News for the Hospitality Executive
A Hotelier's Guide to Budget Planning in '08
Best Practices in Developing the 2008
Hotel Internet Marketing Budget
|By Max Starkov and Jason Price, October 2007
Hoteliers are in the height of the budget planning season for 2008. Understandably, there is a great level of anxiety in the industry. Are you allocating the right budget for hotel marketing? What are your peers doing with their budgets? What are the best practices for 2008? Web 2.0, social media, consumer generated media—what should you do about these new media formats? What are the latest trends in Internet marketing and how should you account for them in the new budget? For a second year in a row, Hospitality eBusiness Strategies takes a closer look at some important aspects of Internet marketing in hospitality and what marketing activities and line items should comprise the 2008 Internet marketing budget.
Critical Trends to Consider in Your 2008 Budget
There is no doubt the hotel’s overall competitiveness today is determined to a great extent by how well it manages its Internet marketing and distribution efforts. In 2008, 60% of all travel bookings and up to 40% of all hotel bookings in North America will be generated from the Internet (PhoCusWright, HeBS), which represents a 15%-16% growth over 2007. Another 25-30% of hotel bookings will be directly influenced by online research, but booked offline. By 2010 the Internet will contribute over 45% of all hotel bookings in North America.
Another positive fact is that the indirect online channel is losing market share. The negative impact of third-party online intermediaries (TPIs) is still felt throughout the industry, but to a much lesser degree. The ratio between the direct and indirect online channel continues to improve in favor of the direct channel: from 52:48 back in 2002 to 60:40 in 2007 and is projected at 62:38 in 2008. Some major brands already enjoy very healthy 85:15 direct vs. indirect online channel ratios.
The following five distinct trends must be taken into consideration when planning your 2008 Internet marketing budget:
Online vs. Offline Channel: The online channel is definitely the winner. Online bookers are predominantly influenced by online marketing and advertising formats, including online chatter and customer reviews. Now more than ever, billboards along the highway, hotel print brochures, and other traditional means of advertising should be shifted towards the web. In 2007, a remarkable 68% of hoteliers reported that they would be shifting their budgets from offline to online marketing activities (HeBS 2007 Benchmark Survey).Planning the right marketing budget for 2008 requires hoteliers to balance limited funds with marketing strategies that will hopefully generate the highest possible returns, so that your hotel website can function as your main revenue generating channel with the highest ROI.
Industry Benchmarks for Allocating Your Internet Marketing Budget
A year ago Hospitality eBusiness Strategies (HeBS), in conjunction with NYU’s Tisch Center for Hospitality, Tourism, and Sports Management, conducted a groundbreaking 2007 Benchmark Survey on Hotel Internet Marketing Budget Planning and Best Practices in Hospitality. This benchmark survey asked hoteliers what Internet formats and methods they are using to reach their customers, what Internet marketing practices they find most productive, why they choose to devote marketing dollars to certain mediums over others, and more.
The following table shows how hoteliers planned on spending their marketing funds in 2007. The highest percentages were reported on website redesign and optimization, search engine optimization and email marketing:
Budget Allocation in 2007
The survey shows hoteliers understand the hotel Internet marketing budget should take a holistic view of the hotel online environment and adopt a comprehensive, long-term strategic approach. The hotel budget has to include Internet marketing “fundamental” formats (e.g. website re-designs and organic search optimizations, search marketing, email marketing and strategic linking, as well as new media formats such as Web 2.0, social media, CGM, blogs, etc.)
You can see a summary of the 2007 HeBS Benchmark Survey results here.
A new survey is now underway for 2008, so if you are a hotel professional involved in the budget planning process, please participate in the 2008 Benchmark Survey on Hotel Internet Marketing Strategies, Budget Planning and Best Practices
Framework of the 2008 Internet Marketing Budget
The five important industry trends we have identified above should be taken into consideration when planning the hotel Internet marketing budget for 2008. Lessening your dependence on higher cost channels and driving more revenues through your own website should continue to be the main objective of your 2008 marketing budget.
The 2007 HeBS Benchmark Survey clearly shows that hoteliers have matured and now understand that long-term, strategic objectives and fundamental Internet marketing formats such as website re-designs and optimizations, organic search optimizations, email marketing and strategic linking produce higher ROIs than “quick fix” solutions, such as SEO and PPC.
The following chart shows hoteliers believe that long-term solutions
such as website optimization produce higher ROIs vs. short-term solutions:
Ironically, hoteliers do not perceive Paid Search Marketing as influential to the ROI (see Table 2), yet in Table 1 above more of the total budget is devoted to Paid Search. 2007 was the year of Web 2.0, as it dominated so much attention and was the subject of so many industry articles, yet new forms of media scored low in Table 2 and received little budgetary attention in Table 1. It will be interesting to see what the 2008 HeBS Benchmark Survey reveals.
Building your 2008 Internet Marketing Budget
By now, hoteliers should all know the importance of the Direct Online Channel and the cost of working with third-party intermediaries. Selling directly to the consumer should be the number one focus of your Internet marketing strategy. If you do not have the essentials in place – an up-to-date, user-friendly, search-engine friendly, booker-friendly and customer-interactive-friendly website, then you must begin with a website redesign and optimization. Once you have taken this vital step and your website is up to 2008 standards, then you can completely focus on your Internet marketing efforts.
Here are our comments on the top 3 line items hoteliers believe produce the highest ROIs that should be included in your 2008 Internet marketing budget:
Besides website optimization, website re-design, and search marketing, here are the other top line items to include as you devise the 2008 Internet marketing budget for your hotel:
Web 2.0 is worth repeating here as it continues to be the most prevalent topic in most discussion circles. Social media/consumer generated media is an important component to the hotel’s marketing mix and may find itself ranked much higher in the upcoming benchmark survey.
Although Web 2.0 initiatives are important, they should not come at the expense of the fundamental Internet marketing strategies such as search marketing, website re-design and optimization, email marketing, strategic linking, online sponsorships and display ads, eCRM, and website analytics and campaign tracking. Once these are in place, you should slowly start to integrate Web 2.0 initiatives into your Internet marketing strategy.
There are three approaches to building the hotel Web 2.0 / CGM strategy. Which approach to use depends on your situation and needs. If the goal is to protect and monitor the ‘chatter’ on the web about your hotel for whatever reason, then a Brand Defensive Strategy should be entertained first. If the goal is to leverage the expert knowledge that currently exists at your property out there on the web, then consider a corporate sponsored CGM initiative, like a hotel blog. Lastly, if the goal is to simply communicate to readers on high traffic Web 2.0/CGM sites, then you can advertise on them (run of site banner on MySpace.com goes for as little as $2-$3 CPM).
Here are some ways to start integrating Web 2.0 initiatives into your Internet marketing strategy:
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.
Hoteliers do not have unlimited budgets and they have to find the marketing strategies that will generate the highest ROI. Knowing what your peers are doing may help provide the rationale to increase or decrease certain parts of the budget. In 2008 we anticipate no surprises but more rationalization as to why one line item was increased over another, and by what amount, or removed altogether. Use this article as a tool to set some parameters when creating the budget and don’t forget to take the latest survey, the 2008 Benchmark Survey on Hotel Internet Marketing Strategies, Budget Planning and Best Practices
Consider seeking advice from an experienced Internet marketing hospitality consultancy to help you build your 2008 Internet Marketing Budget, and implement latest trends and best practices in your Internet marketing efforts to realize substantial ROI and revenue growth.
Note: Mariana Mechoso, Manager eMarketing Services at HeBS, also contributed to this article.
Hospitality eBusiness Strategies (HeBS), the industry’s leading Internet marketing strategy consulting firm for the hospitality vertical, is based in New York City (www.hospitalityebusiness.com). HeBS has pioneered many of the "best practices" in hotel Internet marketing and direct online distribution. The firm specializes in helping hoteliers build their direct Internet marketing and distribution strategy, boost the hotel Internet marketing presence, establish interactive relationships with their customers, and significantly increase direct online bookings and ROIs.
A diverse client portfolio of over 450 top tier major hotel brands, multinational hospitality corporations, hotel management and representation companies, franchisees and independents, resorts, casinos and CVBs and has sought and successfully taken advantage of the firm hospitality Internet marketing expertise. Contact HeBS consultants at (212)752-8186 or email@example.com.
|Also See:||Budgeting for a Robust Internet Marketing Strategy in 2007; A Best Practices Guide to Aid in Developing the 2007 Hotel Online Marketing Budget / Max Starkov and Jason Price / September 2006|