A hotelier’s guide to Internet Marketing Budget 2008

New York – Hoteliers are in the height of the budget planning season for 2008. Understandably, there is a great level of anxiety in the industry. Are you allocating the right budget for hotel marketing? What are your peers doing with their budgets? What are the best practices for 2008? Web 2.0, social media, consumer generated media—what should I do about these new media formats? What are the latest trends in Internet marketing and how should I account for them in the new budget? For a second year in a row, Hospitality eBusiness Strategies takes a closer look at some important aspects of Internet marketing in hospitality and what marketing activities and line items should comprise the 2008 Internet marketing budget. Critical Trends to Consider in Your 2008 Budget
There is no doubt the hotel’s overall competitiveness today is determined to a great extent by how well it manages its Internet marketing and distribution efforts. In 2008, 60% of all travel bookings and up to 40% of all hotel bookings in North America will be generated from the Internet (PhoCusWright, HeBS), which represents a 15%-16% growth over 2007. Another 25-30% of hotel bookings will be directly influenced by online research, but booked offline. By 2010 the Internet will contribute over 45% of all hotel bookings in North America.

Another positive fact is that the indirect online channel is losing market share. The negative impact of third-party online intermediaries (TPIs) is still felt throughout the industry, but to a much lesser degree. The ratio between the direct and indirect online channel continues to improve in favor of the direct channel: from 52:48 back in 2002 to 60:40 in 2007 and is projected at 62:38 in 2008. Some major brands already enjoy very healthy 85:15 direct vs. indirect online channel ratios.

The following five distinct trends must be taken into consideration when planning your 2008 Internet marketing budget:

1. Online vs. Offline Channel: The online channel is definitely the winner. Online bookers are predominantly influenced by online marketing and advertising formats, including online chatter and customer reviews. Now more than ever, billboards along the highway, hotel print brochures, and other traditional means of advertising should be shifted towards the web. In 2007, a remarkable 68% of hoteliers reported that they would be shifting their budgets from offline to online marketing activities (HeBS 2007 Benchmark Survey).

2. Internet vs. GDS: Further erosion of the GDS channel is self evident: less than 17% of hotel inventory in the US is sold via the GDS today, and the number of retail travel agency locations in the US in 2007 has declined to less than 19,000 vs. more than 35,000 in 1996. Most major hotel brands sell more hotel rooms via their brand websites, than via the GDS.

3. Web 2.0 and Social Media: Web 2.0 and consumer-generated media sites continue to create a lot of buzz in the industry. Online travelers are increasingly influenced by social media sites and peer reviews.

4. Direct online distribution has become the way to do business on the Web. Greater amounts of room inventory, at higher ADRs, are being sold direct to consumer via the direct online channel—the hotel’s own website. Marketing the hotel online via search marketing, email marketing, strategic linking, and online sponsorships has to be the main focus of the 2008 hotel marketing budget.

5. Channel Cost-Effectiveness and ROI: The shift from more expensive to less expensive distribution channels has become the norm in hospitality. Lessening your dependence on higher cost channels and driving more revenues through your own website should become the main objective of your 2008 marketing budget.

Planning the right marketing budget for 2008 requires hoteliers to balance limited funds with marketing strategies that will hopefully generate the highest possible returns, so that your hotel website can function as your main revenue generating channel with the highest ROI.

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