According to a recent study, Booking.com and Expedia return $16 for every dollar spent on marketing. This looks great on paper, but the reality is that over the last decade OTAs’ return on marketing investment decreased by 15%.
This explains why Booking.com dramatically decreased its advertising spend.
The same story is playing out across the hotel marketing landscape… cost-per-acquisition is soaring, and if the Goliaths of the industry had to change their strategies, it’s probably time to sit down and address the elephant-in-the-room: how much should you be spending on marketing?
First: What’s in the Marketing Budget?
Allocations within the marketing budget vary from company to company. According to The CMO Survey sponsored by Duke University, Deloitte LLP, and the American Marketing Association, “less than half (47.9 percent) of companies include expenses for marketing employees in their marketing budgets. Most companies (61.3 percent) include direct expenses for marketing—such as advertising, trade promotions, and direct marketing—in their marketing budgets, but this varies by industry (See below):
What does your hotel or resort include in its annual marketing budget? Do you include employee or outside agency costs in your budget? How about OTA commissions or GDS fees?
This is a critical definition that will determine how much you need and how your results are perceived by ownership.
THE INVERTED U-CURVE
Hotel marketers can learn a valuable lesson from Malcolm Gladwell in his inspiring book David and Goliath. In the book, Gladwell talks about “inverted U-Curves:”
“Inverted-U curves have three parts, and each part follows a different logic. There’s the left side, where doing more or having more makes things better. There’s the flat middle, where doing more doesn’t make much of a difference. And there’s the right side, where doing more or having more makes things worse,” according to Gladwell.
