This blog post provides an in-depth analysis of the costs associated with each phase of the guest journey. It will meticulously break down the financial layers from the moment of inspiration to the post-stay phase, where loyalty is established.
NB: This is an article from Demand Calendar
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This detailed analysis aims to reveal the subtleties of financial management at each step, highlighting the potential for a significant impact on a hotel’s profitability and ability to delight guests.
The post aims to offer a comprehensive exploration, providing readers with nuanced insights and actionable strategies. It is designed to equip hoteliers with an enhanced understanding of optimizing financial performance while continuously elevating the guest experience. This piece is not merely a continuation but an expansive deepening of knowledge to transform hotel cost management perspectives.
Cost categories
In the previous post, we looked at the three primary cost categories pivotal to a hotel’s financial health: Customer Acquisition Cost (CAC), Cost of Goods Sold (COGS), and Operating Expenses. These categories are allocated to each step in the seven-step guest journey as high, moderate, or low. Let’s start by taking a look at the allocation to each step.
Customer Acquisition Cost (CAC)
Here’s a summary of how Customer Acquisition Cost (CAC) is allocated across the different steps of the guest journey:
- Inspiration:
- CAC Allocation: High. This stage involves substantial investment in marketing and advertising to spark the interest of potential guests. It includes costs for brand awareness campaigns, social media advertising, and other forms of outreach aimed at inspiring travel.
- Research:
- CAC Allocation: High. Continued investment in marketing is crucial as potential guests explore destinations and accommodations. This includes maintaining an engaging and informative online presence, SEO efforts, and targeted advertising to keep the hotel top-of-mind.
- Shop and Book:
- CAC Allocation: High. This phase sees significant costs related to booking platforms and final marketing efforts. Costs include commissions paid to online travel agencies, booking engine maintenance, and promotions to encourage bookings.
- Prepare:
- CAC Allocation: Low. The customer has already been acquired by this stage, so direct acquisition costs are minimal. However, there may be minor expenses related to pre-arrival communications to enhance the guest’s anticipation and satisfaction.
- In-House Experience:
- CAC Allocation: Low. The focus at this stage is on delivering the service, not on acquisition. CAC is minimal as efforts are directed towards ensuring an exceptional stay, which can indirectly influence future acquisitions through positive experiences and word-of-mouth.
- Share and Review:
- CAC Allocation: Moderate to High. Post-stay efforts to encourage guests to share their experiences and leave reviews can be considered part of CAC, as these actions enhance reputation and influence future guests. This may include follow-up communications, review incentives or social media engagement.
- Remember and Return:
- CAC Allocation: Moderate. Efforts to encourage repeat visits, such as targeted email campaigns, loyalty program promotions, and personalized offers, are part of CAC. These strategies are focused on maintaining a relationship with past guests to foster loyalty and repeat business.
In summary, CAC is heavily concentrated in the early stages of the guest journey (Inspiration, Research, Shop, and Book) and transitions to maintaining customer relationships and fostering loyalty in the later stages. This strategic allocation of CAC throughout the guest journey helps ensure a balance between attracting new guests and retaining existing ones, contributing to the hotel’s overall profitability and success.
Cost of Goods Sold (COGS)
Here’s a summary of how the Cost of Goods Sold (COGS) is allocated across the different steps of the guest journey in a hotel:
