By
the HeBS
Team, March 16, 2009
In the tough year that 2009 is
turning out to be for hoteliers, it is crucial to know where every
marketing
dollar is being spent. When reevaluating marketing plans – as most of
you have
had to do this year - hoteliers also need to consider whether or not
they
should shift marketing dollars from offline to the more measurable
online
initiatives, what their peers are doing, and how they can evolve with
the
industry without wasting valuable dollars on unproven tactics.
How are hoteliers
budgeting for
their Internet marketing this year? Are they focusing on Web 2.0/Social
Media
initiatives in this recession? What percentage of business should be
coming
from your website?
In the 3rd Benchmark
Survey on
Hotel Internet Marketing Budget Planning and Best Practices in
Hospitality,
HeBS set out to answer these questions and identify trends in online
marketing
in hospitality. The purpose of the
survey was to assess
hoteliers’ 2009 Internet marketing priorities and strategies in order
to
compare with the responses received last year, and to provide the
industry with
insights on how internet marketing strategies for the hospitality
industry are developing.
Who
Participated in this Survey?
The
survey experienced global participation, with almost half of
respondents from
the US and Western Europe. Hospitality executives included
general managers (20.6%),
sales and marketing directors (49.6%), e-commerce managers (13%), and
revenue
managers (29.8%).
The
full spectrum of hospitality and travel verticals are represented in
this
survey, including boutique hotels, upscale hotels, budget, mid-scale
and luxury
franchised properties, major brands, real estate groups, resorts, hotel
management companies, casinos, and more. Most participants were
hoteliers from independent
properties; however there was a heavy influence this year of
franchise/hotel
brand hoteliers.
Main Findings from the
3rd Benchmark
Survey
- Hoteliers strongly
believe that Internet marketing produces the best results. We
asked hoteliers whether they thought Internet marketing, traditional
marketing, or a mix of both produces better results and 55.7% said
Internet marketing (up from 49.2% in the 08 survey and 37.7% in the 07
survey). Hoteliers are right on target as the online channel will be
the only growth channel in hospitality in 2009-2010.
- Even in this current
economic environment, 63% plan to increase their
Internet marketing budget in 09 - and a majority of hoteliers are
planning on raising their online budget more than 15%. A larger
percentage of respondents this year (33%) will be keeping their 09
budget at 08 levels. Where is the money coming from for hoteliers that
are increasing their Internet marketing budget? Fifty-three percent of
respondents are shifting money from offline marketing budgets.
- In the 2009 survey, we
introduced ‘the economic environment’ as one of the multiple choice
options when we asked hoteliers what factors they will consider in
planning their 2009 budget. Not surprisingly, 81.6% of respondents
said that the economy will affect their budget planning for 09. We
also saw that ‘what my peers are doing’ and ‘industry averages’ had
less of an influence on hotel budget planning this year.
- The types of Web 2.0
marketing initiatives planned for 09 vary greatly from 07 and 08. In
previous years, hoteliers selected Surveys and Comment cards as the Web
2.0 initiatives they were planning. This year, hoteliers selected advertising
on Social Media sites (i.e. TripAdvisor), creating profiles on social
networks and a blog on the hotel website.
- Almost half of all
respondents believe their property does NOT conform to industry’s
best practices in terms of Internet marketing. While hoteliers are
getting more educated about the direct online channel, many of them do
not have the internal resources, bandwidth or knowledge to deal
effectively with this highly dynamic field.
- This year, hoteliers
overwhelmingly responded that they thought website optimization
produced the best results and the highest ROIs (81.6%).
Search optimization – organic search was next
at 60.9%. Indeed, both website and search optimizations are the
most-cost effective initiatives for hoteliers in this economy.
- This year, 85.6% of
franchise/major brand hoteliers respondents said they did not find
there to be major restrictions in online marketing due to brand
restrictions. This percentage is increasing over the years (81.8%
in 2008 and 76.2% in 2006) as more and more franchisees embrace best
practices and launch local Internet marketing initiatives that
complement their brand efforts.
- The percentage of
hoteliers who are participating in Paid Search increased from 50% in
2008 to 59.8% in 2009. The use of Meta
search and local search is also increasing year after
year. Also, Web 2.0 Paid Search (e.g. TripAdvisor) was big this year as
32% of respondents are spending marketing dollars on this initiative.
These responses are in par with industry practices and show that
hoteliers are aware that as much as 60%-80% of traffic and bookings on
hotel websites originate from the search engines.
Where is
Hotel Business coming from?
For
the past three
years, Benchmark Survey respondents have said that most of their
business comes
from the direct online channel, which is supported by industry data. In
2009,
more than 55% of all travel bookings and up to 40% of all hotel
bookings in
North America will be generated from the Internet (eMarketer, HeBS),
which
represents a double-digit growth over 2008. At least another third of
hotel
bookings will be directly influenced by online research, but booked
offline. Over
65% of online hotel bookings will come from the direct online channel
(76% for
the major hotel brands).
However,
2009 survey
results also show that bookings made via Online Travel Agencies (OTAs)
have
increased for hoteliers – from 19% in 08 to 21% in 09. This is in large
part
due to the dire economic situation many hoteliers are going through.
Hoteliers
seem to be worried about lower occupancy rates and are providing more
and more
inventory to the OTAs. What hoteliers are not realizing however is that
the
OTAs are also affected by the overall decline in travel demand (Expedia
reported 7% decline in revenue in Q4 2008) and can help only so much.
Therefore
the only real growth channel in 2009-2010 is the direct online channel
which
allows savvy hoteliers to outsmart the competition and gain market
share.
Budgeting for Hotel
Internet
Marketing in a Recession
Compared
to last year’s survey, we noticed an increase in hoteliers saying that
they
have overall budget constraints. Hoteliers are less concerned with what
peers
are doing now then they were last year (24% in 2006 up to 27% in 2007,
and back
down to 18% in 2008), and much more concerned with the economy. We saw
the same
decrease with concerns over industry averages for budget planning (from
approx.
40% over the last two years, to 30%). However, despite the economy,
most
hoteliers are increasing their Internet marketing budgets in 09:
Table A
Do you plan to INCREASE
or DECREASE your 2009 Internet marketing budget?
|
I plan to increase my
budget
|
63.2%
|
I plan to decrease my
budget
|
3.4%
|
I plan to keep my
budget at 2008 levels
|
33%
|
So
where is this increase coming from? As expected, over half of the
respondents
(53%) said they were shifting money from the offline marketing
budget.
When
asked approximately what percentage of your overall marketing budget
was
devoted to Internet marketing activities in the past year, most
respondents
were in the 11-20% and 21-49% range. More people are devoting a larger
portion
of their overall budget to Internet than they had been in 06 and 07.
Year after
year we are seeing a shift from lower categories of percentages to
higher
percentages of money spent on the Internet, although hoteliers are
still using
traditional media. In this year’s survey results, people that were
throwing
their entire budget towards the Internet (76-100%), have scaled back as
hoteliers discover a better balance between traditional and Internet
marketing
budgeting.
Once
the budget is set, what are hoteliers spending their Internet marketing
dollars
on? From the table below, you can see that they are indeed spending
their money
on those formats they believe achieve the highest ROIs. Website design,
website
optimization, paid search and email marketing consume fairly high
percentages
of the budget (Table C), and this correlates with those activities
hoteliers
see as producing the highest returns (Table D).
Table B
Of
your Internet Marketing Budget where did you spend your money in:
|
2006
|
2007
|
2008
|
2009
(projected)
|
Website
re-design/design
|
18%
|
22%
|
19.6%
|
20.6%
|
Website
Optimization
|
9%
|
11.3%
|
12.8%
|
13.3%
|
Strategic
linking/partnerships
|
6%
|
9.6%
|
7.5%
|
7.6%
|
PPC/paid
inclusion (SEM)
|
14%
|
8.6%
|
17%
|
15.7%
|
Local
Search
|
3%
|
3.6%
|
4.2%
|
5.2%
|
Meta
Search
|
2%
|
2.6%
|
2.6%
|
3.2%
|
Search
Engine Optimization
|
10%
|
11.5%
|
8.7%
|
9.3%
|
Display
Advertising (banners)
|
6%
|
6.6%
|
7%
|
7.8%
|
Email
Marketing
|
10%
|
11.5%
|
10.4%
|
11.2%
|
Consulting
Fees
|
6%
|
7.0%
|
5.1%
|
5.5%
|
Web
2.0 Formats
|
1%
|
3.1%
|
3%
|
4%
|
What Marketing Formats do Hoteliers
Believe Produce the Best Results?
What
are the Internet marketing formats hoteliers believe generate the
highest ROIs?
In
the 2007 and 2008 results, website design, website optimization and
search
engine optimization ranked as the highest revenue generators. For 2009
we saw a
decrease in the percentage of people who ranked website design as one
of the
highest revenue generators.
This
thinking is in line with current budget restraints due to the
recession.
Website optimizations are much more affordable than website redesigns,
and
often pay for themselves within 3-4 months (as do website redesigns). Unless the website is over 2-3 years old,
hotel optimizations can help hoteliers take advantage of the much
cheaper
organic search related visitors to the hotel website.
Table C
What Internet marketing
formats do you believe produce the best results and the highest ROI?
|
2007
|
2008
|
2009
|
Website design/redesign
|
62.9%
|
70.19%
|
56.3%
|
Website Optimization
|
71.9%
|
68.27%
|
81.6%
|
Strategic links to
property website from online
|
52.7%
|
41.35%
|
48.3%
|
Paid Search Engine
Marketing: Pay-per-click (PPC)
|
40.7%
|
39.42%
|
56.3%
|
Search optimization –
Organic Search
|
68.3%
|
56.73%
|
60.9%
|
Display Advertising
(banners)
|
16.2%
|
12.5%
|
28.7%
|
Email Marketing
|
58.7%
|
60.6%
|
51.7%
|
Email Sponsorships
|
6.6%
|
4.8%
|
4.6%
|
Web 2.0 Media Formats
|
16.8%
|
26%
|
37.9%
|
Other
|
4.2%
|
2.9%
|
2.3%
|
Even
though hoteliers are going back to the basics this year, there are a
high
percentage of hoteliers who believe Web 2.0 initiatives produce
results. This is
interesting considering that according to Table E below, 15% of
respondents are
not even planning Web 2.0 initiatives for 2009.
The
results make a lot of sense however, in the case of the increase of
hoteliers who thought Paid
Search Marketing produces the highest ROI. We saw the use of paid
search
decrease from 07-08, and then saw over a 40% increase in the 09 survey
results.
This is most likely because more and more hoteliers
realize
that Paid Search
works. According to
eMarketer, these survey results
are on track for search engine marketing across all industries (not
just
hospitality), as U.S.
spending on search engine marketing will nearly double from $12.2
billion in
2008 to $23.4 billion in 2013.
Brand Standards &
Regulations on Hoteliers are Easing Up
For
the past two years in the HeBS Benchmark Survey, franchised
hotels have responded that they feel there are some major restrictions
on their
online marketing efforts. However, this percentage has been decreasing
year
over year:
Table
D
If
you are franchised or managed by an outside major chain or brand, do
you find there to be any major restrictions in online marketing conduct
due to brand standards and regulations
|
2007
|
2008
|
2009
|
No
|
76.2%
|
81.8%
|
85.6%
|
Yes
|
23.8%
|
18.2%
|
14.4%
|
Here
are some of this year’s responses:
- “Email marketing is a
challenge when past guest lists are under brand control.”
- “You can’t be as
flexible as you need, you don’t spend a lot of money in online
marketing because you can’t analyze it as you would [normally] do.”
- “Hotel website is
stand-alone however we have to use the Franchise Booking Engine.”
- “Limitations of who you
can contract with.”
- “Restriction for hotel
pictures loading…restriction for hotel package design and loading.”
So what does this tell us? HeBS believes that there are many
online revenue opportunities which fall outside the scope and
‘bandwidth’ of
the major hotel brands’ Internet marketing efforts. Even though most of
the
leading hotel brands have become proficient national and international
eMarketers over the past 5-6 years, they cannot possibly cover all the
local
online revenue opportunities available to the property. As hoteliers
are
becoming more Internet marketing savvy, they are realizing they can
complement
the hotel brand’s Internet marketing efforts with their own “Local
Internet Marketing Strategy for Franchised Hotels” – read HeBS’
article on
the subject.
What’s
Ahead for
Hoteliers and Social Media?
Social
media continues to be a hot topic in the industry, and
more hoteliers are looking for the next big thing they can do (without
spending
a lot of marketing dollars). We asked hoteliers what type of web 2.0
initiatives they were planning for 2009 and compared it to 2008 results:
Table
E
What type of Web 2.0
marketing initiatives are you planning for next year?
|
2008
|
2009
|
A blog on the hotel
website
|
14.5%
|
14%
|
Photo sharing
functionality on the hotel website
|
12.7%
|
4.7%
|
Sweepstakes and
contests on the hotel website
|
9%
|
3.5%
|
Survey and comment card
on the hotel website
|
18.4%
|
14%
|
Subscribe to a
reputation monitoring service
|
8.4%
|
2.3%
|
Create profiles for my
hotels on social networks (Facebook, MySpace, etc.)
|
13.3%
|
14%
|
Actively participate in
blogs that concern my hotel
|
12.7%
|
5.8%
|
Advertise on social
media sites
|
8.1%
|
24.4%
|
I am not planning on
Web 2.0 initatives for 2009
|
NA
|
15.1%
|
According
to the survey, this year the most important Web 2.0 initiatives
were: advertising on social media sites (25%), a blog on the hotel
website
(14%), creating profiles on social networks (14%) and survey and
comment cards
on the hotel website (14% - although this is significantly down from
last year).
Last year, hoteliers selected Surveys and Comments Cards as the most
popular
option. Another big drop was in the use of reputation monitoring tools,
as
hoteliers become savvier and realize they can monitor
the most popular sites that offer reviews themselves – and for free
–
read HeBS’ article on the subject.
Conclusions
The
survey results show that hoteliers really are “Getting
Back to the Basics” in this tough economy –
read
HeBS’ article on the subject. While
there
were some interesting results, such as an increase in hoteliers
planning on
advertising on social media sites, hoteliers are shifting budgets from
offline
to online, focusing on Internet marketing initiatives that have been
proven,
are becoming savvier at monitoring their hotel reviews on their own,
and in
general are embracing the Internet as their most cost-effective,
revenue
generating tool.
All
industry forecasts indicate that
in 2009-2010 the travel industry in North
America
will experience a major decline. GDS contribution is also projected to
decrease
by several percentage points. And yet,
online travel bookings in 2009 are expected to grow by 10.5% and reach
$116.1
billion due to channel shift, and an additional 11% in 2010 to reach
$128.9
billion (eMarketer).
In
other words, this
year the Online Travel Channel will be the only growth channel in
hospitality
and, as the survey shows, many hoteliers clearly understand that. Here at
HeBS, we firmly believe that a
comprehensive, ROI-centric Internet marketing strategy is one of the
perfect
“survival tools” for hoteliers in the current economic environment. The
direct
online channel can help smart hoteliers generate incremental revenues,
improve
marketing ROIs, attract more affluent travelers and out-smart the
competition.
For the past 14 years, our experience shows that Internet-savvy
hoteliers with
robust Direct Online Channel strategies are the winners in economic
downturns
like this one.
About the Authors:
The HeBS
team for this
project consisted of Max Starkov, Jason Price, Mariana Mechoso and Evan
Rosenblum.
About HeBS:
Hospitality
eBusiness Strategies, Inc. (HeBS)
is the industry's leading Internet marketing services and strategy
consulting
firm for the hospitality and travel verticals. As a full-service
Internet
marketing and strategic consultation services firm, HeBS has pioneered
many of
the "best practices" in hotel Internet marketing and direct online
distribution. HeBS specializes in helping hoteliers boost their hotel
Internet
marketing presence, establish interactive relationships with their
customers,
and significantly increase direct online bookings and ROIs.
A diverse
client portfolio of over 500 top
tier major hotel brands, luxury hotel and resort brands, golf and spa
resorts,
hotel management companies, franchisees and independents, meeting and
conference venues and CVBs has sought and successfully taken advantage
of HeBS’
hotel and travel Internet marketing expertise. Contact HeBS consultants
at
(212)752-8186 or [email protected].
|