So, how much does it cost to acquire a booking at your hotel? At first, this seems to be a straightforward metric.
NB: This is an article from Hotelogix
However, it’s much more complicated than that, so understanding what GAC is and how to calculate Guest Acquisition Cost (GAC) correctly is crucial.
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Why? Because diverse guests arrive with varying acquisition expenses, and these costs are spread across various departments, which makes calculating the accurate cost quite intricate.
So, let’s understand GAC in detail today.
What is GAC (Guest Acquisition Cost)
Guest Acquisition Cost (GAC) is a metric to measure the total cost your hotel incurs to attract, convert, and accommodate a new guest.
In simpler terms, it quantifies the expenses associated with bringing a new customer through the doors of your hotel. GAC considers various costs related to marketing, sales efforts, and operational activities aimed at acquiring a guest.
GAC is a significant financial indicator because it provides insights into the efficiency and effectiveness of your hotel’s marketing and guest acquisition strategies.
By calculating GAC, your hotel can assess how much money you need to invest to generate a new booking or reservation. This information is valuable for making informed decisions about resource allocation, marketing campaigns, pricing strategies, and overall business planning.
How to Calculate GAC (Guest Acquisition Cost)
An effective hotel channel manager offers a range of key features that streamline distribution, optimize revenue, and enhance overall operational efficiency.
The formula to calculate GAC is as follows:
GAC = (Total Marketing and Sales Expenses + Total Operational Expenses) / Number of Acquired Guests
- Total marketing and Sales Expenses are the costs associated with advertising, promotions, online marketing, public relations, travel agency commissions, and other efforts to attract and convert new guests.
- Total Operational Expenses are the costs related to the operational aspects of guest acquisition, such as training the staff, updating your website, improving guest services, and other activities to enhance your overall guest experience.
- Number of Acquired Guests refers to the number of new guests your hotel successfully attracts and accommodates during a specific period, typically tied to a particular marketing campaign or time frame.
By dividing the combined costs by the number of acquired guests, the GAC provides an average of how much your hotel spends to acquire a new guest. This figure helps your hotel evaluate the return on investment (ROI) from your marketing initiatives and operational enhancements.
Understanding and managing GAC can lead to more efficient guest acquisition strategies, improved guest experiences, and enhanced profitability.
Importance of Calculating GAC (Guest Acquisition Cost) for Your Hotel
Calculating GAC (Guest Acquisition Cost) offers your hotel business many insights that contribute to strategic decision-making and improved financial performance.
Here are a few reasons why calculating GAC is vital for your hotel business: