When it comes to performance marketing, majority of hotel brands are setting themselves up for failure...
Hotel results are extremely competitive, with a host of local, national & international brands competing for a share of clicks alongside the deep pockets of online travel agents (OTAs), such as Booking.com.
Booking.com's business model is not too dissimilar to Amazon's retail strategy. They're big and savvy enough to know that a substantial chick share equals a winning formula against independents, thanks to their vast array of hotel options and user-friendly site.
Now, going back to my opening paragraph, independent hotels put themselves on the back foot from the get go due to their approach to data analysis.
Revenue is measured and attributed simply by the cost of the hotel room itself (say, £500 for a 2 night stay), but there is so much more value generated post-conversion that isn’t attributed into models.
You pay for your stay, again using the earlier £500 example. Upon arrival and throughout your stay, you indulge in various activities and services: you enjoy a couples massage (+£250), you play a round of golf including club rental, cart, caddy & shoe hire (+£200), you grab afternoon tea (+£40) and eat lunch and dinner in the hotel restaurant each day (+£300). This brings your total spending up to £1,290.
However, usually only the initial £500 payment for the room reservation is recorded as revenue generated by the PPC campaign, even though the actual value created from the conversion is considerably higher.
This approach is highly flawed and results in the business undervaluing the user at the point of click. This then leads to short term scaling issues, before eventually causing long term 'big fish eats little fish' issues, as the larger, more data driven OTAs dominate.
Whilst the picture I’ve painted is one of doom & gloom, it doesn’t need to be that way. Regardless of size, if hotels start looking at data differently these short and long term issues can be avoided.
A hotel group may task its marketing team or agency with the goal of achieving revenue at a specific return on investment. For example, they may set a target of 10:1 target, meaning that for every £1 spent on advertising, they aim to make £10 in revenue. Or, the approach could be that the team can spend 10% of the revenue generated on the costs associated with acquiring the customer.
In these two different approaches, the amount we’re willing to spend varies by some margin. On the outdated model, the one where only the room booking is counted as revenue, we can spend up to £50. On the advanced model, that number increases to £129.
There are various ways to leverage this process, not just in a single example, but at scale across all consumers who make purchases through paid serach. At the core of these methods is Value-Based Bidding (VBB). Since nearly all modern PPC bidding strategies revolve around platform data optimisation, VBB is essential for scaling up in today's digital landscape.
Lead value captured via PPC campaigns...
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Looking to take your digital hotel strategy to the next level? Get in touch to find out more!
