“Spend your money on social. Spend your money on ads. Spend your money on content. Spend all your money here and there and everywhere.” This is the message that we’ve been hearing for a while. Just spend your money and you will make money, but before you go around spending your hard-earned money, you need to know how much money you should be spending to hit your revenue targets.
Want to watch our latest webinar on demand? Click the picture below and let Stephen help you break down your marketing goals and budgets so you can create a strategy that works for you.
Simplify Your Marketing Efforts
More is not always better. Spreading your marketing efforts across every channel out there can spread you thin and make it so that no single channel works for your property. Determine your intentions for your marketing efforts. What are you aiming to achieve? We see two intents that you should focus on:
- Increase demand for your property. Let people know you’re out there and get people to want to come to your local area.
- Allow guests to complete the transaction. Help people find that Book Now or Book Direct button and guide them through making a booking.
Competing for Shelf Space
You know the feeling when you walk into the grocery store and wander into the cereal aisle. Hundreds of different brands are grasping for your attention and you pick one that grabs your attention and moves on. Behind the scenes, brands must pay for the eye level spot on the shelf. Same goes for online travel searches. There are several brands that people can choose from in your region, but places like Expedia, TripAdvisor, and even Google only show consumers a few properties in their ‘eye-level’ displays. You need to pay for these prime positions or you can circumvent these spots with other ads, but either way you are going to have to put down money to funnel people to your website.
Building Your Marketing Budget
CLICK HERE to download the marketing budget worksheet and fill out in excel or print out and fill by hand. The worksheet will be downloaded to your computer.
Demand Marketing
The first box you see is Demand Marketing. Write down all marketing efforts that have a goal of increasing demand for your property. This includes membership fees for associations or destination marketing organizations and keyword advertising around your region. You should also include ballpark annual spends on these channels and ROI effectiveness on a high/medium/low scale.
You can also include management and domain fees for your website under here as it works to increase demand for your site. Website fees can also fall under transactional fees so you can either split the cost 50-50 between the two or dedicate it solely under one section.
Transactional Marketing
Next to Demand Marketing, you will find the box for Transactional Marketing. List all marketing efforts that are focused on making the sale happen. This could include a keyword ad for your property name only, Google Hotel Ads, OTA commissions, Book>Direct component for an association, or your Booking Engine. Note your fees and annual commissions as well as the ROI effectiveness on a high/medium/low scale.
Email marketing is a little bit of both, depending on the content of your newsletter. A special promotion with a book now button would fall under transactional, but a blog post about restaurants or events in your area would fall under demand. Depending on the mix of your newsletter you may split the cost 80-20 between the two channels.
Analyzing your Marketing Spend
Now that you have all of your marketing expenses laid out, add them all up to determine your annual demand marketing expenditure and your annual transactional marketing expenditure. This will give you an overview of where you are now and where you can grow.
It may be a little frightening to look at all of your money added up over a year. Month-by-month it may not seem like a lot, but when you see it accumulated over an entire year, it may be a little stressful. Now is the time to look at what is working and what is not. Remember that not every number is fully representative of the situation. Make sure that you are accurately tracking revenue and that the numbers appearing on your spreadsheet are reliable and not anecdotal. For example, people think that likes on Facebook equals money in the bank, but that may not necessarily be true.
Key Targets & Goals
Your baseline is established and now it is time to start strategically planning. We have found that the ideal occupancy rate is 75% to 85% averaged over the year. Beyond 85% occupancy is the point of diminishing returns. If you are hitting 100% occupancy, you may be leaving money on the table. If your occupancy is below 75%, you may be charging too much for your room or not spending enough on the correct marketing channels.
Now if you were to hit that occupancy sweet spot, what would your annual revenue look like? If you are a seasonally-open business you can adjust your revenue to reflect your open season. After you find your expected revenue for the year, you can plan for your marketing budget. We recommend that your marketing budget should be 10% to 15% of your annual revenue.
The actual number varies depending on the property and your destination has a major influence over how much you will need to spend. Properties that are in highly desirable areas, like Hawaii for instance, do not have to spend as much on marketing as they will fill up simply by being there. These properties see excellent returns with as low as 8% marketing budgets because they don’t have to spend as much on the demand portion. For properties that do not have a large demand pull or if you are your own destination like a wedding venue or spa retreat, you will have to spend a larger percentage to compensate for the extra demand marketing.
Steps from Here
Congrats. You have taken a step in the right direction and can now plan an actual marketing strategy for your property, not just a marketing hodgepodge. You have your marketing budget and can determine the proper channels to invest in. Take time to identify your ideal guest and the marketing channels that will funnel them into your business. Determine whether you should focus on demand marketing or transactional marketing for your property and plan out your strategy for the following year with your calculated budgets.
Watch the Webinar on Demand to get your own worksheet and budget together