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On the 1st of August 1981, MTV broadcast the first music video in its history: “Video killed the radio star”, by The Buggles, a declaration of intentions that predicted, in the form of a catchy tune, the death of the radio format in favour of video.
More than a decade later, in the mid-1990s, the emergence of the internet in our homes would prove to be a golden opportunity for companies the world over to offer direct access to their end customers, eliminating middlemen from the equation. “The Internet killed the middleman”. A new era: direct online sales.
Though decades have passed since these two events, we can affirm that both the radio formula and intermediaries are still in very good health. Let no one sound the death knell yet, no one is dead yet.
Over this period, most hotels and hotel chains have discovered that direct sales bring with them many associated advantages (including reduced intermediary costs and a direct relationship with the customer at all stages of the purchase), as well as at least one inescapable obligation: the customer needs to be able to find you. You need digital marketing.
While in principle this may seem a simple premise, it’s one that doesn’t quite work in practice. Why? We are probably put off by the fact that we have to provide the capital before knowing the exact profitability, whereas the commission model used by intermediaries gives us far more security, as we only have to pay on success and on confirmed bookings. So zero risk.
On the other hand, this reluctance of paying in advance clashes with the expansionist spirit that has always characterized hotel companies. This expansion has been based on investments with medium-term profitability and uncertainty has always hovered over our heads.
Despite the fact that we are no strangers to risk and rather than think “He has spent 52 million on the construction of a new hotel”, would prefer to believe “He has invested 52 million in the construction of a new hotel”, when we speak of digital marketing we often hear expressions such as “I can’t spend that much”, “I’ve already spent too much” or “I don’t want to spend any more”.
Digital marketing is an investment that is necessary in terms of bringing our direct channel to where our customers are and achieving the highest possible sales volume. As part of our distribution strategy, it is an essential tool in terms of capturing and generating opportunities. Intermediaries have learned this lesson well and apply it in an exemplary manner. They are decades ahead of us.
It’s perfectly understandable to want to get the best possible return on investment. Fortunately, in the field of digital marketing today, this is easier than ever, as we can complement our digital marketing tactics with automation, machine learning and optimization tools to help us achieve those results.
The secret to success lies in aligning your direct sales strategy correctly with digital marketing. Nonetheless, if you feel you still haven’t got the formula quite right, here is our survival guide to getting the most out of your campaigns:
- The ideal marriage: your website + booking engine. This is where you direct your customers and monetize your efforts. Sounds very basic? It is, but without it you won’t be able to monetize your investments.
- Web and sales measurement and analysis: This will help you get to know both your audience and your most important KPIs, and thereby help establish both your starting point and the goals you wish to achieve, and allow you to draw up a roadmap accordingly.
- It’s not all about investment: Make the most of organic media, as they will help you increase both visibility and your share of voice at very low cost.
- Don’t neglect showcases: Metasearch engines allow you to compete face-to-face with intermediaries for the end customer. You can start with a commissionable model if it makes you feel more comfortable. As you gain confidence you should migrate to more efficient and profitable CPC models.
- Bet on your brand: As far as possible you must cover all hotel and brand searches or you’ll be out of the game. You may have the best organic positioning, but if you are not in these positions, someone else will get the upper hand. Defence.
- Don’t limit your brand investment to a daily/monthly budget, as that’s like starting the car with the handbrake on. Ask yourself: What percentage of searches am I covering with my investment? How many clicks do I need to make a booking? How long does the budget last? The more you limit the budget, the more difficult it is to get a return on investment, as you may not cover the average number of clicks to get a booking, or you may exhaust your budget during the morning, leaving the peak conversion hours uncovered.
- Your occupancy and sales flows are not linear, so your investment should not be linear either. Seasonality, when it comes to both booking and travelling, is a reality. The same budget cannot cover a “weak” month as it can a month like, for example, November, with Black Friday. This is something you solve by returning to point 6.
- Get the most out of technology: Optimize and automate investments in order to achieve your goals more efficiently and cost-effectively. Tools offer solutions that can do the mechanical work for you, so you can focus on strategy.
- Don’t be in a hurry: Until you have covered 100% the lower part of the funnel (the part closest to the user’s moment of purchase), don’t get involved with more expensive and attractive actions. Once you have mastered that part, then you can start implementing actions that will help attract more traffic volume and incremental sales but will also mean lower profitability. So align your objectives with the actions you want to take.
- STOP & THINK. Always measure, evaluate, stop and think. Digital marketing doesn’t work standalone; it must be integrated into your distribution strategy. If you are not getting the expected results, it’s possible that something within the whole ecosystem is not fully tuned, so before discarding an investment, ask yourself if there is something you can adjust to make it work better (availability, pricing, etc.).
Investing in digital marketing today is far from being risky, if you follow our recommendations, but the first step is to correctly align the strategy with the objectives you want to achieve. For example: are you looking for more bookings or more traffic? The cost and return on your investment will vary depending on your answer.
Investing in digital marketing is necessary if you wish your direct channel to grow and gain independence, and considering it an expense is a stumbling block. If you’re willing to pay a third party up to 20-25% commission to get a booking, why wouldn’t you do the same for your direct channel?
So, while intermediaries are still very necessary today (especially those who offer value) and it doesn’t look like they’re going to disappear in the short term, if all hoteliers do our job well and strengthen our relationship with the end customer, perhaps the day when we can start writing the eulogy for those who only clutter or cloud our distribution is not so far away … while in the background we listen to The Buggles sing “Video killed the radio star”.
About Mirai Consulting
Our consultancy and support service for hotels looking to take their distribution and direct sales to the next level. More information at consulting@mirai.com
