Google are saying goodbye to their commission-based bidding models for metasearch advertising. The good old days when you only paid after a guest’s stay are over. Many vendors will now be asking hotels to pay ad spend upfront.
NB: This is an article from Triptease, one of our Expert Partners
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Let’s dive into what this means for your hotel’s budgeting strategies and how you can navigate these circumstances.
The shift from commission to upfront payment models
For years, Google’s CPA model provided a safety net for hotels, ensuring that they paid for advertising only when it resulted in actual stays. This model aligned well with the hospitality industry’s cash flow dynamics, as payments to Google were made post-consumption, mirroring the way hotels received their revenues. However, with the shift to upfront payment models, the landscape has now changed.
In the new scenario, hotels are required to pay for advertising up front. That’s without the assurance of immediate returns. This means that hotels must now forecast their advertising spend and potential returns with great accuracy.
What you need to know about budgeting and financial planning
The primary challenge lies in managing cash flow – making sure that there is enough to cover advertising costs while waiting for the bookings through metasearch. The transition to an upfront payment model can be daunting, particularly for smaller hotels or those with limited marketing budgets. With that in mind, hoteliers might want to think about funds that were previously allocated to other areas with low return which could be redirected towards high return metasearch advertising.
Strategic financial planning in the new metasearch landscape
- Move to CPC bidding: With upfront payment required in CPC, managing cash flow becomes more critical and so it is important to ensure you have sufficient funds to cover these costs. You can consider reallocating funds from less effective marketing channels to support your CPC strategy, be aware of seasonal trends in your industry to adjust budgets and continuously assess the performance of these CPC campaigns.
- Use Performance Max for Travel Goals: Google’s Performance Max, reaching multiple channels including YouTube and Google Ads. Despite the cashflow challenges and loss of visibility and control across channels, Triptease’s expertise can help hoteliers understand this new Google product.
- Work with a provider offering a commission Model: Triptease will continue to offer a commission model that is risk-free, with no upfront ad spend, allowing you to pay upon a guest’s stay. In a landscape where performance is at risk if vendors can’t match Google’s bidding and cash flow, Triptease’s model shines as a beacon of stability, free from the uncertainties of Google’s guarantees.
The sunsetting of Google’s CPA bidding model requires a more strategic and predictive approach to financial planning. By reassessing your budget, embracing predictive budgeting, diversifying your marketing channels, and partnering with expert providers, you can navigate this transition effectively.
