Hotel Internet Marketing Budget Planning and Best Practices in Hospitality: A Benchmark Survey by the HeBS Team

As the next year’s budgeting process approaches, hotels will be considering how much budget to devote to the online marketing channel. The dynamic nature of the Internet doesn’t help things much with its constantly changing environment, new media formats, new competitors and new tools, and methods. It is not necessarily the size of the budget that is most important but rather how it is used and allocated. What is clear though is that if you are not planning to spend some budget in the online channel you are making a huge mistake. If this is your first year with an online marketing budget – then what is important is that you make a small start, and learn as much as you can.

Some things that should be taken into consideration are

• Direct online distribution is the way to go. More hotels in the US and Europe are selling online than ever before. In South Africa the majority of hotels still do not sell directly online. This is a massive opportunity and an area that deserves serious consideration. Indeed it should be a ‘no-brainer’ as the evidence is compelling – greater amounts of room inventory are being sold, at higher ADR’s directly from hotels’ websites and at lower cost per transaction. The Internet is by far the largest distribution channel – far exceeding the GDS and traditional channels. In the US, the cost to sell directly via your hotel website can be as low as $3 - $5 per booking – compared with the cost of the GDS at $27 (for a 2 night stay at $100/night). And TPI such as Expedia and Travelocity charge $50+ (for a 2 night stay for $100/night). These figures apply to the SA market.
• Elsewhere in the world customers are opting to buy directly from hotels rather than third party intermediaries (TPI’s) and the negative impacts of TPI’s is being felt to a lesser degree than before.

This is the first international survey of its kind and offers some invaluable insights and pointers as to how the hospitality industry in aggregate is planning to allocate marketing budgets. Some hotels have been working hard on growing their online revenues, others have yet to climb on to the bandwagon. But regardless of where you are now – the outcome of this survey will be of relevance to you.

The conclusions of the survey show that online marketing for hotels is growing at an incredible rate. What is important for South Africa is that hotels gain the skills and know how of all the techniques so that they can more fully participate in and enjoy the benefits and increased ROI from online marketing.

A short overview of these are below, with some definitions:

Website development – creating your own hotel website (see website redesign for details)

Website redesign – there are a lot of hotels, large and small, that need to take their websites to a new level of sophistication and in doing so take advantage of the opportunity to redesign and/or relaunch their website and brand. Typically a hotel website should be re-designed every 2-3 years. This doesn’t have to mean a major redesign, but it should be revisited at least to ensure that it is still meeting its objectives and takes advantage of any new developments that would benefit your hotel.

Redesign involves redesign of the site structure and navigation, review and renewal of the content (text and images), review and renewal of the graphic design (look & feel) of the site, redesign of transactional processes (e.g. online booking, site search). When redesigning the site, one needs make sure that the new design is ‘search-engine friendly.

Website Maintenance - Your website is like your hotel – it needs to be maintained on an ongoing basis. You cannot create a website and then walk away from it and expect it to work for you or expect customers to beat a path to your online door. You need to ensure that you allocate resources (time and money) to maintain your website on an ongoing basis. As with you hotel, you need to ensure that your site is all in working order, that the content (text and images) is accurate, current and constantly refreshed and enhanced.

Creating a website is the start of a ongoing journey – it is not an end in itself. This is a mistake many people make – they sit back having developed their website, heave a huge sigh of relief and turn to the next project. Not good! Your website investment is only as good as your ongoing effort to keep it alive. So, allocate time and money in your budget to update it regularly – for example have a budget for images, get in a photographer to take some professional pictures of your hotel.

Search Engine Marketing (SEM) – All of the tactics and tools used to market a site through search engines. These include:

• Search Engine Optimisation (SEO)- The practice of designing and writing web pages to be attractive to the search engines. SEO attempts to place pages highly within the “natural” or “organic” listings on search engines, as opposed to paid ads. An optimised site improves the website usability and performance, improves its visibility in search engine rankings, and increases conversion rates. At the very minimum one should allocate funds to optimise content and keywords.
• Pay per Click (PPC) - In pay-per-click advertising, the advertiser pays a certain amount for each click through to the advertiser's website. The amount paid per click varies considerably. Your budget should make provision for buying keywords on a monthly basis (Google, Yahoo, MSN, Local search). The search engines provide tools that enable you to control this easily – you can specify how much, at what time, and geo-target your efforts.
• Linking strategies – the creation of relevant and quality links from external sites to your site, and the creation of internal links within your site for the purposes of increasing credibility with search engines that results in higher rankings in search engine results

E-mail marketing – marketing your products through e-mails. Your email strategy should include customer email capture initiatives (online and offline), email marketing to the hotel's own opt-in list (monthly promotions, local news, game sightings reports, seasonal emails), email marketing to key market segments and in key feeder markets.

Local search - is a query that includes not only information about "what" the site visitor is searching for but also "where" or geolocation information.

(Web 2.0/Travel 2.0 channels) Consumer-generated content / Consumer generated media – Any of the many kinds of online content/media which are generated or influenced primarily at the user level. Personal web pages, such as those found on MySpace are rudimentary examples; blogs and podcasts are more evolved ones. Creating the facilities and framework for consumers to publish their own content (e.g. hotel reviews) in prominent places (e.g. on www.TripAdvisor.com).

Banner ads and display advertising – Banners are advertising images that appear on websites. Originally static billboards about an inch and a half high and about four inches long, banners now come in a range of standard shapes and sizes, and are frequently animated. Typically, a banner is also a link—click on the banner and you are taken to the product or page it is promoting.

From this survey you can see that the results suggest the continued importance of search engine techniques through

• website optimisation (i.e. customer centric website design to improve the user experience, to provide rich and relevant content)
• search engine optimization and organic search (i.e. higher ranking derived from better website design and richer deeper content)
• website re-design

The above three top solutions show the (correct) acknowledgement that no matter what you do – the most important thing is to get the fundamentals right on your website. And the rule of thumb is that your website needs to be CUSTOMER CENTRIC. It needs to serve the customer with deep and relevant content. It needs to be structured and designed so that people can easily navigate through the site, find the information easily and have a wonderful experience as they do so.

A summary of the conclusions of the survey are:

• marketing budgets will continue to shift online
• the results suggest a stronger emphasis on search engines (see the above list of search engine techniques ranked highest)
• linking strategies will be important
• budgets will go into specialised searches like local search
• email marketing is still a popular tool for building one-on-one relationships with customers, especially for international properties
• web 2.0 stuff like consumer generated media will grow in popularity and the early adopters will determine the model for the industry. Interestingly this survey indicates that international hotels will spend more on new media formats than the US.
• display advertising will take the biggest cut – this may be true for US and Europe – but within South Africa banner display and advertising is still in its infancy. For hotels this is important – if your market is overseas visitors then you need to know that users in Europe and the US are much more sceptical of banners than in South Africa.

Advertising agencies get a digital wake-up call from Nike

Just Do It! Nike just did, ditching its running shoe advertising agency of twenty five years not because it was unhappy with creative or because of costs, but because Wieden & Kennedy just didn't have the digital media passion or expertise needed to adequately engage the new consumer.

While Nike moving its running shoe business after so long and successful a partnership is news in itself, what is really making waves in the agency world is the reason for the move. Agencies worldwide are generally still doing a half-hearted job of leveraging the internet and related technologies for brand building, and most of them know it. When a manufacturer as intimately in touch with its consumer as Nike is sees the need to do more and do it better, and is willing to just do it, the agency world looks over its shoulder to see who is next to go.

Wieden & Kennedy are not a minor agency – they have long been a creative powerhouse doing work for companies like Procter & Gamble and Coca-Cola. They must have seen this coming, and probably had plenty of warning from Nike, but were simply unable to change fast enough to keep the account.

In February, Mark Parker, Nike's CEO, told investors

The Nike brand will always be our strongest asset, but consumers are looking for new relevance and connections. We're fundamentally changing the way we're organized as a company. It's really all about going deeper to get deeper connections and deeper insights, to get more innovation and more relevance, and to make us ultimately more competitive in each of the discrete pieces of our business. This allows us to be more informed and more surgical in creating products and optimizing our go-to-market strategies within each category.

Nike gets it. The consumer – particularly in Nike’s demographic – is now calling the shots, and companies who insist on pursuing a 1980’s-style mass-market broadcast approach to communicating risk being marginalized or, worse, becoming irrelevant.

As the New York Times put it,

The message is clear: No matter how talented an agency's creative team or how well the client's management likes the firm's executives, the agency is of limited value unless it embraces digital media.

That means, just as the web has permeated the lives of consumers, agencies must permeate digital culture throughout their organisations, instead of regarding “internet stuff” as an afterthought, add-on, or external business. For many markets, digital thinking needs to be a foundation of advertising strategy. And while it makes sense to start digital operations as a separate entity (thus bypassing all of the legacy resistance), there has to be a plan to reintegrate online operations as soon as the “interactive agency” is up and running.

But advertising agencies the world over are still dragging their heels. Given that the internet attracts more advertising money than radio worldwide, and was second only to TV in the UK last year, it's hard to keep on regarding online as something that is still not important.

Last week at the Online Media Marketing & Advertising (OMMA) conference in Hollywood, a panel of industry insiders agreed that most ad agencies are simply not ready for the digital era. Tim Hanlon, from Publicis, was adamant that the traditional structure of ad agencies is an obstacle, and that de-siloing brand advertising and response advertising is essential to create the flexibility and spontaneity necessary to get to the online consumer.

Bant Breen of Interpublic was of the opinion that acquiring so-called interactive agencies is easy, but integrating them into existing agencies is not, and that’s the thing which is necessary for a more powerful approach to advertising which can do things like build customer relationships and enable transactions.

What’s the problem with traditional ad agencies?

Firstly, the whole structure within agencies (and the communication structures between agencies and clients) makes change a painfully slow process. Not good when rapid and disruptive change is a key characteristic of online consumer environments. How long does it take to brief, pitch, create and roll out a campaign? Given the aversion to risk within agencies and clients, it can take months. Online, you need to be able to do this stuff in days if not hours. The risk of not operating quickly vastly outweighs the risk of moving so slowly you are effectively doing nothing. Agencies need to be given more latitude to act almost spontaneously, but it is unlikely clients would allow that, and even less likely that agencies would want it.

Secondly, agencies and their clients are way too precious about protecting brand identity. Remember when the primary role of a brand manager was to police the “brand bible” and ensure the eternal purity of the proposition? In a web 2.0 world, consumers want to talk about products. And, in the words of the Cluetrain Manifesto, whether the news is good or bad, they tell everybody.

Trying to protect a brand from consumer comment, being afraid that customer opinion may pollute or hijack your carefully crafted identity, is no longer a valid marketing activity. But encouraging discussion and being ready to respond to it, and making sure you are structurally able to maximize net advocacy, are alien concepts to many marketers and their ad agencies.

Thirdly, the traditional approach to broadcasting generic messages to largely mass markets is inappropriate for digital media, which is all about sharply focused messages for niche audiences who are discerning, informed and impatient. When your medium is newspapers or television, you have to communicate across the broad mix of audiences that they reach, and being too focused in your message risks completely missing important components of those audiences. True, satellite TV and niche publications do allow for a more narrowcast approach, but it is nothing compared with the laser-focused nanocasting and individual consumer conversations that the web allows – and requires. But the broadcast mentality of traditional agencies results in nothing more imaginative online than generic corporate banners on mass traffic sites like directories and online newspapers.

Fourthly, the online business model does not work well for agencies. If a major part of your income originates in placement commissions paid by traditional media, it is very hard to look at online opportunities as anything but financially retrograde. So the only real financial incentives to pursue digital strategies are macro incentives: you’ll pull in big accounts if you are seen to be on top of this web thing, or you’ll lose big accounts if you are not. Ad agencies need to reinvent their business models for the 21st century, because their old models are a significant handicap to progress.

Online Advertising Spend Just Keeps on Growing

Global spending on internet advertising increased from $18.7 billion in 2005 to $24.9 billion (£12.6 billion) last year, according to ZenithOptimedia, the media-buying agency. Worldwide, the internet will overtake radio by next year and become the world’s fourth-largest advertising medium.

In the UK last year spending on online advertisements overtook spending on newspaper ads and, at 11.4% ad-spend share, reached just over half of TV ad spend.

And Google was second only to ITV in UK advertising revenue. According to a report by the Internet Advertising Bureau and PricewaterhouseCoopers, UK online advertising expenditure jumped 41.2% to £2.01bn during the year, compared with £1.9bn spent on newspaper ads.

In the USA, Internet advertising revenues for 2006 reached $16.8 billion, a 34 percent increase over the previous record of $12.5 billion in 2005. Fourth-quarter revenue for 2006 totalled just under $4.8 billion, making that quarter the highest on record.

Google to provide a pay-per-action advertising model

In the past if you wanted to advertise using Google you went the pay-per-click (PPC) route, having Google place your ad either on its search results page in response to a search term you had bid on (the AdWords model), or on a web page in response to some context-relevant content on that page (the AdSense model).

In either case, you as an advertiser paid Google only if a web visitor actually clicked on your advertisement. If you wanted to place ads where you would pay the website publisher only if the clicker actually performed some action (such as buying something, subscribing, or providing information) you could use other services. Prominent among these pay-per-action (PPA) services are secondary search engines like Snap, PPA broker Turn, and affiliate marketing networks like Commission Junction and LinkShare.

In March, Google announced that it was putting a pilot PPA product on the market. That’s huge news, because Google is such a dominant player in online advertising. The implications for advertisers are significant. A PPA model lets you pay only on successful conversion of the traffic that your ad sends to your site, instead of making you pay only for the clicks themselves. Many PPC ad clicks are of no value – the clicker made a mistake, was merely curious, or was deliberately fraudulent. Or your landing page and site structure were poorly designed and just got in the way of them doing business with you.

With PPA, you don’t pay for those clicks that go nowhere. But the sites hosting your ads expect something in return, namely a bigger payoff when they do deliver a visitor who actually becomes a customer.

Unlike with Google’s PPC product, where sites displaying the ads don’t get to choose the ads and are not allowed to encourage clicking those ads, sites displaying PPA ads are being given a lot more ability to both select the ads, or a basket of ads, and urge people to click. So expect much more traffic to sites, and correspondingly lower conversion rates – but higher ad ROIs.

Because a PPA payout depends on clear policing of what action (if any) was actually taken, it requires a system that can automatically monitor and verify those transactions. And because of this additional layer of technological complexity, PPA has not been widespread on the web. Till now. Google has the clout and the tech muscle to make this work, and work well, and the existing PPA players must be expecting their businesses to feel a great deal of pain once Google gets into full swing.

For small advertisers, Google’s PPA could be a boon, the equivalent of paying a small sales commission only on closed deals rather than their existing PPC approach which involves paying each time a visitor wanders in through their virtual doors.

Google is also testing ads that appear in text, similar to those currently run by Intellitext. These ads appear as words or phrases that have been double-underlined. Hovering a mouse cursor over those phrases pops up a small box containing the advertisement. As more and more online content is read through RSS feeds, the importance of in-text ads grows, so it is not surprising to see Google move into this space.

Why ‘Care’ for Your Customers when You Can ‘Love’ Them?

This is a delightful and refreshing article that renews one’s faith in leadership and in leaders who dare to think beyond motherhood, who dare to have passion, emotion, and who dare to dream.

I don’t know how many times in my corporate life that I have been told that I’m too emotional and that I care too much. The body corporate doesn’t like these characteristics – and if you have any hope of climbing the corporate ladder or navigating the corporate politics, these emotions (in their eyes, ‘weaknesses’) must be banished for more acceptable corporate behaviour.

Reaching for the stars and aiming beyond the horizon are viewed as silly. The hospitality industry knows it is selling and providing an experience to its customers. And I suppose you can describe an experience in cold and calculating terms like – we aim to exceed customers expectations. Duh! If that’s all you are doing then perhaps you should be selling railway sleepers to the department of transport!

It is precisely this dreaming that spells the difference between being mediocre and being special. Isn’t it time to take out the dusty mission and vision documents and to breath life into them and create a strategy that takes you, your staff and your guests on a magic carpet ride?