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Hoteliers are in the height of the budget planning season for 2008. Understandably, there is a great level of anxiety in the industry. What are your peers doing with their budgets? 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?
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. By 2010 the Internet will contribute over 45% of all hotel bookings in North America.
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).
Internet vs. GDS: Further erosion of the GDS channel is self evident: less than 17% of hotel inventory in the US is sold via the GDS today, and the number of retail travel agency locations in the US in 2007 has declined to less than 19,000 vs. more than 35,000 in 1996. Most major hotel brands sell more hotel rooms via their brand websites, than via the GDS.
Web 2.0 and Social Media: Web 2.0 and consumer-generated media sites continue to create a lot of buzz in the industry. Online travelers are increasingly influenced by social media sites and peer reviews.
Direct online distribution has become the way to do business on the Web. Greater amounts of room inventory, at higher ADRs, are being sold direct to consumer via the direct online channel—the hotel’s own website.
Channel Cost-Effectiveness and ROI: The shift from more expensive to less expensive distribution channels has become the norm in hospitality. Lessening your dependence on higher cost channels and driving more revenues through your own website should become the main objective of your 2008 marketing budget.
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 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.)
Building your 2008 Internet Marketing Budget
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:
Website Optimization
71.9% of the 2007 HeBS Benchmark Survey respondents said they believed website optimization generated the highest ROI’s, and the second highest portion of the budget, (between 14%) was allocated to this activity. If your hotel website is less than 2 years old, perhaps you do not need to re-design your site. A website optimization may be sufficient to update your website to industry’s best practices. This process involves improving the quality of the website content and rich media, enhancing usability and trust-worthiness of the site, presenting all key aspects of your hotel product, addressing your main customer segments, and boosting search engine friendliness via enhancing the keyword density, page titles, description tags and meta tags.
Website Redesign
62.9% of the 2007 HeBS Benchmark Survey respondents said they believed website redesign generated the highest ROI’s, and the highest portion of the budget, 14.2%, should be allocated to it.
In 2008, online users will have even higher expectations for hotel websites. 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 in order to bring your website up to 2008 online user expectations and best practices in consumer online behavior and purchasing habits.
Search Marketing
68.2% of the 2007 HeBS Benchmark Survey respondents said they believed search optimization/organic search generated the highest ROI’s, and allocated 11.4% of the budget to this line item.
Indeed, according to a recent HeBS analysis, revenues directly attributable to search-generated leads (natural and paid search) produced the highest source of website traffic and revenues for the hotel – more than email marketing, strategic linking, online banner ads, third party intermediaries, Web 2.0 initiatives and other forms of advertising combined. On average, search engines contribute over 50% of the hotel website traffic. In reality, this percentage varies greatly (48%-75%) depending on website optimization strategies, Internet marketing proficiency, property type, customer segmentation, location, budget allocations, etc.
A Closer Look at Web 2.0 in 2008
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.
Here are some ways to start integrating Web 2.0 initiatives into your Internet marketing strategy:
- Photo and experience sharing
- Sweepstakes and contests
- Surveys and comment cards
- Expert blog on the hotel website
- Customer testimonials on the website
- Social Networking Profiles
- Word of Mouth social media initiatives
- RSS Feeds
- Monitoring review sites.
Conclusion
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 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.
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