Hotel owners are feeling the squeeze from rising operating costs, at a time when the U.S. hotel industry is posting record revenues.
Debt service, brand fees, management fees, credit card and intermediary fees and capital improvement programs are all costly contributors that have many fearing that when the next downturn comes, things could get ugly.
Owners can’t really control debt service, brand fees and credit card fees. That’s why hotel owners and asset managers are looking more closely than ever at variable marketing costs—particularly the cost of guest acquisition—which are also rising fast. According to experts, acquisition costs commonly in the range of 5% to 10% less than a decade ago have jumped to between 15% and 25%. If a hotel cannot acquire guests at a tolerable, sustainable rate, then the property is worthless as a long-term asset.
There are a number of reasons why the cost of acquisition continues to spike (along with the blood pressure of some owners) including:
1. Lack of Differentiation and Low Conversion Rates
One of the reasons that marketing costs are rising so quickly is because hotel marketers are often unable to create perceived value in their product, which ends up being treated like a commodity, and bought by consumers on price alone. Part of the problem lies with the brands, many of which have become largely homogenous and difficult to distinguish from one another, further prompting travelers to book solely based on price.
But blame also falls on the shoulders of hotel marketers themselves, who often fail to highlight the unique and compelling aspects of their properties. Instead of just listing amenities like an indoor pool and free Wi-Fi, it’s far more effective to focus on unique differentiators like popular or noteworthy foods and services at the hotel, proximity to favorite attractions and neighborhoods, packages that incorporate local products/services and any other aspects that make one’s hotel different from the rest.
If hotel marketers could create a more powerful story in the minds of potential guests and convert lookers to bookers at a higher percentage, their marketing costs would decrease.
