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Hotel Marketing Budgets: How Much is Actually Enough?

September 18, 2018

Hotel marketing budgets: how much is actually enough?

According to a recent study, Booking.com and Expedia return $16 for every dollar spent on marketing. This looks great on paper, but the reality is that over the last decade OTAs’ return on marketing investment decreased by 15%. 

This explains why Booking.com dramatically decreased its advertising spend. 

The same story is playing out across the hotel marketing landscape… cost-per-acquisition is soaring, and if the Goliaths of the industry had to change their strategies, it’s probably time to sit down and address the elephant-in-the-room: how much should you be spending on marketing? 

First: What’s in the Marketing Budget?

Allocations within the marketing budget vary from company to company. According to The CMO Survey sponsored by Duke University, Deloitte LLP, and the American Marketing Association, “less than half (47.9 percent) of companies include expenses for marketing employees in their marketing budgets. Most companies (61.3 percent) include direct expenses for marketing—such as advertising, trade promotions, and direct marketing—in their marketing budgets, but this varies by industry (See below):

What does your hotel or resort include in its annual marketing budget? Do you include employee or outside agency costs in your budget? How about OTA commissions or GDS fees?

This is a critical definition that will determine how much you need and how your results are perceived by ownership.

THE INVERTED U-CURVE

Hotel marketers can learn a valuable lesson from Malcolm Gladwell in his inspiring book David and Goliath. In the book, Gladwell talks about “inverted U-Curves:”

“Inverted-U curves have three parts, and each part follows a different logic. There’s the left side, where doing more or having more makes things better. There’s the flat middle, where doing more doesn’t make much of a difference. And there’s the right side, where doing more or having more makes things worse,” according to Gladwell.

The curve has been around for over a century and it has been applied to a wide range of different situations:  

Money: Scholars who research happiness suggest that more money stops making people happier after they exceed $75,000 per year

Class Size:  Contrary to popular belief, a class size decreases beyond an optimal number, learning effectiveness decreases. Apparently, the optimum number is 18-24 students per class

Punishment and Crime: Past a certain point, cracking down on crime and locking people up stops having any effect on criminals, makes crime worse and the juvenile delinquency rate increases

Similarly, hotel marketing budgets have an inverted U-curve; doing too little will result in sub-optimal results, but doing too much is often wasteful.

So how can you identify this sweet spot? 

WHERE ARE YOU ON THE CURVE?

Hotels on the left side of the curve (usually large branded properties) typically allocate little to no budget in marketing beyond their brand fees. 

They often have a lackluster brand.com web page, no outside marketing investments and their distribution relies almost entirely on third-parties. The good news is that if your flagged hotel is on that part of the curve, any additional marketing investment will help you move to the flat middle of it, where investments and return are in balance and your profitability is at its zenith. 

The majority of hotels fall between the left side and the flat middle of the curve (and need to spend more to achieve their goals. However, if you categorize OTA commissions as marketing costs, virtually every hotel immediately moves to the right side of the curve, where spending more often delivers diminishing returns. As Kalibri Labs notes in their recent report: Demystifying the Digital Marketplace: “if you’re growing top-line revenue —but you’re spending a lot to do it—then you’re ultimately less successful in contributing to overall profits. Not an optimal strategy.”

However, if profit is not your primary goal (i.e. hotels rebranding, new openings, brand awareness projects, etc.) spending MORE may be the correct strategy, but for the vast majority of hotels (if you believe Malcolm Gladwell) it is not. 

So, how much is too much when it comes to hotel marketing?

Marketing effects profitability

According to a recent Gartner Research study, companies spend an average of 12% of their annual revenue on marketing. A recent CMO Survey comes to similar conclusions, highlighting how tech companies are among the biggest spenders (14%) when it comes to marketing. The hotel industry, however, seems to pay an even higher price (up to 25%, according to Kalibri Labs).  Tom Klein, the former CEO of Sabre, recently stated in a Tnooz interview that Travel “is not 90% margin like many of the businesses that Google and Facebook and others are in.” With OTAs’ average commission at 19% and direct booking cost-per-acquisition growing year after year, industry margins are under siege. 

So while ADR and RevPAR are important metrics, you should also focus solely “ProPAR” (Profit per Available Room): the revenue generated per room minus the investments needed to acquire the guest. Here again, we strongly recommend categorizing OTA commissions as marketing costs to get a true picture of your marketing budget and its effect on profitability!

WHAT ABOUT DIRECT BOOKINGS?

Because of high 3rd party acquisition costs, there has been a lot of attention on building direct channels, just think about Hilton’s Stop Clicking Around campaign:

The unavoidable truth is that it is also very easy to overspend when it comes to direct booking investments and you can find yourself on the right side of the inverted-U curve without even realizing it. Similar to the OTA channel, direct reservations also have growing costs. 

Special discounted rates, loyalty programs, hotel digital marketing, PPC, metasearch engines and social media ads to name a few. Our advice to clients has always been: “you should have an unlimited budget for things that work…”

This philosophy requires a near-manic obsession with ROI tracking and analytics that requires serious software and some intensely nerdy data, scientists. As the CMO Survey reinforces: when respondents were broken into three groups—high, medium and low usage of ROI analytics— marketing budgets were 70 percent larger in the high group than the low group.

HOW MUCH IS TOO MUCH?

Before you can determine how much to budget for marketing, hotel execs need to answer three critical questions:

1.  What are the revenue targets by segment? (more on this here)

Without a concrete understanding of targets by segment, hotel marketers cannot quantify (or deploy) their budgets properly… leading to misalignment with ownership and missed targets.

2. Where is the property in its lifecycle?

Recently opened hotels, or properties which went through a rebranding, in fact, should be less focused on return on investment and more on building awareness. In cases like these, 20-25% of annual revenue spent on marketing is common. If, on the other hand, your hotel has matured to a more advanced stage and it’s been in business for 3+ years, then 8-15% of your annual revenue on marketing should be more than enough to guarantee you a good balance between profit and visibility. 

3.  How much revenue is marketing accountable for…?

As the CMO Survey points out: Marketing is responsible for leading revenue growth at 38.4 percent of companies. These companies have larger marketing budgets as a percentage of the overall company budget than companies that do not assign primary responsibility for revenue growth to marketing.”

Are comments about your hotel falling on deaf ears?

May 1, 2018

Hotel social media monitoring needs to go way beyond Trip Advisor

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Hotels take reputation management seriously when it comes to guest feedback on TripAdvisor but often underappreciate the need to closely monitor other social media channels.

This is a lost opportunity to gain short-term insight and long-term goodwill.

Here are 3 reasons hotels need to prioritize social listening:

1. Instant karma

Social Media is a two-way communications channel; you can talk to guests, and guests can talk back. You can have a real conversation with an individual. Not so with TripAdvisor: By the time you respond, the damaging review may already have been posted.

Not to mention, social media trains consumers to expect an immediate response, and an already irritable customer can get more irritable if they don’t receive a response in an adequate amount of time. Ignoring a problem doesn’t make it go away. It can often exacerbate the situation.

Most negative posters on hotel social media channels are still on the property when they post.

And they aren’t doing it for their own enjoyment, either: 78% of people who complain to a brand via Twitter expect a response within an hour, according to a study by Lithium. By monitoring and responding ASAP, hoteliers can potentially engage these dissatisfied guests during their stay—and win them over—before they turn their vitriol into permanent TripAdvisor or OTA reviews.

Another instant benefit of social listening for hotels is the ability to glean insight on guest experience and product/service issues— both positive and negative.

If your hotel makes the mistake of ignoring positive comments about your property, you’ve just lost out on valuable testimonials you can utilize, as well as gaining useful feedback and a chance to strengthen relationships with users. And if you ignore negative comments, you’ll damage your brand and foster negative social proof.

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Further, by listening to social media channels and acting quickly, hotels are often able to delight guests with unexpected surprises that create long-term loyalty and evangelism. These opportunities—which are fleeting and must be capitalized on almost immediately—can offer significant branding value, at minimal cost.

One company making tremendous strides to this end is Marriott, which has tasked its M Live team with constant monitoring of social channels, for the sake of surprising guests with enhanced service touches, like a free bottle of champagne delivered on-site for guests who got engaged while staying at a property.

2. Complete strangers are talking about you…

It’s not just your fan base that you have to worry about.

Non-fans and non-followers are talking about your brand too. It’s crucial to listen to these potential influencers as well.

Surprisingly, 96% of the users who discuss brands online don’t actually follow those brands’ profiles, according to a Brandwatch report.

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You can be reactive and ONLY monitor people who directly comment or tag your hotel’s Instagram “handle” (your actual Instagram account name) in a picture. You’ll receive a notification and you can respond accordingly.

But there are more proactive ways of monitoring ALL relevant sentiment on Instagram. By typing the generic name of your hotel (see illustration above) or property specific hashtags in the search bar, you can discover additional content that guests have posted about your prop.

If you don’t have the time or resources to monitor your hashtags and geo-
tags, Tools like Tout allow you to find and license the content with ease.

3. Discover (and celebrate) the evangelists

Hotel social media monitoring isn’t just about catching people bashing your hotel: It’s equally valuable when guests are celebrating their experiences on channels such as Instagram.

Over the last few years, storytelling and other forms of user-generated content (UGC) have become some of the most popular and cost-effective methods for hotel marketers looking to harness digital and social media and put more heads in beds.

capturing guest-generated social proof from The St Regis in San Francisco

An example of capturing guest-generated social proof from The St Regis in San Francisco

This is driven by a decline in consumer trust in advertising; instead, consumers now look to one another for credibility. UGC such as photos, videos, and posts about hotel experiences are viewed as more authentic and less sales-focused, so using that content to your advantage can offer tremendous benefits.

By monitoring things closely, you can locate and celebrate those brand ambassadors who are taking pictures of their property experience, allowing you to benefit from what is essentially free positive publicity.


About Tambourine

Tambourine uses technology and creativity to increase revenue for hotels and destinations worldwide. The firm, now in its 34th year, is located in New York City and Fort Lauderdale. Please visit: www.Tambourine.com

Friday Freebie: Rate parity matters… but so does Promo Parity

April 13, 2018

Behold the Power of SPAC…

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Welcome to the Friday Freebie!

Each week we share one impactful hotel marketing tactic that you can implement immediately to drive more conversions and more revenue.

This week’s Freebie: Rate parity matters… but so does Promo Parity.

It’s not easy filling your hotel’s need periods. These low periods can break your annual budget. Avoid what many panicked hotel marketers do… “spray and pray” offers all over the digital landscape.

You need to be deliberate and focused.

Just like a general in charge of an army – you need to coordinate your operations and move your forces in unison.

This is why smart hotel marketers launch one promo across all channels simultaneously. We call this SPAC: Simultaneous Promotion Across All Channels.

Not only will your promo have the best chance of massive outreach and conversions, it also squashes any chance of confusion and skepticism in your market.

Think about it:

If Offer A is running on your Facebook page, Offer B is running on a 3rd-party channel and Offer C is running on your website, guests will be leery of what’s real or what’s current. Prospects will experience dissonance… enough to turn them away looking for another more consistent and mentally-calming hotel option. Consumers are uncomfortable with inconsistency.

Lesson: Consistency matters. Maintaining parity among your offers, not just rate, is vital to your bottom line.

Get More: Stop the Noise: The 10 Things That Matter to Hotel Marketers Right Now


About Tambourine

Tambourine uses technology and creativity to increase revenue for hotels and destinations worldwide. The firm, now in its 33rd year, is located in New York City and Fort Lauderdale. Please visit: www.Tambourine.com

5 Things Modern Hotel Marketers Can Learn From Vintage Travel Posters

April 4, 2018

Hotel marketing hasn’t changed much in 100 years…

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In the Golden Age of travel in the early part of the 20th century, there were no online banner ads. Nor guest analytics, marketing technology, mobile apps, retargeting campaigns, email offers, Insta-influencers, or search engines.

Instead, airlines, CVBs, resorts and railway companies relied on one of the most powerful mediums of their time – the travel poster.

These travel posters shared common characteristics: exuberant colors, a gorgeous single graphic, and bold eye-catching lettering that all evoked a lust for travel and exploration with a single glance. In fact, these poster designers have been nailing it for more than a century. These vintage travel posters are still provoking inspiration for adventures far and wide today.

There’s a lot we can learn from these beautiful illustrations.

Decades before the creation of modern hotel marketing, poster designers inherently understood and integrated five key elements of successful hotel marketing:

1. Take time to CRAFT your story

Your hotel is different.

You may know that, but your prospective buyer doesn’t.

So, you need to make it obvious. Your hotel marketing needs to deliver relevance and intrigue immediately. A mistake many hotel properties make is ‘me too’ marketing that is cliché and already overused by many of their compset neighbors. For example, describing your hotel as ‘in the heart of New Orleans’ or ‘oceanfront hotel,’ making it difficult for travelers to differentiate your property from other central New Orleans properties and oceanfront hotels.  Ditch these overworked marketing messages and present something brilliant and provocative, instead of bland and predictable.

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This poster for a French hotel tells a unique story of mountain air and healthy activity!

2. Tell It Succinctly
The marketing concept behind travel posters is simple: combine one vibrant image and bold text to create a uniquely effective marketing medium that inspires travel.

These posters were easily understood and were perfect for capturing the attention of people on the go. Today, attention spans are at an all-time low, so every second of your hotel marketing counts. Hotel marketers need to be cognizant of the first five seconds that a visitor lands on a property website, that short span of time determines if the person will book, bounce or return. So, you need to squeeze performance out of every second for higher chances of conversion and revenue. Cut the clutter, get rid of slow-loading graphics, keep things simple.

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Is there any question where this Rio hotel is located?

3. Be Visually Arresting

Your marketing images and hotel photography should be more than just pretty pictures. Just like the eye-popping colors and a single image on a travel poster, your images should catch attention in seconds and convey your experience in a single glance.

In fact, studies show that travelers spend time scouring through hotel images before making a decision. And, that your hotel photography has the power to change a buyer’s mind, for better or for worse. Ditch the stock images or dated blurry photos. Invest in a photographer experienced in shooting interior design, real estate, architecture or other hotels. Plus, leverage your hotel’s best FREE photographers – your own social media-savvy guests. Instagram enthusiasts are producing images on par with paid professionals for their personal channels.

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Sometimes, the best image for a hotel is not the hotel at all… it’s the nearby attractions!

4. Keep messaging consistent

Back in the heyday of travel posters, hotels could not change messages very often… so they were forced into being consistent in their marketing.

Today, rate parity isn’t the only consistency your hotel should be vigilant about. Maintaining your hotel’s STORY parity is also vital to your bottom line. Smart hotel marketers know their Unique Selling Proposition (USP) has to be consistent across all touchpoints and marketing channels. If consumers see your hotel described as ‘cosmopolitan and sophisticated’ on one channel, then as ‘central and family-friendly’ on another, potential guests will be confused and leery of moving forward. Consistency builds trust and trust turns into buyer confidence.

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For many years, the Outrigger hotel in Hawaii used images of guests enjoying the surf with the locals. They were the early advocates of celebrating authentic local experiences!

5. Be Intentional with Time and Place 

The biggest boon of marketing technology is the ability to target and automate campaigns, allowing you to reach the right audience, with the right message, at the right time.

Use it.

The most popular travel posters were commissioned by airlines and railway companies and were respectively displayed in airports and train stations touting resort destinations, thrilling cities, and weekend getaways. Today, consider where and when to deliver your marketing messages. For example, consider the impact of a billboard promoting a Caribbean resort and its sunny beaches displayed in New York City during the bone-chilling months of winter.

 


About Tambourine

Tambourine uses technology and creativity to increase revenue for hotels and destinations worldwide. The firm, now in its 33rd year, is located in New York City and Fort Lauderdale. Please visit: www.Tambourine.com

The GM Checklist for Hotel Marketing

March 20, 2018

General Manager’s (GM’s) are more involved than ever in hotel marketing.

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The cost of guest acquisition is on everyone’s mind these days, which means GM’s are feeling pressure from ownership, asset managers and their hotel management companies to maximize the ROI from their marketing investments.

GM’s have responded in two positive ways:

1. GM’s are now holding their marketing teams accountable for contributing – in a tangible, measurable way – to revenue goals and generating leads.

2. GM’s are also championing their marketing team’s efforts and investing more time than ever before in improving their understanding of the complex challenges facing their hotel marketing team

To support this effort, here’s our list of 10 significant hotel marketing elements that every GM should be familiar with:

1. The Four Marketing Pillars: Price, Product, Promotion and Placement

A smart, easy place for every GM to start is understanding the four traditional pillars of marketing that directly drive the success of your hotel:

Product 
The most important of the four, classic marketing “P’s”: How does your product differentiate you? Consider both the hotel’s physical product (rooms, restaurant, meeting space, amenities, spa, etc.), as well as the service experience. GMs need to constantly work with their marketing team to determine if their product or service experience needs improvement (and then ask ownership for the funds)!

Promotion (i.e. Advertising and Traffic Generation)

More than anything else, the GM MUST ensure that the marketing team’s promotional expenses and investments are synchronized with the hotel’s targeted business mix

Placement (Distribution Channels)

GM’s need to know where the business is expected to come from and how the property’s rates and inventory are positioned there? How many groups vs transient do you expect and how much is actually being generated? How much inventory are you allocating to OTAs? Is your team relying too heavily on OTAs to reach revenue goals? Or, are you thoughtfully optimizing your own hotel website and booking engine to attract more profitable, direct bookings?

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Your revenue management team controls pricing, but price is an unavoidably critical element of marketing. GMs need to have consistent, accurate visibility to ADR vs the compset. GM’s should also strongly encourage close cooperation between their marketing and revenue management teams.

2)  What your Marketing Team Needs from YOU to Succeed!

Your marketing team can’t survive without the GM championing their efforts and giving them the right amount of funds, tools and resources to succeed. The key is to simply, and constantly, ask them what they require from you to achieve their goals, then make it happen.

3) The Quality of Your Product 

We want to underscore the importance of your PRODUCT in the marketing mix.

No amount of clever advertising or promotion can overcome an inadequate product or me-too service experience.  Keep in mind this compelling quote by Robert Stephens, founder of Geek Squad, “Advertising is the tax you pay for an unremarkable product.”

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There are far too many hotels that continue to sink millions of marketing dollars to over-compensate for or to cover up an aging, lackluster, or grungy hotel product. The less you pay attention to improving your service and your hotel product, the higher your marketing and advertising expenses will be to make up for it.

GM’s can best serve their marketing teams by driving product improvement first!

By refusing to cut corners, investing in quality from the front desk to the back of the house, and by presenting the best guest experience that your staff can deliver, guest sentiment will go up, your number of repeat guests will go up, profits will go up and your marketing cost per booking will go down.

4) How Marketing Investments Correlate to Projections

Smart GM’s know exactly how much revenue they expect from each segment of the hotel’s business. And they expect their marketing teams to correlate their investments for leisure/transient, group, corporate and F&B.

Generic, aimless and “pretty picture” marketing won’t cut it. Every marketing activity should be done with the intention of achieving the segmented revenue goals of the overall business mix.

Check back in throughout the year to see how your marketing team is synchronizing their allocated budget and resources to align with revenue projections.

5) Your Property’s Story

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Consistently and creatively telling a meaningful, truthful story is what truly attracts travelers. However, many hoteliers don’t know what their story is, much less how to convey it. Correctly telling your story means knowing your audience, being honest about your assets and getting all stakeholders in agreement about your property’s unique identity so that you can convey it poignantly across all your marketing channels.

Travelers are no longer drawn to sterile facts, puffy promises of a wonderful stay or mentions of your recent industry awards. They want to be a part of something that intrigues them, connects with them and gives them something to brag about.

GMs should be vigilant about their marketing team’s ability to propagate a unique story across all channels.

6) Actual Costs of OTAs vs Marketing Expenses

Every good hotel marketer must know the actual costs and expenses of each channel. OTAs are particularly tricky to track, as their commissions are often hidden, yet are one of the costliest expenses to hit your bottom line (OTAs usually pay a net rate back to the hotel, so the actual cost will never show up in your financials). Lean on your marketing and revenue team to track the real expense of OTA bookings and compare that to the tangible expenses that power more direct booking channels.

7) The Ratio of Direct vs 3rd Party Revenue

This goes in tandem with #6. Many hotels are still relying disproportionately on higher cost channels for business. With rates and occupancy at an all-time high, one of the primary areas GMs can affect is COST of acquisition!

And owners are watching this closely.

GMs should check the pulse on this each month to compare how many bookings came directly through your hotel call center and website versus costly 3rd parties.

8) How to Augment the Brand’s Marketing Program

Brand affiliation offers many benefits… But custom marketing targeted to your specific audiences is not one of them.

Branded/flagged properties need to augment their brand’s core program with timely campaigns and custom direct “vanity” websites that help fill periods of need. Instead of solely relying on the brand’s standard marketing program, which is duplicated for every other sister hotel in the region. Your marketing team should be proactively differentiating your property, customizing your website, and boosting your search engine optimization (SEO) and social media efforts.

9) Marketing KPIs 

Get familiar with the KPIs your marketing team is responsible for while ensuring they are not spending too much time tracking vanity metrics. Metrics should offer insight that GMs and the property owners consider high priority (like how much your marketing team is actually contributing to the hotel’s revenue targets). Hotel marketers should be able to share vital KPIs like direct revenue ratio, leads generated for the sales team and marketing cost per booking (MCPB).

10) Why You Lose Business to the Compset

Winning is easy.

Losing requires painful introspection.

A majority of hotel sales and marketing teams fail to ponder why people chose another property. Whenever your team loses a major group deal or market share, the GM needs to ask the team: Why did we not win this business?

What went wrong… How could we have done better?

This simple follow-up could dramatically empower, alter, and inform your future sales efforts.

Also, your team should never lose track of what your comp set is doing. In fact, there are so many tactics and tools at your disposal, that a competitor’s success should never come as a surprise. Keeping tabs on your compset will give you the insight to finesse, and possibly pivot, your own marketing campaigns.


About Tambourine

Tambourine uses technology and creativity to increase revenue for hotels and destinations worldwide. The firm, now in its 33rd year, is located in New York City and Fort Lauderdale. Please visit: www.Tambourine.com

Friday Freebie: Crush the Compset with This Group Sales Tactic

March 16, 2018

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Welcome to the Friday Freebie!

Each week we share one impactful hotel marketing tactic that you can implement immediately to drive more conversions and more revenue.

This week’s Freebie:

Stay ahead of new compset properties. Harvest your city’s special events to get ahead of lucrative group business opportunities

Nothing can shake up your group sales numbers more than a new hotel in your compset. Meeting and group travel planners are hungry for what’s new and will likely include the new space in their consideration set… unless you employ smart strategies to provide your hotel with a constant flow of revenue from other sources.

John Washko, VP of Expo & Convention Sales at Mohegan offers this powerful tip:

Work ahead by keeping close tabs on all the special events scheduled for your city as far in advance as possible; monitor the area’s convention centers, concert venues and CVB websites. Events, such as conventions, sporting events or concerts, almost always bring meeting and/or group opportunities with them.

Your sales team should be researching and reaching out to any related clubs or organizations that would likely travel to attend the event, then directly offer up a block of rooms at a group rate. Your hotel can offer even more value through discounted transportation to the event.

For example, consider a Bon Jovi Fan Club, says Washko. This is a group, typically ages 40 to 50, that are enthusiastic fans of Bon Jovi and travel to his performances. Other examples are car clubs for major races or car shows.

Washko says the key to staying ahead of your new comp set is by being the first to reach out to these groups. So, set up processes with your sales managers to seek out these groups several months in advance.

Get more examples: The New Supply Threat: How Hotel Sales Teams are Fighting Back


About Tambourine

Tambourine uses technology and creativity to increase revenue for hotels and destinations worldwide. The firm, now in its 33rd year, is located in New York City and Fort Lauderdale. Please visit: www.Tambourine.com

Why Do Some Hotel Marketers Get Everything They Want?

March 13, 2018

Smart hotel marketing pros are using simple math get more budget.

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With the hotel industry enjoying a period of record performance, posting all-time highs for occupancy, ADR and RevPAR, one of the most talked-about ways to improve performance (and delight ownership) are to reduce the cost of guest acquisition.

And that begins with fully understanding a vital metric: your hotel’s CLV-to-CAC ratio.

But unlike many other industries that have already embraced the concept, too many hotel marketers are still unable to quantify their CLV-to-CAC formula.

This can be overcome with a little effort, offering a major potential boost to the bottom line and a far stronger bargaining position when asking ownership for more marketing dollars (and a raise)!

What Does It Mean?

To get started, there are some basic principles to know, beginning with terminology.

CLV stands for “Customer Lifetime Value,” meaning the revenue your hotel can expect to earn from each guest over the lifespan of that customer’s relationship with you. CAC, meanwhile, is short for “Cost to Acquire Customer,” or your total sales and marketing spend to attract each customer and obtain the aforementioned CLV. The premise behind the CLV-to-CAC formula is to maximize that ratio as much as possible.

There are multiple benefits from having a strong CLV-to-CAC ratio, including enabling hotel marketers to ask owners for more investment dollars, for example, imagine being able to tell ownership: “We spent $300,000 last year to attract 5,000 NEW guests, who represent a LIFETIME VALUE of three million dollars in revenue… in other words, for every dollar you give me, I’m giving you ten dollars back in gross revenue.”

So how do hoteliers calculate their CLV to CAC ratio?

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According to Kissmetrics, a well-known web/data analysis company, Starbucks CLV is more than $14,000.

Here are the core steps:

1. Making the Calculations

To come up with your CLV, first, consider how many times a guest typically stays at your hotel(s) over a multi-year period. Then, deduce the total value of those stays. Multiply that value by the total amount of visits per guest and that is the CLV you will use in the formula.

Next, to arrive at a value for CAC, simply divide the TOTAL amount your property spends on sales and marketing for each segment (ie: transient vs group vs corporate) by the total number of guests from that segment.

EXAMPLE:
So, if a hotel attracts 1,000 new guests this year and spends $100,000 to do it, the CAC equals $100.

2. What to include in CAC?

When calculating CAC for each demand segment, be sure to include salaries, expenses, technologies, advertising and any other investments made specifically to attract bookings for that specific segment. That may include, for example, a customer relationship management (CRM) system and trade show booth that is part of the CAC for your hotel’s sales efforts for attracting the corporate business segment.

Other costs, like Google pay-per-click (PPC) advertising, email marketing, and social media fees should be attributed primarily to transient guest CAC calculations. On the other hand,
your hotel’s website, the salary for your director of sales and marketing (DOSM) and other “shared” costs can be distributed evenly across all segments that your property targets.

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3. The Results:

Using the calculations described above, divide the CLV by the CAC to arrive at the ratio.

For example, if a hotel has a CLV of $5,000 per transient guest and the CAC for each transient guest equals $100, then the CLV-to-CAC ratio is 50x. In other words, for every dollar spent on sales and marketing to target that guest, the hotel will earn back $50.

That is the kind of return owners love!

And that is the kind of math that separates serious hotel marketers from those just focused on pretty pictures!

Now compare results to your OTA costs!

Once you know your own CLV-to-CAC ratio, you can compare it to the CLV-to-CAC of bookings derived from third-party online travel agencies (OTAs).

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You’ll most likely be pleasantly surprised by what you find: Typically, OTA-driven guests are less loyal and will have a lower CLV as a result. Also, the commissions on those bookings may be higher than the CAC you are achieving on your own.

So, in the quest to drive hotel profitability even further into the stratosphere, make it a top priority today to learn your CLV-to-CAC ratio for each customer segment you target. By offering such compelling insight, the CLV-to-CAC ratio can be an incredibly powerful stat for hotel marketers to cite to owners when requesting more marketing dollars.

You’ll be much more likely to obtain the budget you need when your owner is assured their investment will lead to a far better payoff down the road.


About Tambourine

Tambourine uses technology and creativity to increase revenue for hotels and destinations worldwide. The firm, now in its 33rd year, is located in New York City and Fort Lauderdale. Please visit: www.Tambourine.com

How Guests Decide Whether to Buy on Your Hotel Website

February 20, 2018

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Psychology plays a deeper role in online hotel booking decisions than you may think, particularly when it comes to building trust among hotel consumers. And creating that trust, experts say, is not as simple as just touting your brand affiliation or Trip Advisor rating.

Ultimately, your sales will suffer if you fail to foster trust with your hotel website visitors and give them psychological motivation to buy. According to a recent Western University study recently discussed in the Harvard Business Review, that begins with understanding the two methods of reasoning customers use when making online purchases, depending on the level of risk involved with that decision.

Parallel Processing

There are two different, yet complementary “parallel” means in which humans decide to buy. On the one hand, potential customers use logical, rules-based “deliberative” system of reasoning when making small, low-risk purchases.

That means that when buying lower-priced items online, shoppers are mostly looking for the standard signs of business legitimacy, like a secure checkout, a strong search-engine presence, online reviews, etc. Buying in this situation is a deliberate, informed choice that satisfies a very basic customer need.

But for more expensive, complicated transactions where personal comforts are associated (ie hotel stays), humans tend to rely on what is called “associative” reasoning, which is far less structured and rules-based than the deliberative process. Associative reasoning relies more on the individual’s own intuition and personal experience, and here is where building virtual trust becomes so important. Instead of creating a bond in person through your sales charisma and the reassuring experience of meeting your client in person at your office or storefront, you need to find the online aesthetics instead that trigger the same associative customer trust.

But how?

Here are three proven ways to build trust and increase your hotel website conversion rate:

1. Actually be authentic

You’ll never connect with consumers with a generic, cookie-cutter hotel website that fails to convey a truthful story. But there are also a number of subtle visual cues, as well as content features, that can go a long way toward enhancing a sense of authenticity that eases suspicion and fosters trust. Some useful tips include:

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The great ad man David Ogilvy reminds about the importance of being truthful in our marketing

  • Be truthful

Travelers are no longer drawn to sterile facts, puffy promises of a wonderful stay or mentions of your recent industry awards. They want to be a part of something that intrigues them, connects with them and gives them something to brag about. Telling a meaningful, TRUTHFUL story is what can truly attract travelers. Correctly telling your story means knowing your audience, being honest about your assets and getting all stakeholders into consensus about your property’s unique identity, so you can convey it poignantly across all marketing channels. Also, be truthful in how you tailor your messaging, language and imagery. Avoid using models in photos who don’t look anything like your typical visitors. And write your copy with language that speaks to your intended audience.

  • Avoid stock photography

Those dull, lifeless stock images that are used all too often on the web do little to motivate buyers or convince them they should do business with you. Instead, try and use your own unique photos. If that means hiring a professional photographer in order to create quality images, then go ahead and budget for that. And most importantly, every hotel should be capturing guest-generated content and repurpose it across every marketing channel

  • Get hyper-local

Give visitors the most authentic personalized content and recommendations you can. Offer “Staff picks” on great places to eat, “in-the-know” events and other local suggestions that go beyond the typical tips already available online for your area. Position your hotel website as the epicenter of the destination!

2. Provide social proof

Social proof can have a huge effect on building trust, because it taps into that fuzzy human logic that drives associative reasoning, including the fear of missing out (FOMO). Some core methods of providing social proof include:

  • Celebrate Past Guest Experiences on Social Media

Travel consumers are heavily influenced by “social proof” (this is why TripAdvisor is so popular). By sharing past guest stories, reviews (and best of all videos) on their hotel’s social media channels, you can turn your past guests into a perpetual army of experience evangelists.

Harvest their good times!

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An example of capturing guest-generated social proof from The St. Regis in San Francisco

  • User Testimonials

Post glowing past guest reviews directly on your website (especially for meeting planners). If possible, include a photo of the person leaving the review, which enhances the perceived legitimacy of the testimonial

  • Media Labels

Showcase awards on your hotel website from the reputable news or travel industry organizations who’ve recognized your property. The equity of these organizations creates buyer confidence at a quick glance

  • Partner Logos

Also display the logos of the businesses and organizations you partner with, even if they are smaller, less easily recognized brands. This bolsters credibility and draws other partners and customers to you

3. Create helpful content

Research has shown that people are more likely to do you a favor if you do something for them first. In marketing, this is called reciprocity, the principle of give and take. If you offer something of value upfront, travelers will have an innate desire and obligation to return the favor.

So when planning and executing content strategies for your site, create content purely for the sake of being useful to your customers. Don’t make content a thinly-veiled sales pitch. That’s a surefire recipe for a rapid bounce rate (how quickly someone clicks on a link and then leaves) and is a general turn-off for viewers, who see right through this tactic.

Design content to help solve problems and address customer pain points. Local area guides, FAQ pages, area events calendars etc are all examples of selfless content that conveys helpfulness and generates trust

For more on the psychology of buying as it pertains to the hotel booking process, check out our in-depth series on “The Surprising Psychology Behind Successful Hotel Websites,” Part One and Part Two.

 


About Tambourine

Tambourine uses technology and creativity to increase revenue for hotels and destinations worldwide. The firm, now in its 33rd year, is located in New York City and Fort Lauderdale. Please visit: www.Tambourine.com

Direct Bookings, Guest Experience, hospitality, hotel marketing, Hotel Marketing Advice, Hotel Revenue, Marketing Advice

Friday Freebie: Copy This Tactic From Luxury Hotels

December 8, 2017 • By

Welcome to the Friday Freebie!

Each week we share one impactful hotel marketing tactic that you can implement immediately to drive more conversions and more revenue. 

This week’s Freebie: Luxury hotels know how to focus on health and wellness-enhancing amenities… but now, hotels up and down the chain scale are taking this page out of the luxury segment playbook to drive bookings.

Behind every luxury hotel is a marketer who understands exactly what the affluent customer seeks in a travel experience.

Besides VIP treatment, exclusive amenities, remarkable cuisine and unfettered access to service staff, affluent guests expect luxury hotels to enhance their health and wellness, from arrival to departure.

Luxury properties continue to answer this call with complimentary outdoor yoga classes, farm-to-table organic meals, guided nature walks and sumptuous spa treatments.

But offering the benefit of wellness isn’t just for luxury properties with deep budgets or wealthy guests. Industry research reveals that just about EVERY traveler these days wants to stay healthy on the road and is drawn to hotels that offer unique ways to do that.

Even if your hotel can only offer complimentary bike rentals or cucumber water in the lobby, emphasize any and all of your healthy offerings on your hotel website to stimulate consideration.

Here are some ideas:

  • Provide maps and photos of where guests can explore the area on bike or by foot
  • Emphasize any local ingredients and where they are sourced from in your menus
  • Do your rooms have air purifiers or organic bathroom amenities?
  • Create partnerships and packages with local yoga, pilates, barre and other fitness studios
  • Have specialized equipment in your fitness center? Highlight what they are instead of loosely describing it as ‘state-of-the-art equipment.”
  • Create an online list of vendors offering ways guests can stay active, including bike tours, paddle board lessons, snowshoe rentals, etc.

Get more: 10 Secrets of Luxury Hotel Websites


About Tambourine

Tambourine uses technology and creativity to increase revenue for hotels and destinations worldwide. The firm, now in its 33rd year, is located in New York City and Fort Lauderdale. Please visit: www.Tambourine.com


Friday Freebie: Creating Perceived Value to Stimulate Direct Bookings

September 15, 2017

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Welcome to the Friday Freebie!

Each week we share one impactful hotel marketing tactic that you can implement immediately to drive more conversions and more revenue. 

This week’s freebie: Use generic amenities and perks to create perceived direct booking benefits.

One of the more impactful, yet simplest, ways you can convince people to book direct is to create perceived value. OTAs have hundreds of thousands of properties on their websites, they cannot keep up in real time with the perks and inclusions at all of them.

By cleverly showcasing a few of your generic, everyday perks as special book-direct-only rewards (i.e. “Book direct and get free parking!”) you will create the perception that free parking is a special, direct-only benefit…. without jeopardizing your OTA relationships over promo parity issues.

Most hotels are savvy enough to offer these amenities to entice business away from OTAs, however, they bury these reasons several pages into their website. Or, only display them once the guests make it to the booking engine.

Your direct booking benefits need to be obvious and displayed in areas where online visitors can’t miss them. Right on your homepage, directly in your advertising (including PPC), in a prominent place on all of your marketing emails, in your employees’ email signature, retargeting ads, etc.

Here’s an example of one hotelier, Couples Resorts in Jamaica, creating perceived value in booking direct right on their home page:

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Bring out your direct booking benefits front and center to amplify your chances of guests booking direct.

Get More: Three Ways to Overcome the Perception That OTAs are Cheaper


About Tambourine

Tambourine uses technology and creativity to increase revenue for hotels and destinations worldwide. The firm, now in its 33rd year, is located in New York City and Fort Lauderdale. Please visit: www.Tambourine.com

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