By Ines Barreiros
We all know the social media hype and have read plenty of articles of how important it is. And the truth is that your hotel needs to be where your guests are right? But the question here is, at what cost?
Maybe you are considering working with an agency to help run your social media accounts. Perhaps you want to appoint someone as a community manager. Maybe you think that the time you spend managing these channels internally is enough.
But how can you determine what is the right option for you and whether your efforts are generating a return on investment? This article will explore the rise of social media for hotels to engage directly with guests. We also present some important factors to consider before investing time and money toward managing these channels.
The Rise of Social Media for Hotels
According to our February 2021 edition of The Hotelier PULSE Report, ‘Social Media’ is a growing trend for hotels to engage directly with guests and drive direct bookings. Of the Hoteliers we surveyed in January 2021, 48,75% rank ‘Social Media’ as the 2nd most important Sales & Marketing priority over the next 12 months. This marks a 4.55% increase from the 44.2% who shared this view back in December 2020.
Social media dominates every-day life and influences all of us. And during this socially-distanced era, where more people are stuck at home, everyone is more digitally connected than ever. It’s hardly surprising hotels want to be where their prospective guests are.
According to the latest data from Statista, the most popular social networks worldwide ranked by the number of active users are:
- Facebook – 2.7 billion users
- Youtube – 2 billion users
- Whatsapp – 2 billion users
- Facebook Messenger – 1.3 billion users
- WeChat (China exclusive social media outlet) / 1.2 billion users
- Instagram – 1.1 billion users
- TikTok – 689 million users
Given the immense number of users per channel, these social media networks give hotels ample opportunities to interact with a broad audience. And we know for sure that plenty of your hotel’s potential guests are using these social networks right now.
But Is social media marketing a worthwhile investment for your hotel?
Do you know how to calculate the return on investment (ROI) you get from social media? Are you wasting hours and money without any return?
According to Altimeter, only 28% of businesses feel they can attribute value to business outcomes driven by social media. This means more than 70% of businesses fail to track and evaluate if their efforts on social media are worth it.
And why is the majority of online businesses investing in social media marketing without knowing how these channels contribute to the success of their businesses? Most likely because social media is not a one-size-fits-all tool. What works for one hotel in a specific location may not work for another. Therefore, calculating the ROI of these channels can be a complex and time-consuming challenge for most hotels.
Once you understand how you can analyse this information, you will start to get a clearer picture of your hotel’s social media costs, strategy, and return. This is where we come in.
So first things first, what’s your Hotel’s objective on Social Media?
It’s impossible to measure your social media results without defining your objectives first. These objectives can vary from hotel to hotel. It could be to raise awareness or to engage with prospective, current, and past guests. Maybe you want to increase your hotel’s website traffic, or to improve your hotels’ brand perception. Perhaps your hotel needs to bolster direct bookings or improve guest communications.
Once you define the social media goals for your hotel, the calculation of your return will become easier.
How to calculate the ROI of Social Media for your Hotel
If you’re planning to hire a company to manage your social media, this is a great way to calculate if this is a worthwhile investment. The easiest way to proactively measure the results, costs and acceptable investment to make is to gather the following information:
First of all, let’s consider a 1 year period since there’s a lag time between the investment in social media and the return. In other words, when someone sees your hotel’s social media post, but does not book straightaway:
1. How many hours did you spend managing social media in a year? How much do you pay an agency to take care of this work for you?
Let’s assume this number is $20,000. This is going to be the value of your investment.
2. How many visits from this referral did you have?
Go to your Google analytics account and check the number of your facebook referrals in 1 year. Let’s assume it was 5,000 visits.
3. What’s your hotel website conversion rate?
Website conversion rate is the percentage of visitors that go to your hotel’s booking engine after spending some time on your hotel’s website. Assuming that your website has 100,000 visits per year, and your booking engine has 40,000 – your website conversion rate is 40%.
4. What’s your hotel booking engine conversion rate?
The same logic applies here. If you have 40,000 hotel booking engine visits, and we identify 800 reservations for that year – your hotel’s booking engine conversion rate is 2%.
5. What’s our average reservation value?
Let’s assume your average reservation value is $1,000.
And what are the Results?
To recap, your hotel website had 5,000 website visits from your facebook page, and your website conversion rate was 40%. This means approximately 2,000 users went to your hotel’s booking engine.
Once users reached your booking engine, the conversion rate was 2%. This means that potentially 40 online visitors booked a room with you. If your average reservation value is $1,000 and multiplied by 40, the reservations equal $40,000.
So your hotel invested $20,000 toward social media and generated a $40,000 return. If you apply the OTA commission model, this means you actually paid 50% in commission for reservations generated from social media.
Consider the commission fees your hotel pays to OTAs, typically in the 15% to 30% range according to Hotel Price Reporter. This is already significantly more costly than reservations generated through your hotel website – the channel with the lowest cost of acquisition. Are you willing to potentially pay more than double this amount for your social media strategy?
Of course, there are other benefits to using social media besides generating reservations. These include hotel brand awareness, frequent communication with guests, getting customer feedback, and even increasing your market reach. However, you need to have a strategy that will give you the business results your hotel needs.
The big question here is: “Will investment in social media benefit your hotel?” After all, there’s no universal number that presents a desirable social media ROI. Therefore, you need to look at your hotel specifically, and continuously weigh up the cost vs the return.
*Published with Permission from Hotel Executive