marketing and what on campaign management fees? What portion of the hotel’s overall marketing budget should be spent on Internet marketing?
The Internet has become the largest distribution channel in hospitality, far exceeding GDS and other traditional channels. The direct online channel has become the main focus and incremental revenue generator in hospitality. Naturally this channel demands its proper place and weight in the hotelier’s 2007 marketing budget.
Hoteliers need a comprehensive Internet Marketing Strategy, rather than a fragmented and incomplete Internet marketing effort with ad hoc initiatives. Focusing only on certain aspects of the hotel Internet presence in isolation of the overall Internet marketing and distribution strategy will result in serious underutilization of the direct channel and missed revenue generating opportunities.
An effective Internet Marketing strategy utilizes all the market resources and channels available on the Internet. This includes implementing a robust website optimization strategy, eCRM strategy, search marketing strategy, email marketing strategy, strategic linking, online sponsorships, consumer generated media, and display advertising. All of these strategies are well within the hoteliers’ reach.
About the Authors:
Max Starkov is Chief eBusiness Strategist and Jason Price is EVP at Hospitality eBusiness Strategies (HeBS) www.Hospitalityebusiness.com. Based in New York City, HeBS is the leading Internet distribution and marketing strategy consulting firm for the hospitality and travel verticals. HeBS has pioneered many best practices in Internet marketing in hospitality. HeBS specializes in helping hoteliers build their Internet distribution and marketing strategies, increase online sales and customer loyalty, improve ADRs and establish interactive relationships with their customers. A diverse client portfolio of over 350 top tier major hotel brands, multinational hospitality corporations, hotel management and representation companies, franchisees and independent hotels and resorts, has sought and successfully taken advantage of their eBusiness expertise. You can reach our consultants at (212)752-8186 or firstname.lastname@example.org.
|Also See:||Strategic Linking in Hospitality: Build a Robust Link Popularity / Max Starkov & Jason Price / September 2006|
|2004 the Year of Direct Online Distribution; Now is the Time to Fight Back with a Smart Direct-to-Consumer Internet Strategy / Max Starkov & Jason Price / February 2004|
|Brand Erosion, or How Not to Market Your Hotel on the Web / Critical Online Distribution Issues Revisited a Year Later / Max Starkov / June 2003|