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Hotel and Resort Digital Marketing Budgets: Avoid the Headaches and Get it Right!

2013-10-19

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By:William Bellis III, Senior Corporate Marketing Manager atVizergy®, with contributions fromJoe Hyman, President & CEO, andPaul Fraser, Director of Product Management


Part oneof this series helped you get confidently set up for your 2014 digital marketing budget planning. It shed light on key issues that you should consider.Part twohighlighted primary digital marketing channels and initiatives vital to all property types in 2014. Part three will now recommend dollar percentage allocations across those channels and initiatives, broach ROI, and provide your team a digital marketing budget template.


Get your 2014 digital marketing budget template here.

Note: For our budget template, we used an independent hotel with the following assumptions:

  • 200 rooms
  • $125.00 average daily rate
  • 68% occupancy
  • $6.2 million total annual revenue
  • 30% of total revenue through web direct (does not include OTA bookings)


Part Three – Percentage Allocations, ROI, and Your Budgeting Template

Parts one and two of this series, which you can find linked in the paragraph above, set us up to discuss two crucial items that are a constant debate amongst hoteliers, especially when developing digital marketing budgets – percentage allocations and ROI. Specifically, what percentage of your total digital marketing budget should be devoted to each channel or tool, and what total return on investment (ROI) you should expect from your efforts.


Note – All of these recommended percentages are not one size fits all properties. They're based on Vizergy's proprietary industry and client data, third party research, and various industry projections. Shifting share to more profitable, direct sales channels was also a major consideration in formulate our recommendations. So while it's impossible to speak directly to any one property budget, the ranges we provide should be thought of as general rules of thumb that vary depending on your property's seasonality, business mix, demand generators, booking window, booking pace, stay patterns, market position, occupancy, property size, etc.


Percentage Allocations

Now let's get right to it. Below is a chart with primary digital infrastructure, channels and initiatives, including the six that we highlighted in part two of this series, along with our recommended percentage allocations (of total digital marketing budget):

Digital Infrastructure, Channels & Initiatives   |   Percentage Allocation


Capital Investments, Consulting & Operations 

1. Account Management Strategy, Consulting & Project Management   |   6-10
2.Website Design, Development & Ongoing Optimization (hosting, design, copy, video, photography, user experience, reservation abandonment capture)   |   8-20%
3. Web Analytics, Campaign Tracking & Call Tracking (Vizergy Hotel Web Management Platform)   |   4-6%

Core Digital Marketing Channels & Campaigns 

4.SEO (analysis, setup, ongoing management, including keyword research/targeting, , copywriting, meta data, link building, BrightEdge integration)   |   8-10%
5. Local Search (setup & optimization across Google+ Local, Bing Local & Yahoo Enhanced & three primary data providers – Localeze, Acxiom & Infogroup)   |   2-4%
6. PPC (Google & Bing/Yahoo setup, management , ongoing optimization & ad spend)   |   25-30%
7.Display Retargeting/Remarketing (setup, management, ongoing optimization & ad spend on Google Display Network & Adara)   |   10-12%
8. Meta Search (setup, management, ongoing optimization & ad spend on Google Hotel Price Ads, TripAdvisor Check Rates, Kayak, trivago)   |   10-12%
9. Social Media (setup, design modifications, posts on Facebook, Google+, Twitter, Pinterest)   |   2-4%
10. Email Marketing/eCRM (setup, management & optimization of design, creative, copy & distribution)   |   4-6%
11. Paid Links (Convention & Visitors Bureaus, Destination Marketing Organizations, local hotel directories)   |   2-4%

Need Period Marketing Campaigns & Initiatives

12.Limited Time Offers (Private Sales) with promotional codes via Email, Onsite Messaging, PPC, Display, Social (based on seasonality & booking pace)   |   4-6%


Notes: "Percentage Allocation" is the percentage of total digital marketing budget. Also, "Website Design and Development or Refresh" can mean traditional, tablet, and mobile site OR oneresponsive site.


Notice that our total percentage range is 85-124%, so it will obviously take some fine tuning to get your property's percentages to add up to exactly 100%.


To show why this is not one size fits all properties, consider the following example. A 10 room bed and breakfast with an equally small digital marketing budget may have to spend more than 10-20% of their budget for a new responsive website or a trio of desktop, desktop optimized tablet and mobile sites. On the other hand, a large destination resort with a budget to match may spend much less than 10-20% of their digital marketing budget on website design and development. And if your property has a recent design (less than two years) across all screens, you likely don't need to immediately invest in a new website.

We currently have hundreds of successful branded and independent clients working with similar budget allocations. And since third party research and industry projections (industry recovery and where travelers are researching and booking for example) were included in the development of our recommendations, we have the utmost confidence that we will help you shift share to more profitable channels, maximize both online visibility and direct bookings, and build loyalty in 2014.


Two Items We Feel Compelled to Address

These items weren't detailed in parts one and two, and we'd be remiss if we skip over them now, so here you go:

Pay special attention toNeed Period and Seasonal Marketing Campaigns. All hotels and resorts have slow, off season times – or need periods – that cover different time frames, from 1-2 days a week to 2-3 months a year. There are ways to counter these sluggish times though with intelligent and creative marketing campaigns with promotional codes. For example, limited time offers and private sales with promotional rates and/or packages (capitalizing on local events and attractions) delivered via email marketing, social media, search marketing and onsite messaging can shift demand and generate incremental revenue.


Don't overlook professional photography and videos. Photography can literally make or break an entire website design, especially since supersized header imagery is now a best practice. Imagery is directly where visitors' eyes migrate upon landing on your site. A vacant lobby photo taken with your smartphone vs. a busy lobby photo taken by a professional photographer in the right resolution will make a far better impression. The first step is investing in a professional photo shoot with a thoughtful shot list highlighting your property's key attributes and amenities that are most compelling to your target audience. Once you have these quality digital assets in a dedicated folder, it's easier to update your website and marketing campaigns to maximize engagement.


The Truth about ROI and What You Should Expect

There are deceiving ways to calculate ROI by manipulating the costs of and/or inaccurately attributing revenue to certain campaigns or efforts, so be careful when calculating your ROI or verifying ROI numbers that are presented to you. The bottom line is this – 10:1 should be a minimum overall goal. This means $10 in revenue is gained from every $1 spent. Now 20:1, 40:1 and even higher can happen in certain business situations, but 10:1 is a good starting point for digital marketing. So next time you read some outrageous ROI claim, think twice. And if you're performance data shows that you're consistently underachieving (less than 10:1), it may be time for different resources and strategies altogether.


ROI can also be expressed as a percentage, which looks better. Check out this example:

Revenue = $110,000

Total Cost (capital, operational, strategy, etc.) = $10,000

ROI Calculation: $110,000 - $10,000/$10,000 = 10:1 ROI

To express a 10:1 ROI as a percentage, you simply multiply by 100 to make it 1,000%. So when companies say "2,782% ROI," it could also be expressed as "28:1 ROI."

Anyhow, like we stated earlier, a 10:1 ROI should be your minimum initial goal. Gradually increasing 10:1 to 12:1 to 15:1, and so and so forth, is reasonable.

And as far as return on ad spend (ROAS) goes, remember that ROAS by definition, unlike ROI, does not include total cost (capital, operational, strategy, etc.). It only includes your actual ad spend. This means that ROAS will generally be even higher when expressed as a percentage. For example, $35,000 revenue/$1,000 ad spend = 35:1 or 3,500% ROAS.


Last but not least…

From part one, to part two, to the percentage allocations, we've provided you almost everything we planned. But perhaps the most important and useful takeaway from this series – your budgeting template – is all that remains. The following template is fully editable, with formulas that sum the columns and rows as you manipulate them. Like already mentioned, we plugged in some sample costs (that stay true to our percentage allocations), which may or may not be close to your hotel's or resort's budget. You may also have unique costs associated with certain tools that we don't include, but the template should be an excellent starting point for you to break down your monthly costs and form a well-organized and revenue driven digital marketing budget.


More information at hospitalitynet.org