It’s a question that we regularly get asked by hotels at Up Hotel Agency and our answer sometimes surprises.
So why the question?
Hotels, like most traditional businesses like to set a firm budget i.e. know how much they should set aside each month for activities like marketing. So it’s natural to want to know what the most optimal spend is for a good return and market share.
Why so difficult to answer?
If you asked 3 agencies the same question, you’d likely get wildly varying answers, all with great sounding reasons why their suggestion is better. So which is right? The truth is, without trying all budgets with the same conditions, it’s difficult to tell.
Is there a solution?
In short…YES! Let’s imagine an environment where we can be creative for a change! Let’s look at this on a Cost per acquisition (CPA) basis. Why not look to sell my hotel rooms direct as long as I can sell for 14% or less for example.
Why does this make such a big difference? Well take the following example with one month Google Adwords spend:
Hotel A – Fixed Budget
Average Sale = £200
Fixed £2000 / month Adwords Budget
ROAS = 1500%
CPA = 7.5%
Total Sales = £30,000
The Result = A great month good ROI and high fives to the agency. But wait…
Hotel A – Variable Budget
Average Sale = £200
Variable Budget £3750 (spend)
ROAS = 990%
CPA = 11%
Total Sales = £41,000
The Result = True it’s a lower ROI and slightly higher CPA but £11,000 more direct bookings in one month! That’s £132,000 extra direct revenue in a year.
That alone would be positive, but in addition, for this example let’s say that these extra bookings moved across to direct from OTA channels.
Cost of sale through OTA – £132,000 (sales) = £26,400 (@20% comission)
Cost of sale Direct – £132,000 (sales) = £14,520 (@11% CPA)
So in addition to the extra direct sales, we reduce dependency on the OTA channels and save £11,880 in commission. And this is just one example for the range of digital marketing channels available. Think how this approach could also work across other channels e.g. Meta Search Marketing.
The Conclusion
Why limit your budget with a ceiling while cost per sales direct are cheaper than selling through other channels? You have a limited inventory, why not make your hotel more profitable and gain more direct loyal customers?
True, it pushes us to think a little differently about marketing budgets, but the results are worth it. Why not work with an Agency who understands this methodology and see the results for your hotel?
Up Hotel Agency have a great OTA Spend calculator to help you see the true savings your hotel could make by shifting channels (and it only takes 2 minutes): OTA Calculator
