Today, every hotel manager is faced with the decision to market their hotel online. The desire for more bookings, building a network of regular guests, more conferences and individual packages drives them to the Internet. Whatever a hotelier wants to achieve, the internet offers many possibilities.
Since there is often not enough time to do it all themselves, there is the possibility of hiring external agencies. With the CPB, you have an instrument to keep control of your marketing costs.
- What opportunities are there online for hoteliers?
- Which marketing effort is really worthwhile?
- How much should a hotelier invest?
- Are my numbers good and am I successful?
- CPA considerations are mostly insufficient
- CPB provides for higher significance
- Example calculation for CPB
- Further key figures for measuring success
- Regular guests as a guarantee of success
What opportunities are there online for hoteliers?
For hotels, as for other businesses, regardless of whether they are B2C or B2B models, there are numerous strategic options for creating a successful online presence.
- Google Ads
- Facebook and Facebook Ads
- Instagram and Instagram Ads
Hoteliers often hire an external marketing agency to take care of the maintenance and preparation for these channels. This way the hotelier does not have to sacrifice his time for this and leaves the success of his hotel to the professionals.
Furthermore, many hoteliers resort to so-called OTAs (Online Travel Agencies), such as booking.com, hrs.de, expedia.com.
The big disadvantage of using OTAs is the lack of guest loyalty. The goal should be to get bookings based on self-marketing. The guest should find the hotel and thus book directly with the hotel.
Which marketing effort is really worthwhile?
The problem with most online marketing efforts often is a lack of transparency. Regardless of whether it is an agency or OTA, the hotelier can only determine his budget and receives an evaluation of the bookings and other key figures at the end of the month. No consideration is given to how and when the guest originally became aware of the hotel. The following graphic illustrates the guest journey with an example. This means that the guest has already had individual points of contact with the hotel on different channels. Unfortunately, how many, when and how often this took place in each case is taken into account far too rarely and is not included by an agency in the analysis. This makes it very difficult to identify which channel is the most important.
How much should a hotelier invest?
Already the first step of budget allocation has a great impact on the success of the marketing. Before starting a marketing campaign, the hotelier should be aware of how much money he wants to spend per booking. Then the agency calculates the maximum CPA. A conversion can be a booking, reservation or inquiry. Here we recommend the value of the booking and therefore talk about CPB (Cost per Booking).
Most agencies do not work with the real bookings, but with inquiries, phone calls or other targets on the website.
Companies or hotels that offer expensive products may well accept a higher CPB value. Smaller margins, on the other hand, have lower CPB values.
As a rule, the hotelier should invest 5-10% of his profit. However, the investment can also be increased, but in relation to it should also increase the revenue.
Are my numbers good and am I successful?
When the hotelier receives his evaluation from the agency at the end of the month, he usually also receives an assessment of the month’s success. The agency usually only considers one sales channel, such as Google Ads. The hotelier receives the CPA (cost per acquisition) and other key figures such as traffic, click-through rate or clicks.
CPA considerations are mostly insufficient
The CPA that the agency outputs as a measured value is incorrect and only very superficial. The problem is that the agency only looks at the costs spent per channel and does not compare all bookings and costs holistically. This value could then be called CPB.
In addition, comparability is difficult because measurements are irregular and CPA as a measurement value is not uniformly defined. Sometimes an agency only counts bookings and not inquiries or reservations. Likewise, cancellations are not taken into account. Another agency, on the other hand, counts bookings, inquiries and reservations and classifies them all the same.
However, since most hoteliers rely only on the agency’s statement, they forget about the numbers of other channels that also contribute to the company’s success. For example, the evaluation of OTAs, social media posts, offline marketing activities, newsletter costs, etc.
CPB provides for higher significance
It is important to look at marketing costs holistically and not just examine one channel. Therefore, our recommendation for the hotel industry is: Calculate a CPB with ALL marketing costs.
Thus, all marketing costs incurred per month are really added up. Regardless of whether the costs were self-triggered, originated from an agency, both offline and online.
On the other side is the total number of bookings. Here all bookings which came about per month are added. It does not matter where these bookings come from, i.e. whether they occurred offline or online.
The CPB prevents advertising expenses from being too high in relation to bookings. In general, the goal is to keep the CPB value low. This means that the use of investment costs was low in relation to bookings.
And this is how you calculate your CPB:
Example calculation for CPB
All marketing costs versus all bookings. The monthly evaluation shows:
|Marketing Costs||2.000 € Google Ads||2.000 € Facebook Ads||1.000 € SEO||= 5.000 € Total|
5.000 € / 1.000 = 5 € CPB
Relative Marketing Costs= 6,25% is invested in Marketing.
Of course, do not confuse occupancy with booking receipts. Booking receipts are not only valid in the current month, but can take place in the following months, which of course also has an effect on sales.
Further key figures for measuring success
In addition to the CPB, which only takes marketing costs into account, the hotelier can also calculate the gross margin, also called gross operating profit. This is the gross profit. In comparison to the CPB, not only the marketing costs but also the cost of goods and materials are taken into account.
Here, the hotel is measured purely in terms of operating profit.
Regular guests as a guarantee of success
Another indicator of a hotel’s success is the number of regular guests. If a guest visits the hotel at least once a year, he is considered a regular guest.
From experience we can say that guests visit a hotel 3.5 times.
Long-term loyalty is important, so the investment can be “higher” in the beginning and the loyalty is in the foreground. Thus, there are less marketing costs for re-booking and the initial high costs can be prorated per stay.
The increase of regular guests is a very important success key figure, as well as the rate of guests who do not come back. The churn rate provides more information on this.
All in all, I think it is very important to know the CPB. I have done online marketing for over 200 hotels in the 4-5 star range and have very often come across very low CPBs.
Don’t underestimate the power of online marketing and remember that a customer usually comes in contact with very many channels until they finally book. Attribution is currently a problem that challenges the biggest companies worldwide and rarely come to solutions.