As a hotelier, you rely on many different tools to sell your product: professional photography for marketing collateral, training programs for the sales team, advertising in traditional media, wining and dining potential clients, emarketing and even business cards. They all come at a price. Whether it's at the property level or supplied by the brand, someone has to pay for the tools that are essential to marketing and selling your hotel. So what is the ROI on those tools? If you've never bothered to calculate the return, why not?
Most likely you've never bothered because it's difficult to measure the ROI on things like photography, sales training and social media, but that doesn't mean there's no return on those investments. Instead of always focusing on the direct financial return on those investments, consider the other value those tools bring to your business. These might be things such as:
- Gaining insights into customer sentiment
- Receiving feedback about your product
- Encouraging happy customers
- Diffusing angry customers
- Offering customers another channel with which to communicate with your hotel
- Improved rankings in search engines
- Improved rankings in TripAdvisor
- Assisted Conversions (see below)
- The billboard effect and branding
How do you calculate the ROI on business cards?
What always strikes me as odd and somewhat hypocritical is that many hoteliers will automatically include in their annual marketing budgets items of such nebulous ROI as business cards, printed brochures, training and traditional advertising; however, when told to budget for social media marketing suddenly the alarm bells ring, red flags go up, and the familiar scrutiny over this channel's dubious ROI suddenly rears its ugly head. Why do the hackles go up and the purse strings tighten at the mention of Twitter, Facebook and Google+?
When was the last time you questioned the ROI on business cards that you purchased for your team? Surely you know the return on investment for your hotel's photography. Were you able to isolate the ROI on that out-of-state training seminar your sales team attended? What kind of return were you able to measure from that investment?
Clearly there must be value in these investments; otherwise it's just wasteful spending for no better reason than because "it's just where hotels have always spent money." But when was the last time anyone questioned why you were spending $10,000 a year on printed brochures of your meeting space? Has it ever happened? Although the cost may be scrutinized and negotiated, my experience is that hotels see that kind of collateral (as well as many of the other aforementioned expenses) as a necessary cost of doing business as a hotel. The ROI is never questioned, even if it should be. What if every potential client that receives your $10,000 printed brochures dumps it in the trash after their thorough site visit of your hotel? It seems to me that $10,000 would be better spent elsewhere.
Why do we invest in tools that have an unknown ROI?
Most travelers--and I would hope by now, most hoteliers--would agree that professional hotel photography is a crucial component of a hotel's success in marketing itself both online and offline. Not only can we draw from our own personal experiences (I know I head straight for the photo gallery when researching various accommodations), but most hotel website analytics will point to the photo gallery page as one of the most visited pages of a hotel's website.
So how do you attribute a return on that investment? Good photography isn't cheap, so why do hotel's put money aside for it when the ROI is unknown? One possible estimate would be to say that X% of visitors that booked a room also visited the photo gallery page. It still doesn't give you an exact ROI though. Instead, it tells you that photography is important to visitors, but it doesn't tell you by how much. Of that X% that checked out your gallery before booking a room, how many would still have booked if your hotel had no photos? You don't know an exact number, but all signs point to photography being a marketing component that is important to your potential guests. Even if you assume that $1 million in revenue was generated from visitors who also access your photo gallery, you can't possibly attribute all that revenue to the effects of the photos. What if those visitors entered through your email campaign? Certainly some of that $1 million in revenue would be attributed to the ROI of the email campaign as well as the photography.
The point is, it's difficult to attribute exact ROI figures to certain necessary items like quality hotel photography or training for your sales team, despite the fact that both are crucial to the hotel's overall sales process.
It's just the way we've always done things
I get it. Social media is unfamiliar territory for many hoteliers. Business cards, printed brochures and photography are old stand-bys--tried and true friends that have been around since the day Statler first met Waldorf. Hotels have continued to invest in those tools because it's what they've always done as part of their sales process. It worked last year, so it'll work this year. ...at least, you assume it will.
When it comes to ROI for many sales and marketing investments you simply need to guess or make a guesstimate or make an educated guess, but in the end it's still a big question mark. It's just like when you purchase a billboard ad and the ad agency assures you an average of 500,000 cars pass by that billboard each month. That's great, but how many people are really looking at the billboard? Then, how many of those people actually took action after seeing that billboard? Do you ask guests at your hotel: "so did you hear about us from our billboard ad?" If not, you should...if you care about the true ROI of that ad.
But billboards are simple. Their purpose is clear. A business advertises, consumers read and consumers consume. Social media, on the other hand, can be used to benefit businesses in so many different ways that many hoteliers become overwhelmed by this open-ended channel and lack of a singular purpose. As a result, they become wary of social media's effectiveness and ultimately pull the plug, or never start at all.
Those who cannot remember the past are condemned to repeat it
We've seen echoes of this trepidation towards new technologies and communication tools throughout the hospitality industry's past. For example, when the hospitality industry was just starting to get its feet wet on the web, there were many hoteliers that rejected building websites due to cost or because it didn't seem like a viable booking channel at the time. Or, in cases where they did have a website they may have heard about this crazy new thing called "search engine optimization," but dismissed it as another vial of snake oil cleverly marketed by those dastardly SEO companies. Looking down the barrel of hindsight we get great examples of opportunites missed.
In the end, this hesitation paved the way for the OTAs to dominate the online travel world. Their websites were designed well, provided better usability to customers and were properly optimized for the search engines. In addition, they enhanced their online visibility through paid advertising. The OTAs had embraced these online tools that many hoteliers and major hotel brands had rejected. As a result, many hotels websites are still trying to catch up to this day. As philosopher George Santayana cautioned in his famous quote in the subtitle above, the hospitality industry needs to learn from these past mistakes and realize that social media is not a passing fad. While the tools of social media may change drastically (Myspace who?), the core concept of word-of-mouth marketing will continue to be one of the most trusted marketing channels available. Hotels can't afford to be late adopters in such a competitive arena anymore.
Not only is social media unfamiliar territory, but as a hotelier, you no longer have complete control of your marketing message. In fact, your customers are now part of your marketing team, and that scares the hell out of many hotel folks. Still, sticking your head in the sand and pretending you don't need this crazy Twitter or Facebook thing, doesn't mean people will stop talking about your business. If you're rowing against the social media tide, then every day will be a public relations struggle.
It may be the case that your social media ROI remains as elusive and mysterious as the sasquatch; however, ignoring this important channel means your customers have the final say in your hotel's reputation online--not you. The goal isn't to completely control what every guest is saying, but rather to be a participatory voice to help foster loyalty, diffuse discontent, and learn from the comments of your customers.
Measuring other returns on social media success
There is a way to measure the ROI on social media, but it depends on what you consider to be the "return." While metrics such as Facebook likes and Twitter followers may not tell you exactly how much revenue social media is generating for your hotel, other social metrics can give you valuable insights (such as feedback and customer sentiment about your property).
Some savvy hotels and emarketers even assign estimated ROI values to those figures. For example, if a customer complaint is diffused by the hotel through conversations on Facebook, what is the value of that resolution? How much is it worth to you, being able to prevent that irate customer from blowing up on TripAdvisor with a full-page, scathing review of your hotel? Is it worth the value of that one customer's stay? Or do you estimate the value based on how many people you would have lost had you left that customer to fume and paint the web with expletives about your hotel? How much is that prevention worth to you?
If you are hellbent on assigning a financial return on your social media investment then you need to agree on the value of these interactions. How much is it worth to your hotel to accommodate an angry customer? To gain feedback about problem areas at your hotel? To get "billboard effect" type exposure across your social networks? To connect with potential guests interested in your city? There is a value here, but it's up to you to determine its worth.
Measuring direct financial ROI on social media
In addition to those more amorphous means of attributing ROI to social media, you can measure its direct impact on your revenue. Provided you have the appropriate analytics integrated into the backend of your website, you can see the direct contribution of various social media channels to your bottom line. That's right, exact dollar amounts! You can even see Assisted Conversions. An assisted conversion occurs when a visitor returns to your hotel website multiple times through multiple channels (Google search, email campaign, pay-per-click ad, social media, etc) before finally making a purchase.
For instance, consider this customer's path through the booking cycle:
- The guest initially visits your hotel's website from a friend's Facebook link about your property.
- Soon that visitor leaves your site to do more research.
- Five days later that same guest is finally ready to book, remembers your hotel and returns to your site through a natural search result in Google.
In this example, the final step in the customer's booking funnel was a search engine, so Google gets credited with the direct conversion. However, the Facebook link was the first channel that drove the customer to your site. Facebook was the site that got that customer started down the booking funnel, and thus gets credited with an assisted conversion. These channels work together to assist each other and help move the potential customer down the sales process. So even though Facebook didn't result in a direct booking for the hotel, it did assist in the conversion and thus deserves credit for revenue booked as well.
The value of an assisted conversion
Take a look at the Google Analytics chart below for one of our hotels. It shows that 18 Assisted Conversions generated about $4,260 for the property. In addition, if you look at the column labeled Last Interaction Conversions you will find the number of conversions that were a result of the user coming directly from a social media channel. In this case, the hotel made almost $12,000 from visitors who arrived directly from sites like Facebook, Twitter, Google+ and others.
Also, keep in mind that this hotel has no active social media presence. The conversions shown above are a result of a basic presence featuring minimal engagement with their potential customer base. If this is what the hotel is generating without even trying, just imagine the potential of social media if they actually invested in an active marketing campaign!
Direct revenue from social media is low? So what?
Yes, financial return that is directly attributed to social media will likely be low for most hotels. So what? If you think about it, people don't join social networks so they can read advertisements or be spammed with special offers. If that's your idea of social media then your campaign definitely needs a new strategy. Consumers are there to connect with friends and families. Fortunately, many people also follow companies and brands they like, as long as those businesses provide interesting, valuable content, and don't spam their followers with constant advertisements.
Social media for most hotels will never be the revenue generator that organic search has been, so stop thinking of it that way. Social media is a more open, friendly communication. It's the General Manager walking around the hotel, shaking hands and asking, "So, have you had a pleasant stay with us?" It's not so much about advertising your product, but rather it's about making your product more valuable, more approachable and more accessible to your customers. Social media is that handshake with customers before they even enter your doors.
It's how your customers choose to communicate with you
Even if you completely write off social media ROI as nothing more than smoke and mirrors, social media is the way customers expect to be able to contact your hotel in the 21st century. It's not the only way customers want to connect, but it should be an option offered by the hotel. Currently people can make reservations at a hotel by calling or booking online. But if the hotel suddenly dropped its phone service and forced new customers to only book online, there would certainly be a lot of unhappy customers who would have preferred to call in their reservation. Although offering both options certainly comes at a higher cost for the hotel, it also makes it more accessible to a wider audience who might prefer one mode of communication over the other. Hotels should want to provide as many channels for their customers to communicate with them as possible.
Social media makes other features of your hotel more valuable
Your hotel would still function without a concierge, without a pool and without a bellhop, but those features add value to your overall product. Social media is the same. It doesn't function in a vacuum. This means you need to fully integrate social media into your overall marketing plan. When paired with natural search, added to your website, tied in with local events and encouraged onsite at your property, social media makes it easier for customers to connect with your hotel. Moreover, it gives them the opportunity to provide you with valuable feedback and then share their experience easily with friends and family. Best of all, it means your own customers can become the most valuable marketing tool in your entire arsenal: a positive, word-of-mouth recommendation.
Everything online has a social component these days, so don't be a wallflower
Even if you don't subscribe to the concept of "connecting with customers," consider this: search engines such as Google and Bing have quickly moved towards more socially-integrated platforms. This means that your rankings in the major search engines are already impacted by your reputation (or lack thereof) on popular social media networks. Google's local search has already been assimilated into their own social media platform, Google+. Likewise, Bing has been taking social cues from your Facebook friends and relevant experts in order to provide you with more useful search results. Even TripAdvisor has integrated Facebook, highlighting hotels that your friends and family have liked or visited. The popular travel site then uses that information to give ranking preference to those hotels more highly favored among your social network.
Social media is still important even if it never creates a single direct booking for your hotel
Even if you never know how much direct revenue is being generated by your social media campaign, at this point it should be clear that social media has a tremendous impact on your hotel's other online marketing channels. When a significant portion of your online revenue comes from search engines, and social cues are influencing search engines rankings, you can not afford to leave social media out of your marketing mix.
Although most people focus on the financial return when they consider the R in ROI, that's not always the case. The return on your investment is the additional value (different from money) that is created through your investment. The value of this return could come in the form of:
- Illustrating complex data more efficiently (ie, printed floor plans)
- Enhancing the aesthetic appeal of your product (ie, professional hotel photography)
- Improving your team's skills (training programs)
- Providing your contact information on a handy-dandy note (ie, business cards), or...
- Connecting with brand supporters, understanding customer sentiment, and ranking better in search engines (ie, social media marketing)
In the end, you may not know exactly how much exact revenue each of these tools generated for your hotel, but there's no question each plays a valuable part in the overall marketing of your hotel. Next time you demand to know the ROI on your social media campaign, consider the other kinds of return that will likely be realized, beyond the direct revenue. It may difficult to assess that value, but not every important investment needs to have direct financial return in order to be valuable to the growth of your business.
Want more information?
Give us a call at 877-361-1177 x202 or send us a note if you are interested in finding out more about independent websites or how Blue Magnet can help you achieve your hotel's ecommerce goals.