Overview: The Increasing Costs of Hotel Customer Acquisition

Overview: The Increasing Costs of Hotel Customer Acquisition

When we talk about red flags and concerns about increasing acquisition costs, some might be inclined to dismiss any worries and point to continued growth and prosperity—both in the industry and across the larger economy. And it is certainly true that we are in the midst of a sustained period of strong performance.

The Prosperity Trap:

Consider the following recently released data from TravelClick. As of this May, committed occupancy for the second quarter of 2018 through the first quarter of 2019 is up at 1.6% compared to a year ago. The pace of new commitments is continuing to edge upward, increasing by 0.1% over the last month. Additionally, 15 of the top 25 North American markets are showing committed occupancy increases compared to a month ago. The Average Daily Rate (ADR) is up at 2.7% based on reservations currently on the books for 2018, and is trending upwards in 23 of the top 25 North American markets. Actual occupancy for April was up 1.8% and ADR was a healthy 3.0%. RevPAR for April was up 4.8%.

The TravelClick outlook for the third quarter of 2018 is equally robust. Committed third-quarter occupancy is up 2.2% year-over-year (July committed occupancy is showing an increase of 1.8%, and August and September commitments are up 4.7% and 0.2%, respectively, relative to 2017 numbers). Transient demand is up 6.0%, business demand is up 4.6%, and leisure demand is up 6.6%. ADR for the third quarter of 2018 is up 2.4% over the same time last year.

All of this is undeniably positive, and marks the continuation of a years-long trend of strong performance across the Hotel industry. While some segments have performed better than others and market-to-market fluctuation remains, the overall trend-line is both positive and persistent. The problem, however, is that while a rising tide might lift all boats, it can also make that pesky leak seem like less of a problem than it really is.

Technology Giveth, and Technology Taketh Away:

One of the most exciting aspects of the hotel industry is the degree to which new and emerging tools and technology have the potential to add value to everything from marketing, to operations, to guest service. As hotel owners and operators can attest, the volume of technology accelerators out there is on the rise: we are constantly being inundated with new and better tech solutions to improve the performance of our hotels. But as intriguing as innovative and inspired tech can be, it also presents a challenge. Because every single one of these new platforms and solutions comes with a price tag—sometimes a significant price tag.

Consequently, we need to make sure that we are both thoughtful and strategic when it comes to the review, consideration, adoption and implementation process. We need to be diligent about conducting a detailed ROI for every piece of new technology, and make sure that we are not just layering technology on top of technology simply for the sake of having the latest and greatest items in the toolkit.

Keeping up with the technology Joneses can be exhausting and expensive. And this tech tidal wave is not happening in a vacuum: it comes at a time when a tight labor market and increasing labor costs are also increasing financial pressures. And as new models to acquire guests proliferate and evolve, marketing expenses are also on the rise. On the marketing side, money = visibility, and it takes more money than ever before to maintain that visibility across a growing number of platforms.

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