Cost Per Acquisition(CPA) is a metric that most Hotel owners look at to learn how much money has been spent in generating a room booking. Hotels must determine the total amount of money they spend on each room booking.
Today the journey that leads customer down the path to a booking decision is more complex than Hotels has experienced in the past.
According to data from STR during the fourth quarter of 2016, the U.S. hotel industry reported positive year-over-year results in the three key performance metrics. Occupancy rose 0.6% to 60.7%, ADR was up 2.6% to US$122.25 and RevPAR increased 3.2% to US$74.25.
Across the industry, revenue capture, or the percentage of guest-paid revenue that Hotels retain after CPA costs are paid including sales and marketing expense, declined by 0.5 percent from 2015 to 2016 according to data from Kalibri Labs.
The Digital Age Impact on CPA
The growth of digital distribution and with a large increase in the acquisition of new supplies has impacted revenue over the years. Also, has third-party intermediaries has also caused distributions costs to rise over the years.
We have over the years seen an increase in bookings from OTA, GDS and FIT/wholesale. This has increased the total transient bookings, particularly due to high growth rates in OTA channels. Due to the increased market share of third-party intermediaries there been a decline in direct Hotel bookings over the years.
New Media and Social Media Impact on CPA
Travelers love to dream about their next vacation, between travel-related posts and vacation photos shared on various Social Media sites, consumers have plenty of inspiration. This is a vital step in the planning process because the trip seed has been planted and will continue to harvest within the next few steps.
- 74% of consumers rely on Social Media to influence their purchasing decisions. (CeBIT)
- 83% of leisure travelers use social networking, video, or photo sites are top online sources of inspiration for leisure travelers. (Google Traveler’s Road to Decision)
We are experiencing a major shift in consumer behavior and patterns when it comes to New Media and Social Media. Still, we are at a point where it influences travel inspirations, and consumers share their experience with a large network. When it comes down to the booking decision itself cost is still a major factor.
Some of the trends we see particularly with Facebook will make shifts towards where consumers become more accustomed to make a booking decision directly from Facebook.
Because of this Hotels in the future will have to implement new strategies that focus on more Social Engagement that allows consumers to get a better understanding of the real value of direct bookings.
Increased engagement capturing new and renewing consumers
With New Media and Social Media, we have started to focus on collecting behavioral data that allows to better understand new patterns and behaviors.
Optimization has become one key strategic factors today for Hotels to succeed. For search engines like Google, Audience targeting is essential for success.
In a study done by Google/Phocuswright data indicated that “four out five Hotel loyalty members said they would book outside Preferred Hotel if they found better prices”.
One of the key components today with Google is Audience Solutions. Whenever a consumer explores sites and content online, signals are generated which can be gathered and interpreted while maintaining the consumer’s anonymity. These daily interactions across the web, which include searching, browsing content, watching videos, and interacting with social networks, help Google to understand and categorize audiences.
A study done by Forbes in 2015 concluded that brand marketers see the value in audience targeting for their campaigns and recognized the importance of reaching the right audience to add relevancy and truly make a difference.
A case study by think with Google did with La Quinta concluded that harnessing audience signals allowed La Quinta to connect early with travelers, drive additional consideration throughout the research process, and ultimately generate more direct bookings at a higher return on investment.
These implemented audience strategies now drive 32% of La Quinta’s paid hotel bookings through Google.
New data and more insight provides new opportunities
Data and insight today requires that Hotels implement Reputation and Relationship Management strategies.
Most hotels today have a Customer Relationship Management (CRM) system in place. One aspect that we now add to CRM systems is the Community aspect.
This allows Hotels to get valuable data about influencers and brand advocates that will help with the amplification process and open doors for new opportunities.
Optimization is an ongoing process today that applies both to online and offline strategies. Today we experience consumers access information about Hotels through a variety of sources. And the Hotels challenge is to ensure they generate positive and effective awareness about the benefits of direct booking.
Bringing down acquisitions costs soon will become a matter of how your Hotel is communicating and engaging with the community and the consumers. The opportunity to bring down costs is there, it is a matter of if Hotels is willing to make a shift.
New opportunities bring on new alternative ways to sell, cross-sell or upsell rooms. In the end of the day, it is still the numbers that will tell us what tomorrow brings.
Ultimately, the consumer will decide where and with whom they book their Hotel. Your job, as a Hotel, is to understand their journey because once you do you will be much better equipped to develop a booking strategy based upon big data-driven decisions and specially built with your Hotels profitability in mind.
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About the author
Are Morch is the founder and owner of Are Morch – Hotel Marketing Coach. Get more from Are on Facebook | Twitter | LinkedIn | Pinterest | Instagram| Podcast
